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Quick Technology Guide to Starting a Hedge Fund

 

While the initial TODO list might be staggering, this article attempts to address the technology components that need to be in place to ensure as smooth a launch as possible. Technological requirements will differ based on numerous factors, but what will not differ is that it is an essential element of achieving success.

Consultancy, Vendor Selection & Project Management

This may sound like a message from the Ministry of the Bleeding Obvious, but there is a fair amount to do in terms of vendor selection, product selection and managing the implementation of all these various elements. This translates to a large amount of time which will be significantly longer if the individual managing the process is not familiar with the current technological landscape. It pays to engage with an independent consultant that can assist in identifying the various requirements and then apply them to the current marketplace in terms of suitability of vendors and systems. There are of course the alternatives of either having a tech-savvy team member take responsibility for managing the process or engaging with a technology partner that is going to feature prominently in your overall technology environment and have them manage all elements of the process. Regardless of which option is selected the individual managing the process should have awareness of: different vendors and their offerings, different systems and possible suitability, nuances of integration with prime brokers and market data feeds and finally experience in co-ordinating everything to work in harmony.

Network Requirements and Infrastructure

The first port of call is to assess the infrastructure requirements, once they have been agreed key decisions such as cloud computing vs. on-premise solutions can be easily made. Certain elements such as data circuits and telephony need to be prioritised due to the length of time these usually take. Following on from these the relatively simple matter of workstations and other peripherals can be decided on. All of the above elements need to be brought together with delivery, installation and testing. Other items that should be addressed at this point are identifying who will host your email and ideally they can also host your website. Your domain name will need to be chosen and registered, the website requirements agreed and the website design company identified and engaged.

Software

The systems that are referred to include portfolio management, order management and accounting software. Due diligence of vendors here is essential and particularly the support capabilities of said vendor, not only that service desk hours match your operational requirements, but that also the appropriate level of service is available at an acceptable cost. Will the vendor be able to service you as a customer both today and in the future? How complex are the systems to integrate? What are their maintenance agreements like and what do they cover? How easy is it to use your preferred market data vendor with these systems? All questions that need to be considered.

Data & Research

This is impacted primarily by the nature of the required data and the requirements of the above mentioned software. This includes both market data and market research. Installation times can also vary greatly, so they need to be confirmed.

Integration

Possibly the trickiest part where all the software, data and processes needs to come together and be tested. Integration refers to not only the integration between the systems, but all data flow which encompasses the market data, prime broker data, etc…

Business Continuity and Disaster Recovery

These overlap a great deal, but are subtly different. While business continuity deals with the continuation of the mission-critical processes and how the business and its employees continue to operate, disaster recovery focuses on the infrastructure, both hardware and software, necessary to run the business e.g. phones, email and systems. Additionally, the value of having comprehensive procedures cannot be underestimated when it comes to attracting investment.

Avoiding Common Pitfalls

Rank requirements in terms of priorities and identify your nice-to-haves early, they will make a large difference in terms of choice. Costs, timings and effectively risk can quickly escalate when looking for the perfect solution.

Do not underestimate the impact of your systems and technology as a whole on attracting investment, this refers as much to infrastructure and software as it does to processes and procedures.

Managing IT effectively requires a specific skill set and an up to date understanding of the latest technologies, whilst many people within the finance sector will have the ability to perform this role to some level, their time is often better spent on the business as a whole. It’s time consuming and there are service providers, consultants and contractors that can be leveraged, each of these suited to different requirements. Do you really want to spend days writing VBA code and nights rebooting servers?

 

George Toursoulopoulos is a technology specialist and Director at Synetec, one of the UK’s leading providers of bespoke software solutions.

3 Reasons to move away from Excel Development

 

A spreadsheet is the tool of choice for a business starting up and requiring a quick and flexible low-cost solution to meet a business requirement, however as a business becomes more mature its requirements are likely to change over time and the same advantages can become disadvantages. Below I give you the 3 main reasons to move away from excel spreadsheets, but in my conclusion I also give you a couple of key factors to consider before doing so, because in some instances Excel is still the best tool for the job.

Maintenance is a Mission

Excel macros and VBA code is often initially created by non-developers, usually intelligent and knowledgeable people, but not trained software developers which normally results in something being created that is not only difficult to change, but if it should break, extremely difficult (see expensive) to fix. Whomever coded it initially is most likely the only person who truly knows how it works and every subsequent change will serve to further complicate matters, especially if the changes are undertaken by different individuals every time.

Cheap today, expensive tomorrow

While you don’t have software license fees, servers or cloud platforms to pay for you still need to factor in the maintenance costs of supporting the spreadsheet and the more code/macro heavy it is, the more expensive it is. The more ongoing changes that are required, the more expensive it gets. Who is making these changes? If it’s not a member of your team then where can you get access to Excel developers for short periods of time on a short notice period and at a reasonable price? To make it viable for software companies, they have to charge accordingly, if they are willing to take it on at all. I have been contacted countless times by businesses urgently needing an Excel developer to fix a business critical spreadsheet. Factor in the new versions of Excel and how that can affect a macro/code heavy spreadsheet and the costs mount up quicker than you can say “here is my letter to Santa”.

Security? Not so much

Data within these spreadsheets is often of a sensitive nature, but controlling security and access to this data is challenging. I have heard of many instances where former employees have emailed themselves spreadsheets with financial data or customer lists. This lack of security also impacts data integrity, who has made changes and to what? I have seen further instances of portfolio managers making investment decisions based upon incorrect data because another user made a change to a formula in a cell.

Conclusion

There are many scenarios where an Excel-based application is the ideal solution, it can add a great amount of flexibility, allowing a business to get something up and running in a very short period of time and usually for a low initial cost. The points above do illustrate that there are some situations where the cons will outweigh the pros and then it might be time to consider a move away to a more structured product. The great thing about making that move is that Excel is a fabulous prototyping tool allowing the gathering of all the essential business requirements by key users. So not all bad news!

 

George Toursoulopoulos is a technology specialist and Director at Synetec, one of the UK’s leading providers of bespoke software solutions.

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