Five Hedge Fund Cloud Trends to Keep on Your Radar | Today on the blog, learn five hedge fund cloud trends that should be on your radar.
Hedge Fund Cloud Trend One: Hedge funds are adopting private cloud services at higher rates.
Over the last several years, hedge funds and other alternative investment managers have started adopting private cloud services at higher rates, and this trend is only expected to continue. Hedge funds are adopting the private cloud for a variety of reasons, including better cost efficiency, enhanced scalability and functionality, and even enhanced security. The private cloud enables hedge funds to get up and running quickly and efficiently by transitioning expenses from a CAPEX (capital expenditures) to an OPEX (operational expenditures) model. Rather than making a large investment in on premise technology that may need to be adjusted depending on how the hedge fund grows over time, the private cloud allows hedge funds to pay only for the resources that are consumed in the form of a monthly fee. If the hedge fund grows, the cloud specifications can be easily adjusted to accommodate the needs of the firm. The scalability of the private cloud minimizes the need for a complete IT redesign and eliminates the risk associated with an upfront technology investment.
Hedge Fund Cloud Trend Two: The private cloud is actually more cost effective for hedge funds.
It is widely accepted that the public cloud is not a viable technology option for hedge funds due to regulatory concerns around data location and customization. However, many hedge funds assume that the private cloud will always be more costly than the public cloud (due to the lower levels of customization offered by the public cloud and the lack of insight into data location). While as a whole the private cloud is a usually a more costly option, there are very few viable options for hedge funds when it comes to the public cloud. This is because many hedge funds require large amounts of computing and processing power and storage to run financial applications. The cost to run these applications in the public cloud can be significantly more expensive than the private cloud due to the lack of available customization.
Hedge Fund Cloud Trend Three: Regardless of your hedge fund’s size or IT approach, the cloud will bring benefits.
Historically, the private cloud was viewed as a viable option for smaller, start-up hedge funds with a non-quantitative investing approach. Today, however, the private cloud’s capabilities have become so advanced that it can bring great benefits regardless of a hedge fund’s size or approach. For example, larger hedge funds can leverage the private cloud’s scalability and flexibility by housing specific applications there. The computing power of the private cloud allows larger hedge funds to utilize power hungry applications while still enabling them to retain control over sensitive data and without overwhelming their own on premise infrastructure. In addition to larger hedge funds, the private cloud can now bring benefits to quantitative hedge funds. The next generation of the private cloud allows quantitative hedge funds to gain the same competitive edge they would utilizing on premise infrastructure. The fully customized and scalable nature of the private cloud enables quantitative hedge funds to adjust computing power based on individual specifications, as well as quickly and efficiently bring up or take down servers for testing abilities.
Hedge Fund Cloud Trend Four: Your cloud is only as good as your cloud provider.
Not all clouds are created equally, especially from a security, data location, and even customer support perspective. All of these areas will determine the functionality of the cloud. When it comes down to it, a hedge fund’s cloud is only as good as their cloud provider.
Because moving to the private cloud requires a hedge fund to shift complete responsibility for technology management to a provider, it is important to understand what types of capabilities will be included with the cloud. These capabilities can include disaster recovery, backup, and bundled applications. Additionally, hedge funds should consider where and how data is segregated, how operating systems are shared, what type of security is provided for the applications running in the cloud, where the cloud provider’s infrastructure resides, what type of hardware is used, and what type of compliance and security designations the cloud holds (SAS70/SSAE16, SOC 1/2, and ISO27001 are all designations to look for depending on your specific location).
Hedge funds should also consider what type of support will be provided with their cloud environment. Public cloud services are not designed with enterprise use in mind, so the level of support will likely not meet expectations. The right cloud provider will provide around the clock support and will be able to confidently address any questions about the specific cloud environment.
Hedge Fund Cloud Trend Five: The private cloud can improve your hedge fund’s security.
When managed and built by the right provider, the private cloud allows for enhanced control, privacy, and security of a hedge fund’s data. The private cloud mitigates security threats by automating security patching. In addition to automated patching, the private cloud ensures that all applications, such as email, CRM systems, or trading platforms stay up to date because they are run on secure systems within the cloud provider’s private infrastructure. Private cloud administrators can monitor and review employee actions on the network, as well as block or make updates to control usage based on employee status. This helps mitigate the risks associated with data privacy, location, and segregation.