Hedge funds choose outsourced and customised trading solutions
A raft of new hedge funds have recently launched in Asia,
choosing to outsource customised trading
solutions for managing trading and commission payments.
Chris Jenkins, managing director of Asian specialist broker
Tora, said start-ups in previous years often chose to build their own systems
and staff them with their own traders but the current climate had changed the
appetite of the latest breed of hedge funds.
may be down but we’re seeing increased activity this year in terms of new hedge
fund launches. Over the last year-to-eighteen-months there have been several
spin outs from other funds – for the time being that trend may be coming to an
end but there are still a lot of new fund launches, albeit with second- or
third-generation managers,” says Jenkins, admitting there was still a significant
gap between the big finds and the small funds. “It seems they are either under
US$50 million or you’re over US$1 billion.”
In terms of
the services these new funds require from brokers and technology providers,
Jenkins says they are becoming increasingly sophisticated.
funds which are looking to find an edge, so from a technology perspective we’ve
seen an uptick in the demand for customised automated strategy tools,” he says.
“These hedge funds have a trading strategy they want to implement but they want
it automated because they have so little staff. We’re now building tools on a
customised basis for these hedge funds, such as gamma-hedging, auto futures hedging,
as well as uniquely customised algos.”
explains that every hedge fund wants to prove itself to investors and get
decent performance, and customising their tools offers them an edge.
same reasons, our outsource trading is also growing in Asia as local funds look
to start up and US funds decide not to fork out expensive real estate fees to
set up in Hong Kong,” says Jenkins.
2006-7, many hedge fund start-ups were over-subscribed and gained regulatory
approval quickly, Jenkins says that simply isn’t happening anymore. This has
meant a sharper focus on systems and processes, which has led to higher demands
on technology providers.
order routing is exactly that – generic and commoditised. These days, new hedge
funds need something else.”