HEDGE FUNDS ARE USING ADVANCED TECHNOLOGIES AND SYSTEM INTEGRATION TO IMPROVE RISK VISIBILITY
Beacon Platform Inc. research identifies the most important risk management capabilities
But not many hedge fund executives describe their existing systems as “Excellent”
London December 4, 2024 New global research* by Beacon Platform Inc. shows that advanced technologies and system integrations are playing vital roles as hedge funds strive to improve their visibility in an increasingly risky and volatile investment environment.
The surveyed executives were asked to rate the importance of five essential risk management capabilities. Almost all of those surveyed (93%), described seamless integration with existing systems, including compatibility with current tools and near-real-time data on positions, PnL, and risk, as an important or very important source of competitive advantage of their systems. Advanced technical features, such as cloud-based architecture for scalability and integrated development environment for proprietary models and customisation, were the next most important (87%).
Table 1: How important will these aspects of modern portfolio analytics and risk management systems be as a source of competitive advantage?
| Very Important + Important | |
| Seamless integration with existing systems – Compatible with current Portfolio and Order Management tools – Provides near real-time data on positions, profit and loss (PnL), and risks | 93% |
| Advanced technical features – Cloud-based architecture for scalability – Integrated development environment for customization | 87% |
| Broad market coverage – Supports multiple asset classes across global markets – Allows funds to capitalise on diverse opportunities | 86% |
| Powerful reporting capabilities – Scalable framework for customizable reports – Enhances risk transparency and PnL explanations | 84% |
| Single, extensible platform – Consolidates analytics and risk management in one solution – Adaptable to evolving fund strategies and market conditions | 79% |
To identify the leading funds, executives were then asked to rate the competitiveness of their existing systems. Surprisingly, the study by Beacon Platform Inc., with 100 executives in the US, UK, Germany, Switzerland, France, Italy, Sweden, Norway, and Asia responsible for a collective $901 billion assets under management, found that just 20% of those surveyed describe the competitive edge gained from their portfolio analytics and risk management system as “Excellent”.
Systems integration is leading to greater success.
Integrated systems are playing an important role in competitiveness and risk visibility. Half of those who rated their competitive edge as “Excellent” said their systems were extremely well integrated, compared with just 5% of those who had a “Good” competitive rating and none of the “Average” funds. Similarly, 60% of the group with “Excellent” risk visibility said their systems were extremely well integrated, compared with 10% or less of the “Good” and “Average” funds.
Table 2: System integration and competitive edge
| Thinking about the hedge fund you work for, how well | How would you describe the competitive edge of the portfolio analytics and risk management systems at your fund? | ||
| integrated are its technology systems? | Excellent | Good | Average |
| Extremely well integrated | 50% | 5% | 0% |
Table 3: System integration and visibility of risks
| Thinking about the hedge fund you work for, how well | How do you rate your hedge fund’s visibility of the risks it faces?? | ||
| integrated are its technology systems? | Excellent | Good | Average |
| Extremely well integrated | 60% | 4% | 10% |
Increased technology investments are paying off.
All of the funds who described their current system as excellent were more likely to have increased their risk management budget dramatically over the past 2 years (55%), compared to 13% of those who describe their system as good, and just 6% of those who rate it average.
Table 4: Competitiveness and risk management budget
| How has the risk management budget at your | From a competitive perspective, how would you describe the portfolio analytics and risk management processes around your fund management firm’s work? | ||
| organisation changed over the past two years? | Excellent | Good | Average |
| Increased dramatically | 55% | 13% | 6% |
As a result, funds in the “Excellent” group have experienced greater improvements in risk visibility, with 60% saying visibility has improved dramatically over the past 2 years, compared to less than 10% of those rating their system as good or average.
Table 5: Competitiveness and visibility of risks
| How has its visibility of the risks you fund | From a competitive perspective, how would you describe the portfolio analytics and risk management processes around your fund management firm’s work? | ||
| faces changed over the past two years? | Excellent | Good | Average |
| Improved dramatically | 60% | 8% | 6% |
Asset Tarabayev, Chief Product Officer at Beacon Platform Inc. said: “Hedge funds clearly understand that data and systems integration are essential components of both risk visibility and competitive advantage—even if only 1 in 8 think that their current systems are extremely well integrated.”
Notes to Editors
* Beacon Platform Inc. commissioned independent research company Pure Profile to interview 100 senior hedge fund executives in the US, UK, Germany, Switzerland, France, Italy, Sweden, Norway and Asia collectively responsible for $901 billion assets under management. The research was conducted during August 2024 using an online methodology.
For more information please contact
Phil Anderson at Perception A on 044 7767 491 519
About Beacon
Beacon is a financial technology firm that provides everything quantitative developers need to rapidly build, test, deploy and share trading and risk applications, analytics and models. Developed by a team with unmatched financial markets experience, Beacon’s unified platform includes the apps, tools and infrastructure firms need to migrate their software and infrastructure to the cloud, manage risk across all asset classes, and focus on building innovative strategies that provide a competitive edge. For more information visit www.beacon.io
