Wireless Technology for Hedge Funds

Mobile technology for hedge fund managers on the go

Brian Macallister, Pyxis Mobile
Originally published in the February 2007 issue

In an industry where 'time is money' and best of breed solutions are common place, software providers are preparing for mobile solutions mass adoption. Technology to support the productivity of hedge funds has made a major leap forward in 2006 with the introduction of mobility tools designed to meet the needs of this demanding marketplace.

Laptops, which only a few years ago were rolled out to users across the industry, have largely failed to un-tether financial professionals from their desks. The size and weight of the laptop made it awkward to use on the go, and with system start-up taking so long, the solution continued to take a back seat to printed notes and frantic phone calls to assistants and trading desks. The result has been a reliance on desktop systems that eliminates the ability to be away from the office before, during, and after business hours.

In lieu of laptops, mobile devices have reached mass adoption in the hedge fund community and one would be hard pressed to find a manager or analyst trader in the field without a mobile device attached to their hip. However, many users perceive these devices as a glorified email pager, until now!

Day in the life

The average day in the life of a hedge fund manager starts at around 6:00am, ends at 9:00pm and includes early morning and end of day market and news reviews, team meetings, client conferences, prospective investment calls and administrative task completion. Because of the diversity of these activities, and the perceived complexity of information management required to be productive throughout the day, many of these professionals have resigned themselves to working from a single location, presenting an impersonal face to the critical business partners (both clients and investments alike) that come together to make the firm successful.

The information compiled for use by a hedge fund manager over the course of the day comes from a number of disparate systems including internal and external portfolio management systems, accounting systems, customer relationship management systems, outside market data providers, internal and external analysts, and news outlets. A visit to a fund's office is generally reminiscent of a visit to NASA's launch monitoring station, with data streaming to numerous large screens and monitors driven by keyboards more suited to guiding aircraft than for guiding investments.

Given the job requirements for a hedge fund manager and the critical nature of the information they monitor and manage it is no surprise that more than 90% of hedge funds believe that wireless access to their enterprise data is important to their managers and the firm. This is why hedge funds have been, and continue to, attempt to extend front office desktop systems to the users in the field. These efforts over the years have typically come with little success. This is in large part due to the demanding user requirements, device and carrier technical limitations and security constraints required within this community. These software solutions have been typically either proprietary or third party solutions that attempt to go beyond the traditional wireless email solution. The majority of hedge funds haven't crossed the threshold of extending other front office system beyond email.

As you can imagine, transitioning from the command centre like desktop environments to a device with a business card size screen has not been an easy process for a number of software providers and internal developments staffs. However, past debates over environment, devices and means of communication have been all but put to rest with the mass adoption of the BlackBerry Products, manufactured by Research In Motion Limited. The overwhelming device of choice by hedge fund managers, analysts and traders is the little wireless email device called the BlackBerry. According to a number of hedge fund managers this device is more than just a mobile email device; it is a way of life. And now with the technical advancements of the BlackBerry operating system and carrier networks, this once perceived email only device is being leveraged as their mobile desktop. These technical advances in recent years have eased certain problem areas when attempting to initiate a mobile strategy. In the past there have been far too many failures and few successes. Although with the proper organisation and presentation of data allowing end users to see the critical information necessary to be productive, without creating information overload would prove to be a profitable tool in the hands of a hedge fund manager. Often, the balance of what to show versus what not to show separates the good solutions from the bad.

If you were to ask any hedge fund manager what information and which systems they would like access to while they were out of the office without regard to technical limitations or current device constraints, you would be likely to hear a wide array of responses. However, market data and position profit and loss monitoring appear to be the most critical information required while they are away from the office. Other use cases include, but are not limited to: order management, order creation, analyst research, position reporting by book/trader/desk/country, CRM systems, alerting, news, watchlists, disaster recovery plans, compliance management and others.

The lack of success for mobile solutions hasn't been attributable to inaccurate use cases or lack of business requirements; on the contrary, these solutions typically meet or exceed the majority of the business requirements. Where these solutions come up short is in their implementation: device usability, performance, security and support. That is why more and more hedge funds, even those with a large in house development staff, are leveraging the expertise of third party mobile solution providers to assist in overcoming these obstacles.

Mobility Requirements

Any successful mobility solution within this sector must address four critical components: Presentation, Performance, Security and Support. All of which are equally as important. The ideal hedge fund wireless solution would include the user experience only achieved by a thick client application on a mobile device combined with the ease of support and deployment that a browser application can only provide.

Some of the hurdles to date within wireless solutions centre on meeting the unique needs of each individual hedge fund and extending their existing systems and business logic in a wireless environment. Similar to desktop applications in this space, there are no 'one-size fits all' mobile solutions. In fact, mobility needs for hedge funds require greater flexibility and customisation than traditional mobile solutions. This is where a number of mobile providers, third party venders and market data providers have fallen short in the wireless space. In other industries and sectors, workflows and presentation of data vary slightly. While one hedge fund to another quite often varies drastically with their unique workflows and tailored views. This extends not only to the way data is presented to the user but how and what business logic is applied to each mobile request.

