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Bart McDonough From Kirsten Bischoff, Opalesque New York:

The bulk of technology spending in the hedge fund industry during 2011 will be spent on maintenance as firms await final regulation before spending money on IT solutions for compliance requirements. This, together with continued growth in the number of launching funds, has the IT industry poised to see increased spending in 2012.

“By 2012 IT spending will return to a solid growth pattern, with firms spending at a pre-crisis level. Firms will also seek to differentiate by achieving operational alpha through technology,” says research released this week by Celent. Much of this work will be outsourced, according to the Celent survey as funds post-crisis remain focused on delivering alpha to investors and more readily embrace unloading non-alpha generating activities to vendors.

Perhaps the biggest driver of IT spending will be new launches. The higher level of experience that managers at most new launches have in 2011 compared to 2007 is very evident. With this experience come raised expectations on the parts of these launching managers (such as prop traders) who spin out of large firms and are used to managing portfolios with the benefits of institutional infrastructures.

Although it is always different when managers are spending money from their own budgets, the asset-raising environment is still enormously competitive. “Cost and capability are the two things CTO are looking at when making an IT decision,” Bar......................

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