Citi introduces operating model for "maturing" hedge fund industry
10 November 2011 New York
Image: Shutterstock
Citi Prime Finance has launched its new operating model for hedge funds which it says will allow managers to run an operation with smaller teams and less IT bulk .
The concept details an outsourcing and partnership framework across business, knowledge, professional and employee process outsourcing as well as cloud technologies to reduce IT costs.
"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," said Alan Pace, head of Prime Finance in the Americas at Citi. "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 offering comes at a time when hedge funds have evolved past initial developmental stages, says Citi, moving from a niche business relying upon a single prime broker to increasingly complicated, global strategies across multiple asset classes, in turn, requiring multiple prime brokers for support. Meanwhile, as the hedge fund industry grew rapidly, more infrastructure and IT support was required leading to a high fixed cost base and organisations continue to face challenges posed by proprietary built technology systems.
"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," said Sandy Kaul, US head of Business Advisory. "These firms can think strategically about the use of outsourced partners, especially when facing trigger events, such as, expansion to larger office space, replacing end-of-life equipment, moving to multi-currency operations, or launching a new investment strategy. Over time, many funds will move to a hybrid approach that combines in-house and outsourced resources."
The concept details an outsourcing and partnership framework across business, knowledge, professional and employee process outsourcing as well as cloud technologies to reduce IT costs.
"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," said Alan Pace, head of Prime Finance in the Americas at Citi. "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 offering comes at a time when hedge funds have evolved past initial developmental stages, says Citi, moving from a niche business relying upon a single prime broker to increasingly complicated, global strategies across multiple asset classes, in turn, requiring multiple prime brokers for support. Meanwhile, as the hedge fund industry grew rapidly, more infrastructure and IT support was required leading to a high fixed cost base and organisations continue to face challenges posed by proprietary built technology systems.
"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," said Sandy Kaul, US head of Business Advisory. "These firms can think strategically about the use of outsourced partners, especially when facing trigger events, such as, expansion to larger office space, replacing end-of-life equipment, moving to multi-currency operations, or launching a new investment strategy. Over time, many funds will move to a hybrid approach that combines in-house and outsourced resources."
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