Innovation, Technology Molds Hedge Fund Sector At Its Best
Manager of the hedge funds know that competition will be tighter over the next 5 years. Survey says further that most expect to significantly increase their focus on innovation in order to uncover new operational efficiencies, improve compliance and drive investor relations. A new era of innovation-led competition is emerging.
While some may suggest that the hedge fund sector has been somewhat shielded from the disruption that has been wrought on other financial services sectors by digitization and technology, it seems clear that the sector is now undergoing a period of technology and innovation-led competition.
According to our survey, 94 percent of hedge fund managers believe that technology will have an impact on competition over the next 5 years. More than a third - 38 percent - say that technology's impact will be significant. Larger funds seem more concerned about the impact that technology will have on competition. In fact, funds with AUMs of more than US$500 million are around 10 percentage points more likely to say that technology will have a significant impact on competition than those with AUMs of less than US$500 million.
Globally, fund managers are investing significant sums into technology and tools. And, not surprisingly, the amount invested tends to increase with the size of the fund. More than half of those with AUMs of more than US$5 billion report spending more than US$5 million per year over each of the past 5 years. Eighty-six percent of funds with AUMs of less than US$500 million report spending less than US$500,000 per annum on technology over each of the past 5 years.
Our data suggests that North American funds are investing more in technology transformation in the hedge fund sector. One-in-five North American respondents say they spent more than US$5 million on technology over each of the past 5 years versus 12 percent of European respondents. And while no funds based outside of North America and Europe report having spent more than US$5 million on technology over the past 5 years, this is likely indicative of the size of funds in Asia Pacific rather than a lack of willingness to invest.