One of the most important decisions a hedge fund will make is choosing which service providers to work with. Service providers can include IT providers, technology vendors, accountants, and law firms, making it likely that you will work with more than one service provider as your firm grows. Service providers can be highly valuable to a hedge fund by providing expertise, guidance, and assistance in managing internal business processes at a more cost effective price point. Because service providers can play a pivotal role in the success or failure of your firm, it is important to thoroughly evaluate potential providers before enlisting their services. Below are three things to keep in mind as you decide on which providers to work with.
Focus on the service provider’s area of expertise rather than their size.
Most new hedge funds will begin by enlisting an IT provider to get their operations up and running. While it may seem logical to go with a larger provider, it’s more important to go with a specialist partner that offers a range of services that can meet the specific needs of a firm in the financial industry and integrate with your other suppliers. A specialist provider will be able to advise you on industry specific issues, such as compliance, regulations, and cybersecurity. This will allow you to confidently offload a variety of internal operations so that you can focus on growing your business.
Make sure the service provider can grow with your firm.
Make sure the service provider can grow with your firm over the long term. Switching providers down the road is a costly and time consuming process that will steal time away from managing your core business, so it should be avoided at all costs. To ensure that the service provider can grow with your firm, check to see that they offer flexible terms that can be adjusted over time to meet your needs.
Evaluate the service provider’s reputation in your industry.
The reputation of the service providers you ultimately decide to work with will have an impact on your firm’s own reputation. Selecting highly reputable partners will instill confidence in your investors and demonstrate that you take your business seriously. You should evaluate the service provider’s customer base and check to see that they have strong vendor partnerships, the relevant accreditations, and that they exceed all security and compliance requirements. You should also ask for references from other firms in your sector.