London, 24 January 2023: Systematic hedge funds are changing long-standing attitudes to how they source and develop their front-office technology stacks, a recent study by Acuiti shows.
The study, Brining the case for buy-and-build to the front office, revealed a shift in attitudes among systematic hedge funds towards sourcing and developing their front-office technology stacks.
Systematic hedge funds have traditionally placed high value on the development of trading strategies in-house. This is the main way they differentiate themselves from competitors and therefore constitutes highly valuable intellectual property.
Historically, hedge funds have been reluctant to entrust third parties with this technology build, not just for reasons of IP but also fears over losing the ability to take control of troubleshooting when systems malfunction.
This mindset is still strongly embedded in the industry. However, according to Acuiti’s latest research, conducted in partnership with global Fintech Leader, Broadridge Financial Solutions, a shift is underway.
In a project that surveyed or interviewed 50 systematic hedge funds, Acuiti found that 58% of the surveyed firms are already utilising a combination of both outsourced strategies and in-house development to build their front office technology.
Other key findings of the report include:
- Latency is the key factor in determining attitudes to outsourcing front office technology, with firms for which latency is critical more likely to develop in-house
- Finding skilled staff and raising initial funding have become the biggest challenges for starting a new fund
- The front-office functions that funds are most likely to outsource are EMS, market data feeds and front-end trading screens
- Buy and build platforms are emerging as a new alternative to choosing between off-the-shelf solutions and in-house development
“These findings show that space is opening up in the front office for systematic hedge funds to diversify their technology stack,” says Ross Lancaster, head of research at Acuiti.
“This could provide a new route for funds, especially those just starting up, that need to prioritise cost efficiency without giving away IP.”
Download the full report here: https://www.acuiti.io/hedge-fund-front-office-technology
For more information, contact:
Nastja Konic at Acuiti
Tel.: +44 (0) 203 998 9190
Acuiti is a management intelligence platform designed to provide Senior Industry Professionals in the Derivatives Industry with high-value insight into industry-wide performance and business operations. Acuiti provides a platform through which our exclusive network of Senior Industry Executives can share and source information on day-to-day operational challenges, providing them and their management teams with increased transparency and in-depth analysis to make more informed decisions and benchmark company performance. Financial Institutions benefiting from our services include Banks, Non-bank FCMs, Brokers, Proprietary Trading Firms, Hedge Funds and Asset Managers.