Spreading The Wealth In Risk Management

Jan 18 2007 | 10:20am ET

Rising fees notwithstanding, many smaller hedge funds rely on an old standard for their risk management systems, Microsoft Excel, according to a new study from buy side research firm Carbon360.

“Funds under $4 billion rely on Excel or prime broker-delivered risk solutions,” said Brian Shapiro, president of New York-based research and consulting firm Carbon360. “The larger risk systems, which can cost up to $4 million to buy and install are completely unaffordable for the smaller funds.”

Instead, they’ve turned to the ubiquitous, more affordable spreadsheet (retail price: $229). According to the new study, fully 29% of hedge fund risk management is still based in Excel leaving a lot of room for growth in sales of risk systems.

“A majority of interviewed firms advised that their primary risk systems have all been built in-house,” Shapiro said. “This leaves open the opportunity for many of the vendors mentioned in this report to see strong sales in the years ahead.”

Carbon360 expects spending on risk and portfolio management systems will rise 17.36% this year to $5.25 billion and to $9.68 billion by 2011, driven by demand from alternative firm clients.

“We do see a trend in the uptick in demand for risk systems driven by institutional investors seeking greater transparency and risk controls,” Shapiro said.


In Depth

GSAM's Papagiannis: Liquid Alternatives For The Long Run

Apr 21 2017 | 8:44pm ET

Interest in liquid alternatives cooled a bit last year amid a broad shift in investor...

Lifestyle

Aston Martin Returns To Debt Market As DB11 Drives Turnaround

Mar 31 2017 | 5:21pm ET

James Bond’s preferred carmaker is returning to the public debt markets for the...

Guest Contributor

Debunking Conventional Investment Wisdom (Part II)

Apr 17 2017 | 5:56pm ET

The alternative investment industry is currently replete with buzzwords around data...

 

From the current issue of