Hedge funds have spent significant dollars building out their trade practices, profit and loss systems, order management solutions and decision support tools within their environment. These systems contain significant business logic that can't be compromised or avoided in a wireless environment. Any wireless solution considered in this market place must be able to extend their existing systems that they use today while maintaining data integrity regardless of the access point. The breakdown of this methodology does not lie solely in the hands of the mobile providers. Ideally all order management systems and decision support tools would be inter-operable and easily accessible from a third party solution, however, this is not always the case. In fact, a number of proprietary systems and third party solutions haven't opened up their business logic and data for external communication. Leading systems like Microsoft Excel, Eze Castle, Charles River Development, Advent, Beauchamp, Reuters, Dow Jones and others have made significant strides in re-architecting their environment for external access.

Hedge fund firms and financial services firms are looking to one integrated mobile solution. Wireless solutions are not new to the hedge fund community. In fact, market data providers and point to point solutions have been launched and re-launched over the years with limited success. These solutions may be perfectly fine when the mobile user has a certain business problem to solve and is willing to see only one systems data in a canned fashion. Hedge fund users today have 3 to 4 flat panel screens on their desk each displaying a different application on each. One screen may contain Microsoft Excel displaying intraday profit and loss, another displaying open orders, the third displaying their market data provider with instant messaging and of course we can't forget the fourth screen displaying Microsoft Outlook or Lotus Notes. Having four to five applications open at the same time is what it takes for hedge fund user to solve that one use case of: 'What is going on with what I own now'. This one use case is what Pyxis Mobile, Inc. is attempting to solve with mHedge. Extending what hedge funds users see on their desk with one integrated solution.

Future wireless solutions will be likely to follow what Pyxis Mobile, Inc. has deployed in late 2005, one integration wireless solution on a mobile device. This allows users to view their existing profit and loss systems integrated with their market data in one screen with one click on the mobile device of choice. The value of an integrated and customisable solution within the investment management community extends beyond just the hedge fund managers and traders. One flexible wireless/mobile infrastructure would allow:

  • Portfolio managers and traders access to profit and loss reporting, market data and trading.
  • Institutional sales associates access to holdings and CRM.
  • Chief Compliance Officers access to compliance violations.
  • Head traders access to trade reports, unattended orders and FIX alerts.
  • Firm wide disaster recovery/business continuation alternative.

The future is bright

We can't forget that advancement within wireless technology has allowed hedge funds to even consider a mobile solution in this space. Without the introduction of high speed carrier networks and a general focus on improvements within data networks there would not be a mobile solution suitable for the hedge fund community. Mobile users in this space require real-time access to research, market data and profit and loss at all times. There is not the market for staging/synchronising all of the data on the user's device. This is a significant technology shift for most mobile solution providers in the way data is stored and delivered to mobile users. Any significant delay of data delivered is considered out-dated and useless for evaluation and decision support. Acceptable response times for hedge fund users within a wireless environment maintain around five seconds. This requirement alone prohibits certain technologies to be leveraged and widely adopted within this space.

Regardless of the wireless solution considered, security of client data and adherence to trade regulations are of utmost importance in a wireless environment. With the advent of push email, mobile data services through Blackberry Enterprise Server, virtual private networks and the internet, hedge funds have grown accustomed to the means in which data is exchanged within today's wireless environment. Security extends beyond the data delivered in a wireless environment, while authentication and authorisation need to be considered and handled in a manner that is acceptable to the firm's policies and security regulations. Typically there is no room for any security shortcomings when considering a wireless strategy.

Given the unique needs of these hedge funds, a number of firms have attempted to develop their own wireless solution and initially have met and in some cases exceed the first three components necessary for a successful mobile solution (Presentation, Performance, and Security). However these solutions often lack the fourth critical component, Support.

Unlike deployment on a desktop, deploying and supporting any mobile/wireless solution is not a trivial task. With all of the various operating systems and versions of devices offered by carriers there are no standard deployment methods that can be undertaken without exceptions. Initial deployment of a solution on device is just the beginning to the headaches that occur with maintaining a mobile solution; bugs are identified, screens need to be adjusted to fit different devices, navigations will be likely to change per user or user group and the list goes on. Before anyone realises it, the project is shelved and your IT staff has just received a crash course on the blackberry and windows mobile operating system without any support or deployment answers.

The future of wireless solutions regarding support and deployment is likely to follow Pyxis Mobile's lead with dynamically changing thick client applications. This will allow hedge funds to tailor their deployed wireless solutions after they are installed without a re-deployment or user interaction; screens and deployed applications will change accordingly.

In today's market climate where information is becoming commoditised, hedge fund managers are encouraged to get out of the office and into the field for hands on research. In doing so, a hedge fund manager must have access to real time research, market data, intra-day profit and loss and portfolio holdings at all times. mHedge, offered by Pyxis Mobile, is a glimpse into the future of wireless solutions to be offered to the wireless hedge fund community.

Hedge fund managers are conducting business as usual tied to their desk or using point to point solutions in the field to date. Integrated wireless solutions will cut the tether between the managers and their desktop allowing access to all the necessary reports, market data and news to effectively manage their strategies, portfolios and trading activity from any location.