Hedge funds use technology and systems integration to manage risk

Hedge funds use advanced technologies and systems integration to improve risk transparency

Beacon Platform Inc.’s research identifies key risk management capabilities

But not many hedge fund managers describe their existing systems as “excellent.”

London, December 4, 2024 New global research* from Beacon Platform Inc. shows that advanced technologies and systems integrations play a critical role as hedge funds seek to increase their visibility in an increasingly risky and volatile investment environment.

The executives surveyed were asked to rate the importance of five essential risk management skills. Almost all respondents (93%) identified seamless integration with existing systems, including compatibility with current tools and near real-time position, PnL and risk data, as an important or very important source of competitive advantage for their systems. Advanced technical features such as a cloud-based architecture for scalability and an integrated development environment for proprietary models and customizations were the second most important (87%).

Table 1: How important will these aspects of modern portfolio analysis and risk management systems be as a source of competitive advantage?

To identify the leading funds, executives were then asked to assess the competitiveness of their existing systems. Surprisingly, Beacon Platform Inc.’s study of 100 executives in the US, UK, Germany, Switzerland, France, Italy, Sweden, Norway and Asia, responsible for a total of $901 billion in assets under management, found that just 20% of respondents describe the competitive advantage they gain from their portfolio analysis and risk management system as “excellent”.

System integration leads to more success.

Integrated systems play an important role in competitiveness and risk transparency. Half of those who rated their competitive advantage as “Excellent” said their systems were extremely well integrated, compared to just 5% of those who had a competitive advantage rating of “Good” and none of the “Average” funds. Likewise, 60% of the “excellent” risk visibility group said their systems were extremely well integrated, compared to 10% or less of “good” and “average” funds.

Table 2: System integration and competitive advantage

Table 3: System integration and risk visibility

Increased technology investments are paying off.

All funds that described their current system as excellent were more likely to have dramatically increased their risk management budget in the last two years (55%), compared to 13% of those that described their system as good, and only 6% of those who rate it average.

Table 4: Competitiveness and risk management budget

As a result, funds in the Excellent group saw greater improvement in risk visibility: 60% said visibility had improved dramatically over the last two years, compared to less than 10% of those rating their system as good or average.

Table 5: Competitiveness and risk visibility

said Asset Tarabayev, Chief Product Officer at Beacon Platform Inc: “Hedge funds clearly understand that data and systems integration are essential components of both risk visibility and competitive advantage – even though only one in eight believe their current systems are extremely well integrated.”

Notes for editors

* Beacon Platform Inc. commissioned independent research firm Pure Profile to survey 100 senior hedge fund executives in the US, UK, Germany, Switzerland, France, Italy, Sweden, Norway and Asia, who collectively account for $901 billion in assets under management US dollars are responsible. The research was conducted in August 2024 using an online methodology.

For further information please contact

Phil Anderson at Perception A on 044 7767 491 519

About Beacon

Beacon is a financial technology company that offers everything quantitative developers need to quickly build, test, deploy and share trading and risk applications, analytics and models. Built by a team with unrivaled financial markets experience, Beacon’s unified platform includes the apps, tools and infrastructure companies need to migrate their software and infrastructure to the cloud, manage risk across asset classes and focus on developing innovative Focus on strategies that provide a competitive advantage. For more information, visit www.beacon.io