The Big Balancing Act: Integration and Hedge Funds in 2017
News flash! The record for the fastest lap around Germany’s famed Nürburgring racetrack was set just a couple weeks ago by Chinese stunt driver Han Yue. His time? A shade under 46 minutes.
A Balancing Act
Why do I care? Well, it always fascinating when someone outpaces the competition while balancing a heavy set of constraints. That's our market today. Now more than ever, hedge funds and other investment management firms are looking for ways to streamline their operations setups – while at the same time trying to boost their systems' effectiveness and scope.
I recently sat down with HFM Week to talk about where this drive for integration comes from — and why 2017 will be a big integration year. In case you missed that story, here's a quick lap around the course:
Our industry continues to see dramatic increases in the breadth and depth of regulation. Regulations such as Dodd-Frank or MiFID II are now so broad that they affect virtually all aspects of the business. Asset managers need to be able to rely on a centralized system that allows operations, trading and compliance staffers to use a consistent, reconciled data set to operate and meet regulatory requirements.
The higher regulatory burden has in recent years combined with challenging performance results to force institutions to manage their bottom lines more carefully. Firms have consolidated roles, forcing managers to do more with fewer bodies and leaving CTOs and COOs with precious little time for innovation.
Additionally, asset managers are looking to reduce their overall number of applications and relationships. Investment platforms increasingly should be able to handle multiple third-party relationships and the ability to offer algorithms, market data and relevant analysis through a central, integrated hub.
Finally, as investment managers have diversified their strategies, they've found they need to handle asset types that haven't been traditionally served by electronic trading systems.
Meanwhile, as the new “smart" (reconciled) data is injected into the firm's database, front and back offices will need to work together to define data requirements and implement frameworks for the different asset classes. The smart data can only be driven by a consolidated, reconciled data set that's easy to work with and can be used to report to regulators, investors and internal users alike.
Racing Into the Future
At Eze, we're already starting to see integrations accelerate. We saw 60 clients extend their use of Eze Software Investment Suite with one or more applications last year — a 75% increase in such deals since 2015! Given the market landscape, we expect this trend to continue.
For more on this, be sure to subscribe – and stay tuned for details about the latest improvements in our own EMS/OMS workflow integration.
By the way, if you're wondering: The real fastest time around the Nürburgring is 6:11.13, set by Stefan Bellof in a Porsche 956 racecar back in 1983. Our own David Quinlan is still chasing that one; we know he’ll get there one day!
Photo Credit: Guinness World Records, 2017