The Transformation of IT and Hedge Fund Operations


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Regulatory oversight, competition for assets and investor due diligence concerns have left investment management firms with more pressure than ever to succeed. And technology innovations like the cloud have turned the traditional hedge fund operations model on its head. This presentation examines the changing world for hedge fund managers and how technology is evolving with the adoption of cloud computing to meet various operational needs.

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The Transformation of IT and Hedge Fund Operations

  1. 1. The TRANSFORMATION of IT and Hedge Fund Operations
  2. 2. State of the Industry • Managing investments is not just about managing investments anymore. • Hedge funds require sound operations and infrastructure to succeed. • A variety of industry factors play key roles. competition for assets technology innovation investor expectations regulatory oversight
  3. 3. Regulations • Post-Madoff & 2008 Financial Crisis, SEC and FINRA keeping closer eye on financial services industry • e.g. Dodd-Frank, SEC cybersecurity roundtable last month regulatory oversight
  4. 4. Competition • More competition than ever for investment allocations • Technology powering smaller firms to compete on institutional-level with larger funds competition for assets
  5. 5. Investors • Demands for transparency are stronger than ever • DDQ requests have increased exponentially • Investors expect sound operations & technology to support investment management investor expectations
  6. 6. Technology • Increased focus on managing operational risk • Emergence of “big data” trend as firms manage more and more info • Reliance on mobile devices, BYOD technology innovation
  7. 7. Technology Shift 5 YEARS AGO • $200K-500K technology investment • In-House Comm. Room TODAY • OpEx vs. CapEx • Leverage Cloud or Data Center
  8. 8. Cloud Adoption 74% 90% 87% private cloud avg. satisfaction level using cloud services Source: Cloud Usage Trends Survey, Eze Castle Integration & IDG Research, September 2013
  9. 9. Why Go Cloud? • Business needs driving cloud deployment: Easy access to applications; simplified application management Greater control and predictability of IT costs and budgeting Reduced complexity and management of IT Improved disaster recovery/business continuity Enabling global support of local and remote offices Reallocating personnel resources 60% 55% 55% 54% 42% 41% Source: Cloud Usage Trends Survey, Eze Castle Integration & IDG Research, September 2013
  10. 10. The Right Time Office Relocation New Applications Technology Refresh • Ideal time to review infrastructure • Don’t invest in moving outdated technology • Migrate to cloud prior to relocation • Easy to add new applications (in hours) • Long-term planning no more • Predictable cost structure • Conduct a cost- feature comparison for on-prem refresh vs. cloud • With cloud, transition process is simple
  11. 11. Due Diligence • Institutional investors demanding more transparency than ever • Due diligence questionnaires evolving/expanding • ‘Checking the box’ is not enough • Detailed responses on DR/BCP, security, operations, etc. INVESTORS How often are IT policies & procedures tested? How is data backed up and at what frequency? Do you have a written business continuity plan in place to guide employees during a disaster? Have you conducted a security vulnerability assessment or penetration test?
  12. 12. DR/BCP Disaster Recovery • Infrastructure-centric • Details implementation/support of recovery infrastructure • Minimizes & mitigates effects of outages/disasters • Allows continuation/quick resumption of mission- critical functions Business Continuity • People-centric • Concept-centric • Details mission-critical services, functions & personnel • Reveals risks • Documents, tests and educates on steps to return to operations
  13. 13. Disaster Recovery • A fully managed service that supplies the resources and redundancy to quickly resume and maintain mission-critical functions when faced with outages & disasters. Managed Disaster Recovery Features & Benefits to Look For • No hardware or software purchases necessary • Replication of production virtual machines (VMs) • Remote access to applications (MS Exchange, OMS, SQL, etc.) • Virtualized solution with resource pool • 24x7x365 support • Proactive maintenance and bi-annual testing
  14. 14. Security Practices • Security = Most frequently vetted topic by investors in 2013. Principle of Defense in Depth Principle of Least Privilege Audit & Logging Systems Secure User Authentication Protocols
  15. 15. Security Practices • Employ multiple layers of security simultaneously, e.g.: • Windows hosts protected by anti-virus software with up-to-date virus definitions • All Internet and DMZ facing hosts protected by OSSEC host-based intrusion detection • Limit access to only those who need it • Implement restriction policies • Access Control • Applications • Data • Inbound/Outbound Internet Principle of Defense in Depth Principle of Least Privilege
  16. 16. Security Practices • Central logging system that records: • All login/logout events • Inbound/outbound connections through Internet-facing firewalls Audit & Logging Systems Secure User Authentication Protocols • Assign unique domain user IDs to each employee • Enforce strong passwords • Restrict access to active users and active user accounts only
  17. 17. Looking Ahead • Future of cloud services looks certain: hybrid cloud private cloud public cloud 38% 41% 28% 6% 9% 11% 39% 46% 49% 18% 5% 13% Future Use of Cloud Services increase decrease remain the same not applicable Source: Cloud Usage Trends Survey, Eze Castle Integration & IDG Research, September 2013
  18. 18. Eze Castle Integration Awards 2013/2014 Founded Office Locations Employees Core Services 1995 Boston, Chicago, Dallas, Hong Kong, London, Los Angeles, Minneapolis, New York, San Francisco, Singapore, Stamford 340 • Strategic IT Consulting • Outsourced IT Solutions • Project Management • Communications • Network Design/Mgmt • Internet Service • Private Cloud Services • Business Continuity • Disaster Recovery • Storage Solutions • Colocation Services • Message Archiving