Increasing Investor Interest in Asian Markets Drives Changing Technological Needs for Hedge Funds
In its recent Asian Hedge Fund Industry Report, Hedge Fund Research (HFR) notes that Japanese funds started 2023 on a positive note. Investors were optimistic that U.S. and global inflation had peaked – and U.S. interest rate increases were nearing an end.
In addition, as the Japanese Yen and Chinese Yuan fell to historic lows against the U.S. dollar, the Nikkei showed solid gains, rising to its highest level in three decades.
With global hedge funds and asset managers looking to expand in Japan and take advantage of a surge in investor interest, Reuters reports that Tokyo is now a hot job market for fund managers.
As Tokyo grows as a financial hub and its alternatives and offshore business gather momentum, existing industry players are experiencing an associated increase in demand and spike in activity, causing changing technological needs as they look to grow to accommodate global investors.
This change in demand – and the resulting operational challenges – means many firms are looking to move away from incumbent technology platforms that don’t have the features and flexibility necessary to accommodate the demands of these investors and position their firms for growth.
For firms finding themselves in this position, I share insights I’ve learned from more than 20 years of experience working with the Japanese asset management sector, particularly in alternative investments. My goal in writing this post is to give investment firms an understanding of how to select technology that will not only accommodate the demands of global investors but also prime firms for growth.
Capitalizing on Today’s Changing Market: Choosing a Technology Partner
Flexible, Mobile Solutions Built for Growth
As Asian markets mature and globalization across financial markets increases alongside global demand, incumbent technology platforms built around domestic markets will have difficulty accommodating the added complexity of global strategies. Bringing these incumbent systems into the modern age can be a costly and manual process.
Firms that have invested in flexible technology, however, can easily accommodate global strategies and the demands of global investors. These firms will be positioned ahead of the competition.
The type of flexibility offered by solutions with an elastic infrastructure also allows firms to scale faster to accommodate growth. Such a solution should offer quick delivery and regular rollout of new features that can be easily added to better meet a firm’s needs.
Additionally, with so many firms adopting a hybrid work structure, fund managers looking to retain top talent may need to do the same. However, operating effectively in a remote environment requires the right investment technology with accessibility across browser, desktop, and mobile. Look for a solution that provides the features and functionality needed for employees to be productive no matter where they are located.
A History of Successful Implementations & Outstanding Support
To navigate this increased demand and ongoing changes in technological needs, hedge fund managers need reliable partners, not just vendors.
It is critical to select a provider with a longstanding history of successful and timely implementations and continued support as firms grow. Look for a vendor that boasts an expert client service team that is intimately familiar with firms’ business needs and workflows.
To gauge a vendor’s success in this realm, ask the right questions:
- How long will my implementation and upgrades take?
- Have you dealt with a fund like mine before?
- How is training handled, and what documentation and other resources are available to ensure my investment operations run smoothly?
- What is the breadth and depth of your service team and expertise?
- If I am looking for assistance, when is support available, and how long will it take for me to hear back?
- What solutions do you have available related to outsourced and managed services? Can I count on you to help expand my firm's capabilities in the short or long term if I need you?
- What is your understanding of the industry, and what do you think is coming next?
Eze Eclipse clients rate their implementation experience an average of 9.6 out of 10. Read about one firm’s experience deploying Eclipse in just two months.
Technology Value Over Time – No Hidden Costs & Fees
Another consideration for managers selecting a new technology partner is total cost of ownership – what will it cost, and what value will be generated over the lifetime of the relationship?
Lack of transparency is often a challenge when calculating investment technology's total cost of ownership. That’s because the price listed on a vendor’s proposal is often not the solution’s total cost of ownership (TCO). This can lead to firms being forced to pay for unexpected costs that impact their bottom line – and future growth.
Ask a potential vendor for a breakdown of the costs of the baseline features and capabilities needed for your firm. Then, look for the hidden values and fees that are not covered. This analysis will help demonstrate the total cost of your technology options.
Swift Response to Changing Regulatory Requirements & Investor Demands
Firms that employ a global or multi-region strategy face increasingly complex compliance requirements. In a global market, firms may have to adhere to beneficial ownership and jurisdictional regulations across their trading regions. These regulations and new complexities require firms now more than ever to leverage sophisticated compliance solutions to help support the growth of the firm.
Look for solutions that are positioned well to respond to the needs and demands of the market with timely and effective product updates.
Investor due diligence is more rigorous than ever, and we are finding that more investors want to know what rules are in place to satisfy their demands. Investors have also been asking for access to the firm’s charters to see exactly what compliance rules are in place to satisfy investor mandates and the fund’s prospectus.
A partner that offers support throughout this complex process is an invaluable resource.
Expansion Throughout the APAC Region
SS&C's Eze team has proudly served the Asia Pacific region for over 15 years. And we were honored to have our commitment to the region recognized by the Tokyo Metropolitan Government (TMG) in 2019 when we were named one of its first Qualified Outsourcing Providers. This TMG program was created to help hedge funds adapt their infrastructure to meet industry shifts and accommodate global investors by steering them toward the most reputable and knowledgeable providers.
Across APAC, our client base continues growing, with over 270 firms optimizing their operations using SS&C's Eze technology. More than 220 of these firms are utilizing our flagship platform, Eze Investment Suite, to grow their businesses.
One such firm is CSOP, one of the largest offshore Chinese asset managers. CSOP utilizes both Eze OMS and Eze PMA to cater to its global strategies and provide global investors with better exposure to China’s indexes.
An Optimistic Outlook for Japan & Beyond
I recently celebrated my one-year anniversary of joining SS&C as the country manager for Eze solutions in Japan. The past year has been full of great conversations with hedge fund managers in the region about how SS&C is evolving to meet this market's unique and shifting needs.
With over $80m invested annually in R&D across SS&C wealth and investment technology offerings, I am confident that we will continue to develop technical innovations that meet the changing needs of hedge funds in APAC and across the globe.
In my second year at the company, I feel proud to be part of this client-first organization and look forward to seeing how our company – and the firms we serve – continue to grow.