09 Jun 2016

Hedge Fund Tips: Office Space

Today on the blog, RFA Managing Director George Ralph discusses how to identify an office space that maximises your hedge fund’s technology performance.

As a new hedge fund, your office layout will be one of the largest factors to impact your technology performance. Whilst technology has evolved to enhance scalability and efficiency, your fund’s office setup will still impact your technology performance. But how can you maximise your space for the best technology performance, and how can you ensure that your office space works with your desired technology set up? Today I outline five factors to keep in mind as you look for your first office.

1. When looking for an office space for your hedge fund, expect to grapple with several challenges. In addition to high costs and competition for limited space, you will also have to navigate the many layout challenges that come with older buildings. Whilst newer construction might sound appealing, it is also limited and more expensive. The layout challenges of older buildings can include lack of space, poor lighting, low ceilings, inefficient airflow and HVAC setup and poor network connections. Each of these factors will have an impact on your fund’s ultimate technology performance.

2. Once you have selected your office space, it is important to evaluate the limitations of the new space alongside your budget and firm’s projected growth plan. The pros and cons of each technology set up should be mapped out and thoroughly evaluated. Start-up hedge funds typically must decide between utilising the cloud, on premise services, or a hybrid approach. Today, many new hedge funds are selecting the cloud for a variety of reasons, including lower start-up costs, enhanced scalability and greater cost efficiencies.

3. There are several factors to consider when deciding between on-site servers and the cloud. For example, on-site severs consume lots of energy, so be sure to factor high electrical costs into your budget. A Comms room will need to be factored in along with air conditioning and specific power outputs. Servers also include several components and must be replaced every five years, but are often more efficient for housing larger capacity files and for bandwidth-prohibitive operations. In comparison, the cloud requires lower start-up costs and requires resources to be paid for as consumed as opposed to upfront; however, cloud performance is highly dependent on the available internet connection and speed and requires significant bandwidth. Many firms also employ a hybrid technology approach, which utilises a mix of on-site servers, private cloud, and public cloud.

4. A technology partner like RFA will provide local knowledge of the area and restrictions, introductions to property agents and serviced office providers, and project manage the process. RFA will also advise you on how to design a technology infrastructure that supports both your current and long term goals, maximises your office space for the best performance, and provides the greatest cost efficiency as you scale.

5.  Serviced or Leased? This can be a a key deciding factor with technology choice with most serviced office providers charging you corkage for your own connectivity and fees for rack space in a shared Comms room (leaving your physical security questionable). Leased however, ties you into long term contracts and requires (normally) a large capEx cost to fit it out. Generally we visit multiple options with our clients to help negotiate rates to favourable position and assisting in calculating the ROI of each.

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