Asset managers always need to be aware of emerging developments in the investment and securities business, to guide their organizational and fund growth strategy. Here are the current and upcoming hedge fund trends to take note of:
The growing popularity of advanced, cloud-based portfolio management systems. Aside from maintaining a well-trained talent pool, an asset management firm needs the right portfolio management system to ensure its smooth-sailing operations from day-to-day. After all, it will serve as the backbone of various aspects of the front, middle, and back office procedures. The best-of-breed software should be able to handle all the following portfolios: multiple 401(k) accounts, brokerage trading accounts, investment portfolio accounts, stocks and bonds, derivatives, high-yield savings accounts, fixed assets, and international assets.
Tightened regulatory standards. Across the globe, hedge funds are being subject to more stringent regulations established by the industry as well as governments. The tightened standards are a logical response to the controversies faced by the sector, as well as a growing awareness among client-investors regarding issues of transparency, accountability, and corporate governance. While this calls for rigorous procedures and greater investment towards compliance management, it can also be seen as a great opportunity and motivation to streamline business operations, boost efficiency within the organization, adopt the best innovations, and hone the skills of all staff, and ultimately, promote fund growth.
Shift towards passive investments. The debate between active and passive management of funds has been on for sometime. Active management refers to monitoring the market by the hour, and buying and selling based on the viability of opportunities that emerge. The appetite for risk is increased, which, during good market conditions, could lead to superior returns for the client investor. The goal is to generate growth that beats the overall performance of the market. Passive management, on the other hand, only involves market monitoring, and gains will only reflect the volatility or stability, if not upward tenor of the market. The latter means less risk, and also less fees to pay for, on the part of the investors. Today, there is a palpable shift to passive funds, especially in the pensions domain. Some factors driving this trend include the buyout of companies, and reduction of allocations to equities.
Helping many companies adapt to these hedge fund trends are asset servicing solutions that are equipped with the technology, strategies, and talent to navigate the challenges of fund management in today’s age.