Hedge funds account for a substantial portion of the asset management industry, and they, like many other sectors of the financial services sector, are being challenged by the current macroeconomic environment.
The energy crisis, falling consumer confidence and rising inflation mean that profits across the board are shrinking. When it comes to investment, opportunities to generate returns are becoming increasingly few and far between. These circumstances mean that hedge funds, who are renowned for their bullish, risk-seeking mentality need to up the ante, and be able to strike at a moment’s notice to maximise each and every opportunity.
But what happens when that moment arises, and your technology fails? A few seconds of downtime can be fatal for profits, with millions of dollars being hemorrhaged per second – and that’s without even considering the missed opportunity costs that arise when you can’t execute a great deal, at the right time, because of a system failure. Despite the cost, firms are still all too often a victim of IT outages.
Utilising technology in hedge funds is nothing new, in fact, the majority of firms have approached technology adoption in their usually aggressive manner. But what many have failed to do is ensure that their end-to-end operations are robust enough to prevent systems outages.
So how do you guarantee your technology systems are performing at an optimal level to give the best possible chance of generating returns?
To truly mitigate risks, it’s essential that that firms have full observability of their infrastructure at all times. ‘Observability’ instead of ‘monitoring’, is the key word here. It’s about unknown-unknowns rather than known-unknowns. Monitoring tells you if the systems are working, while observability answers the question as to why it is not working. Achieving real-time observability of all relevant structured and unstructured data in real-time is vital – by utilising technology to ensure this, hedge funds can dramatically reduce mean time to resolution (MTTR) – the time it takes to resolve faults should they occur. Additionally, the importance of early notification of potential issues enables funds to spot and correct them before they escalate. As put simply, incidents that impact systems impact revenue.
Furthermore, using technology to ensure better management of capacity levels, can help make IT infrastructures more efficient and therefore more sustainable. Hedge fund technology is often bespoke, and the management tool that supports this needs to be built for purpose. Surveilling the most complex and interconnected IT estates requires a platform that is adaptable and customizable, allowing you to write your own scripts to monitor your critical infrastructure at scale.
The knock-on effect of IT and system outages goes beyond the immediate inability to trade and exploit market opportunities – investor confidence is at risk as well. Investors trust the growth of their capital not only to a fund’s strategy, but to the underlying operational infrastructure that support the models. Informed investors perform Due Diligence on the firm’s entire operations; IT performance is of significant and growing importance to today’s investors. Therefore, it’s essential that firms have the solutions in place to ensure they are ‘always-on’, no matter what is happening in the world around them.
In a world where the macroeconomic storm has little chance of abating anytime soon, it is essential that firms take control of the controllables and ensure that they are giving themselves the best possible opportunity to thrive. And while technology can’t answer every problem, having the right systems in place ensures that when that moment comes, you – and your bottom line perform.