Should traditional asset managers look at Hedge Fund systems for use as an investment book of records?

For the past twenty years, there have been two very distinct markets for asset management systems: those designed to support traditional asset managers and those for hedge fund managers.

Systems aimed at traditional managers typically have strong post-execution STP; clear segmentation of functions and a flexible implementation model as asset managers have increasingly outsourced differing parts of their business. Hedge fund systems have often taken a different approach – they were established to provide solutions that cover all aspects of portfolio, order & risk management not undertaken by their prime broker and fund administrator.

More recently there has been a convergence in needs and operating models; increasing numbers of traditional asset managers utilise derivatives across a broad range of funds; they have increased the number of instrument types they use to generate exposure and manage overlays.   Hedge funds now increasingly operate in a multi-prime broker, multi-custodian environment with clients expecting them to have robust control of their service providers. Hedge funds are also starting to offer OEICS and segregated mandates to asset owners.

Today’s regulatory environment has been applied equally to both traditional asset managers and hedge funds, as well as affecting asset owners with in-house investment management teams.

Systems previously targeted at Hedge Funds have tended to offer a very broad instrument type coverage, integrated portfolio management, order management, compliance and risk management; flexible slicing & dicing of portfolios by positions and strategies, real-time pricing and in-depth performance and risk analytics – functionality that all asset managers require.

Hedge fund systems have also tended to be offered as a hosted solution as their clients have not wanted to build up IT capability outside of their core competencies, a theme that is increasingly prevalent with traditional asset managers too.

Are the traditional lines blurring? Is it time for institutional asset managers and investment teams to look over the fence at what is on offer in the hedge fund technology market?

Note: This opinion piece was first published by Knadel Limited prior to the Catalyst-Sionic merger

About the author

Phil Hannay


I have experience across front, middle and back office working on diverse projects including target global operating model review and design, IT strategy, system selection and implementation.