New York (HedgeCo.net) – Citi Prime Finance has released the new survey results on how much hedge funds’ are spending on IT. The survey documents for the first time both the industry’s aggregate expenditure on IT and the average expenditure per hedge fund.
Hedge funds will spend over $2 billion on technology in 2011, with investments in data management platforms and collateral optimisation tools accounting for a significant share of overall expenditure, according to the survey.
Large funds managing $5 billion or more are expected to spend an average of $7.9 million on technology in 2011, more than 13 times the amount forecast for small funds with AUM less than $500 million. Large managers also charge 20%-30% of their technology costs to the fund, while small funds charge nearly the entire IT expense to the management company.
The survey findings also include:
· Bigger “franchise” funds (more than $5 billion AUM) have some IT cost advantages, and better ability to pass on costs, than smaller funds
· More funds are adapting unified data management solutions to consolidate data on risk, accounting, trading, finance and other elements into a single platform.
· Hedge funds are changing their approach to investing in new information technologies, often opting build in-house IT capabilities rather than relying on outside vendors.
· Technology innovations are helping launch new hedge funds, and helping existing hedge funds launch new funds more quickly.
Citi found that 49% of sub-$500 million hedge funds launched in the last five years currently use managed service providers. Only 39% of these small hedge funds host their own infrastructure. Of the large funds that have been in existence for more than five years, only 24% source their technology from managed service providers or hosted vendors.
The findings are based on responses from 75 hedge funds and 15 vendors in the US and Europe that participated in the 2011 Citi Prime Finance IT Trends & Benchmark Survey.
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