Why Institutional Investors Love Hedge Fund Startups That Choose Options

Why Institutional Investors Love Hedge Fund Startups That Choose Options

Why Institutional Investors Love Hedge Fund Startups That Choose Options

When it comes to fundraising, experienced managers know that there is only one thing more important than having a great IT platform; that’s having a great IT platform that institutional investors see as the industry benchmark.

That said, many hedge fund startups don’t realise the importance of securing the right technology partner. Some simply don’t see the importance of a solid technology platform, while others typically feel there is some strategic advantage to doing things in-house. Institutional investors (and more experienced fund managers) take the opposite view. They know that getting the technology platform right from day one is essential and “in-house” infrastructure is more of a liability than a strength.

In my more than 20 years delivering IT infrastructure and managed services to hedge funds and the wider financial services industry, I’ve found the following to be among the key reasons institutional investors see the Options Core platform as the gold standard for hedge fund IT:

– Bullet proof service and reliability.

– An innovative platform delivered with the personal touch.

– A feature rich global platform.

– Mobile working (Citrix, VPN, Microsoft Lync).

– Complete transparency (Clearly defined support process with appropriate permissions and access).

– Security (protection against random attacks, directed attacks, insider breaches and data leakage).

– Recoverable (including 7 years of data retention, daily backups for six months and seven of monthly backups).

– Compliance (including journalling, daily backups, voice recording, audit).

– Cost certainty and a platform that scales seamlessly as your business scales.

– Disaster recovery that’s managed seamlessly at the platform level.

– Due diligence (Options is a box tick for the majority of institutional investors as they have already carried out due diligence on the platform through their other fund investments).

Take cybersecurity as an example. Guarding against external attacks are an essential foundation of any IT strategy but this is only the start. Institutional investors recognise that while it doesn’t always make the headlines, attacks by both current or previous employees are a much greater threat to a firm’s long-term viability. Plain vanilla, non-malicious weaknesses presented by a typical internal IT platform are also an increasingly serious concern; be it the nerd who manages all the passwords, the quant who copies Excel sheets to a USB (or Dropbox) to work on them over the weekend or a simple spillage or water leak in the the server room. Any hedge fund business, however small, needs rock solid security and recoverability with full process transparency in the event of such an incident.

And while security and avoiding single points of failure is critical, institutional investors also realise that having a robust platform for recoverability and compliance is even more important. One of the key features of the Options platform is that we hold six months of daily backups and seven years of monthly backups. The people who avail of this service the most are usually the quants, and not the compliance teams, who want to recover modelling work carried out on a specific day in the past which has subsequently been lost. Again, Options majors on compliance and meet all the requirements out of the box and across all the key jurisdictions, ensuring any startup has a massive head start when it comes to fundraising.

Finally, but not to be over-looked, every hedge fund CEO building a startup team must have one eye on the future. There might be a team of five today, but this could grow quickly through 20, 50 and 100 people as the management team deliver on their business plan. Often this growth includes opening an office on either side of the Atlantic or in Asia within the first 12 to 18 months. Building a coherent global team and business quickly brings all sorts of challenges for any management team. If however, that startup chooses Options, technology won’t be one of them.

Thanks,

Nigel

(For more on what Options recommends when it comes to your firm’s cybersecurity, download our 2015 Cybersecurity Policy here.)

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