Fintech Insights

How Hedge Funds Can Capture Their Share of $3.2 Trillion

July 13, 2018

It’s no secret the hedge fund space has been rattled over the past few years. While recent reports show that the hedge fund industry now has a total AUM of over $3.2 trillion, driven by inflows of $59 billion over the course of 2017, there have been struggles.  A strong bull market, trend toward passive investing, and lower volatility, all have made it difficult for managers to outperform the market.  These factors have made attracting inflows of capital more challenging than ever. Then consider this startling statistic from Preqin’s 2018 Global Hedge Fund Report: 89 percent of the total AUM is managed by only 13 percent of hedge fund managers. This means it’s particularly difficult to attract capital if you aren’t in the top 13 percent.

So what can the other 87 percent of hedge funds do to capture more of that $3.2 trillion?

When competition is fiercer than ever, the cost of being in business is high and resources are tight, it is critical that operations are set up to maximize growth. The hedge funds that are ready to rise know that a jump in growth requires a resilient springboard. And in this case, that springboard is an operational environment that is as streamlined and efficient as possible.

For a hedge fund that’s looking to boost its competitiveness and ensure resources are focused as much as possible on delivering alpha, attracting inflows and servicing clients, there is an ideal model for the next era of operations: business process as-a-service (BPaaS).

When a hedge fund embraces BPaaS, it’s ultimately a move to free up many parts of the operation that are less strategic, or that a best-of-breed service provider can do better, and transferring those parts to the provider. While it may not be quite this simple in practice, imagine listing all the operational areas that take up most of your team’s energy and time, and reviewing where you can “turn on” a service from a reliable partner dedicated to mastering these areas. Now, doesn’t that sound satisfying?

If you are ready to grow and haven’t yet considered an outsourced, BPaaS model for your operations, this may be the time. Remember: to jump to growth, you need a springboard to jump from. If your fund is ready for growth, consider a partner that can help you boost your operational excellence by taking your operations to the next level.

Want to learn more about how FIS empowers hedge funds with a BPaaS approach to operational excellence? Contact our team today.