A multitude of factors is leading asset manager to adopt and deploy cloud-based technology for running their infrastructure: cost savings and backup/recovery chief among them. The cloud outsourcing model, which comes in a variety of favors—Infrastructure as a Service (IaaS), Software as a Service (SaaS), and Platform as a Service (PaaS)—enables hedge funds and other asset managers to leverage a shared IT platform at a fraction of the cost of maintaining one in house.
“For asset managers, we see cost-cutting and legacy IT consolidation are the primary drivers to adopt cloud-based solutions,” said Roji Oommen, managing director, financial services, at CenturyLink Technology Solutions. That said, there are many cloud models to choose from and factors to consider. For example, while it may make sense to leverage the public cloud model for test and development environments of new applications, there are often regulatory and governance issues that may drive firms to consider private cloud, managed hosting or pure colocation for other functions such as proprietary analytics applications or sensitive data.
“Likewise, a large firm may have complex holdings that make a full migration to an external cloud model extremely cumbersome, but they could – and do – consider public cloud services for functions such as on-demand access to portfolio valuation and risk analysis tools,” said Oommen.
The trade-offs for each model vary, depending on size of the organization, risk tolerance, legacy
IT environments and regulatory requirements. “Rather than a total outsourcing to cloud platforms, we see asset managers and other financial services firms taking more of a hybrid approach, enabling them to benefit from today’s rapidly evolving technologies while consolidating infrastructure resources and cutting costs,” Oommen said.
Evanston Capital Management, which manages $4.6 billion, specializing in the construction of multimanager hedge fund programs for 300+ institutional investors liked the combination of using a cloud-based service to not only eliminate capital infrastructure expenditures, but also improve upon business recovery, according to chief operating officer Ken Meister. It concluded that continuing with having an internal infrastructure and having to replace and maintain servers every few years was not a viable option.
Hedge funds are typically agile, and require robust technology, noted Grigoriy Milis, chief technology officer of Richard Fleischman & Associates. “Using the cloud, hedge funds can implement applications very fast with low capital expense, and it allows them to change applications quickly,” he said. “It’s much easier for the cloud provider to build a platform that complies with different regulatory requirements. It makes more economic sense for a service provider to build security and DR measures into their platform that for an individual fund would be substantially more expensive.”