When I first joined Eze Software Group 17 years ago, it was at the height of the dot-com bubble. As it turns out, it was in those heady days that the concept of blogging got its first real boost, in the form of online tools that allowed anyone with an idea to express — or an axe to grind — to put pen to pixel.
Well, it's taken us a while to join, but here we are. We're kicking off a series of blogs to discuss the latest trends in investment management and how technology fits into the picture.
Why are we doing this now? The investment technology industry today is changing fast — so fast, in fact, that we thought it made sense to stand back from the coalface, in order to take our customers and other interested readers on a tour of those changes, and to explain what they mean for all of us.
Broadly, we'll be talking about four interconnected industry drivers:
1. Increasing regulatory burden.
Evolving regulation since the financial crisis, coupled with increasingly sophisticated investor due diligence, is adding to the already heavy compliance burden on asset managers. We believe technology has the key role to play in easing some of those burdens.
2. Pressure on the hedge fund industry.
The alternatives community is facing increased pressure to demonstrate consistent returns at the same time investors challenge the traditional 2/20 fee structure. The way funds interact with and leverage prime brokers is evolving, too. Funds that wish to maintain profitability are finding they need to increase efficiency while operating at scale, which leads us to…
3. ...Investing in technology and outsourcing.
The need to scale up efficiently, while also retaining the best talent, means that middle- and back-office functions, and even some front-office functions, are increasingly being farmed out. Leveraging the right partners and proven technology is a crucial step in addressing the evolving challenges associated with those functions.
The backdrop to all of this is a far broader convergence happening across industries. The stiff competition for new assets is forcing both banks and asset managers of all stripes to consolidate and scale, even as they try to boost their agility in terms of launching new and differentiated products. In a sense, they're like linemen in the NFL today: they are expected, simultaneously, and without contradiction, to weigh 300 pounds and sprint the 40-yard dash in under five seconds.
These drivers are why we at Eze Software are now “bringing it all together" — we're integrating our software modules into one holistic, end-to-end platform, supported by more than 20 years of expertise. A big driver behind this project is our customers' growing requests for guidance on how to navigate an increasingly complex world.
So, dear reader, bookmark this page and stick with us! In the posts that follow, we'll be exploring related trends in areas like technology and operations, regulation and compliance, and fund structure, as well as responding to substantive industry news.
These are again heady days, and we hope you find it all as exciting as we do. Up next: we'll delve into the top issues that are costing hedge funds money. Stick with us.