Citi Launches Hedge Fund 3.0

New York ( – Citi’s Hedge Fund 1.0, saw the hedge fund industry as a niche business, with funds typically relying upon a single prime broker to support trading and reporting. In Hedge Fund 2.0, the next evolutionary phase, funds expanded to include more specialized arbitrage, event-driven, macro and credit-related strategies.

“The Hedge Fund 3.0 concept reflects the emergence of specialty providers who focus on the hedge fund industry, enabling fund managers to concentrate on key aspects of investment management while reducing their base of fixed costs,” Alan Pace, Head of Prime Finance in the Americas at Citi, said. “These experts have a keen understanding of the complexities of hedge fund management and can lift the burden of building and maintaining the infrastructure needed to handle complex trading strategies, as well as extensive regulatory and reporting demands.”

The Citi Prime Finance Hedge Fund 3.0 model proposes to help fund managers control the ratio of support staff to investment professionals, reduce the cost of the internal employees and remove the need for an extensive infrastructure and IT support function.

3.0 includes:

  • Business process outsourcing for middle-Office, collateral management, cash & treasury, and reference data management functions
  • Specialist HR and benefits brokers, including professional employee outsourcing (PEO) options.
  • Off-premise IT services, often leveraging cloud technologies

“While the Hedge Fund 3.0 model will benefit firms that are about to launch or are in the early stages of their development, the model is also useful for funds with established infrastructure and resources,” Sandy Kaul, US Head of Business Advisory at Citi, said. “Over time, many funds will move to a hybrid approach that combines in-house and outsourced resources.”

Alex Akesson
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