By Bob Goldbaum and Craig Rowland
The HFM European Tech Leaders’ Summit, held this year in London, sizzled with energy as senior executives and technology staff engaged in panel discussions and roundtable conversations. A wide range of alternative investment firms was represented, from those who handled $100MM in assets under management (AUM) to those responsible for several billion dollars. As we listened and participated at the summit, we gained many insights:
1. In the “build vs. buy” debate, “buy” is gaining ground.
Tight budgets and conflicting priorities are driving alternative investment firms to put cost benefits under the microscope in build vs. buy discussions. With the growing availability of off-the-shelf products and third-party service providers, buying is becoming a more and more attractive option, especially when the software or service in question is operational in nature. For example, investor servicing, reporting, and maintaining certain aspects of compliance can all be administered with purchased products or services.
Choosing to buy rather than build cuts development costs and allows alternative investment firms to repurpose their internal resources on strategic business interests and activities such as refining their trading algorithms.
2. Cloud-based solutions: shunned no longer.
Just a few years ago, many alternative investment firms shunned cloud-based solutions as unreliable, inconvenient, or insecure. Today, that has changed. Firms are embracing the cloud, recognizing that cloud-based infrastructure is often more sophisticated and secure than what they can develop in-house. Their data is safer in the cloud than it would be in their own internal network.
The cloud is not necessarily cheaper, though. But any additional cost is deemed acceptable because of the quality and efficiencies to be gained compared to a firm owning its own software.
3. The weakest link is always the human one.
A constant theme at HFM in the area of IT security was training employees in secure behaviors. Mobile devices and work-from-home options continue to pose a challenge to security. While some firms do not permit employees to use mobile devices or to work from home, many do, citing increased productivity as worth the flexibility. However, consistent training in security protocols is vital to increase awareness and promote best practices. A significant number of firms, when asked, said that they did not currently have a solid security training program in place, but that it was a priority to establish such a program for their employees.
4. Get ready for a new abbreviation: GDPR.
General Data Protection Regulation (GDPR) was a big topic at HFM. GDPR focuses on providing greater protection for personally identifiable information (PII) for individuals in the European Union (EU). Firms have time to prepare, since the regulation does not go into effect until May 25, 2018. Nevertheless, they still need to move quickly, since they will be required to encrypt and protect all data in transit and at rest. Failure to comply with GDPR once it is in effect will net substantial fines.
5. Guarding the recipe for the “secret sauce” is a huge concern.
Alternative investment firms are not only concerned about preserving the security of their investors’ PII – they are also vitally concerned about protecting their own algorithms and intellectual property. These, after all, are the “secret sauce” that gives firms their edge in the marketplace and delivers returns for their investors. Firms are tightening up IT security to prevent their employees from walking out the door with code, and to block hackers from breaking in and stealing that code.
Once again, the HFM European Tech Leaders’ Summit proved to offer a wealth of insight, information, and expertise to firms engaging in the alternative investment space!