Shopping for Support
Fund entrepreneurs desire big-time IT services without the hefty price tag.
As traders at bulge-bracket firms continue to head out the door to start their own hedge funds, they are demanding IT support that’s on a par with what they received at their former firms, albeit at a much lower price tag.
That’s creating a premium on IT providers that can combine tech savvy with financial smarts.
“We need to understand their business model, as well as their risk tolerance,” Michael Madigan, client services director at Chelsea Technologies, told Markets Media. “Most of these guys come from prop desks at banks, and are used to having a big IT support organization.”
The Volcker rule, issued by federal banking regulators and the SEC, prohibits banking entities from engaging in prop trading, i.e., in trading for their own account. That has produced an exodus of talent from the large banks that’s looking to set up shop for themselves.
“They want to be able to leverage their proprietary trading models by deploying name-brand technology, high availability and disaster recovery, on a shoestring budget,” Madigan said.
“Someone looking to launch a fund will call us in to translate their business requirements into technical specifications,” said Madigan. “Clients also have specialized projects such as e-mail upgrades, integration of new apps, or a CRM [customer relationship management] solution.”
Chelsea Technologies’ client base is comprised mainly of hedge funds, banking institutions and private equity firms.. In addition to having a large presence in the financial industry, Chelsea Technologies has clients that consist of media corporations and aeronautical businesses.
“On the surface, IT support is no different for financial services than for any other industry,” Madigan said. “What makes us unique is that we understand and have knowledge of high availability and low latency, which are critical in capital markets. We understand the demands and the lingo of our clients.”
Servicing capital markets firms also requires understanding of compliance and regulatory requirements around business continuity, archiving and disaster recovery.
“Message archiving is very host and has been for awhile,” said Madigan. “Business continuity, and the need for replicating data offsite and available at a moment’s notice has become apparent in the last two years.”
Social media is another hot button technology issue, both from a compliance standpoint and as a trading strategy in its own right.
“We launched a fund in August whose platform is purely social media,” said Madigan. “The technology will crawl social media engines for information used to inform trading decisions.”
One example of a social media conundrum would be if a blog post regarding an impending initial public offering includes material, non-public information. In this case, the investment bank underwriting the IPO could be held responsible.
“Lots of funds that are worried about what employees are putting out on social media sites,” said Madigan. “We utilize inexpensive solutions to archive all social media content, and some of our clients are blocking all access to major social media sites.”
Through an alliance with PTS Consulting Group, an international IT consultancy and project management company; Chelsea Technologies, is providing q global, one-stop solution for technology consulting and managed services.
The partnership addresses growing demand in the financial industry for a global solution for managed IT and consultancy service. Strategically, the deal marks a milestone in the delivery of a global 24x7x365 support model to financial clients with offices in multiple international locations, the companies said.
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