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Alternative Market Briefing

The evolution of the hedge fund back office is a challenge for many managers

Monday, August 15, 2011

From Kirsten Bischoff, Opalesque New York:

It is difficult to believe that as recently as five years ago, many hedge funds were still tracking portfolio information on Excel spreadsheets. The very idea of it is so surprising that even the phrase is tossed about with incredulity (especially by anyone who has crashed a server hitting the update button on an intricate, massively-linked spreadsheet). Luckily, a technological evolution has coincided with the regulatory changes and investor demands made of the hedge fund industry back office. But even with that technology available, hedge fund managers need to embrace the fact that the back office is a place of constant evolution; because as incredible as the idea of an Excel driven fund is – they do still exist. But back office evolution has in fact grown to be so much more, and the most important aspects of this area of the hedge fund business include placing a high value on best practices for data management, knowledge of accounting rules changes, and the ability to meet investor expectations for transparency.

When speaking with many managers it is easy to see that philosophically, they understand that the state of their back office reflects their brand. However, in practice, especially today as regulatory and policy changes keep this area in a constant state of flux, managers seem to struggle with the challenges required not just to survive this evolution but to thrive in it.

"At the end of the day it is al......................

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