Hedgeweek Interview: Beyond the Cloud

With a heavy dose of irony, Robert O’Boyle, Executive Vice President and Director of Sales & Marketing at Liquid Holdings, recalls how last year he commented that all the coverage of the ‘cloud’ was overblown.

“What I mean here is that the topic has reached a saturation point. There are very few people who don’t know that the cloud exists or what the benefits are. There’s nothing more to reveal about the cloud – now it’s a case of leveraging what’s actually in the cloud,” says O’Boyle.

A survey conducted a few years ago entitled “Cloud Adoption Trends in the Investment Management Industry” found that eight out of 10 hedge funds were using or in the process of deploying the cloud to address certain parts of their IT infrastructure and application needs.  Adoption has continued apace. Last year, a survey by Ernst & Young found that 47 percent of hedge funds already outsource technology and data management to improve operational efficiency, with a further 28 percent indicating that they planned on doing so over the following two years. Explaining the virtues of a multi-tenant versus single tenant cloud architecture used to elicit a pained expression. Now, familiarity is bedding in. Hedge funds get it, they know how it works and they are investing in it.

It’s time to consider the next stage of the discussion – cloud capability. How can the cloud demonstrably change and benefit a manager’s day-to-day business activities?  This is what O’Boyle refers to as elevating ‘Beyond the Cloud’.

“At Liquid Holdings, we’ve always focused on the cloud as a very important business model transformation which allows us to service our clients faster and more efficiently. Not all clouds are built the same. So this concept of moving beyond the cloud is about educating the audience on the actual capabilities available within, and not merely about deployment.”

Managers need to know the basics of the cloud. Here are four examples, which are by no means exhaustive, but serve as a good illustration of where Liquid Holdings is focusing its attention.

1. Scalability and the act of becoming a co-sourced data custodian

One of the biggest challenges hedge fund managers face operationally is the volume of data needed to fully understand their investment profile while complying with and meeting regulatory and investor demands.  Big Data – including both raw and derived data – is something that any cloud platform has to adequately support. Put simply, it needs to be scalable.

“A true cloud architecture can support big data without sacrificing speed, performance or support. Our approach allows us to be a more effective ‘data custodian’. A multi-tenant cloud platform meets the classic definition of Software-as-a-Service. We have multiple organizations and data structures running on a unified database,” says O’Boyle. He adds, “The cloud is a much more viable solution for organizations looking to take advantage of Big Data for historical, real-time or forward-looking purposes.”

Managers that can accurately mine data by using such a cloud-based architecture benefit in two primary ways:

• Supporting enhanced decision making. This is where the real-time aspect of supporting big data is so important.  “This concept of scale allows us to have a unified database across OMS, EMS, risk analytics, P&L, returns and performance. We offer a single operating system that breaks down silos because we have massive scale that can readily support large data sets across key front- and middle-office functions,” says O’Boyle. This means that a hedge fund manager can leverage their historical portfolio and investor data with real-time data alongside forward-looking scenario model data to enhance their decision-making process.

• Secondly, it supports enhanced communication with investors. Personalized transparency is an important facet of the GP/LP relationship. The investor wants to know what’s going on in the hedge fund and likewise, the manager needs to be in command of the information their investors’ request.

2. Mobility supports actionable data

The cloud can be viewed as a repository for data. This is the deployment point made earlier. Fund managers love out- or co-sourcing their IT infrastructure to give the key individuals across their firm access to the same pool of clean, normalized data held in the cloud. This mitigates human risk and furthermore helps to streamline a hedge fund’s operations by moving away from a disparate multi-system architecture to seamless workflows for investing, risk management, reporting and trade reconciliation.  Yet that’s only half the story. It’s all well and good having access to data. More important is how that data can be acted upon to bring tangible benefits to the fund. Key to this is knowing that the data is updated in real-time, taking into account the latest transactions, and can be accessed on mobile devices.

“A distinct advantage of a cloud-based offering is this concept of mobile and being able to access your information everywhere. One of the things that we continue to move towards is having a user experience that is device optimized. There’s a common phrase used across industries – BYOD or Bring Your Own Device. We aren’t beholden to technology – we are creating strong device independence and touch optimization around the key data that fund managers require to operate their business when the markets are calm and during high volatility,” explains O’Boyle.

Actionable data matters. A lot of cloud platforms today host data but the best a manager can do, even on a mobile device, is access PDF reports. This is not actionable data – it’s static.




“With Liquid, the experience on the tablet is such that you are able to create and access customizable widgets for specific data elements. You effectively create your own dashboard of key statistics, whether it be for portfolio, risk, or client management. Other providers offer this but because of the underpinnings of their ‘cloud’ solutions are full of legacy approaches, they have to build layer upon layer. This creates latency, cross-referencing, and data discrepancy problems when you’re dealing with siloed data coming from different systems which update on different schedules,” adds O’Boyle.

It’s one thing to have an outsourced IT provider to maintain one’s hardware and database. It puts the workload and the risk on someone else’s shoulders and allows the manager to focus on their expertise of making returns for their investors. But when selecting a cloud provider, fund managers should also be thinking, ‘What are they giving me beyond this transference of responsibilities?’

“For us, when we refer to ‘beyond the cloud’ a lot of it has to do with this concept of continued evolution and right now, that is a convergence of mission-critical capabilities accessible from any device,” stresses O’Boyle.

Liquid Holdings soft-launched its mobile-optimized app, LiquidMobile, in Q3 to a select number of clients and it is now readily available for the hedge fund community here: http://liquidholdings.com/solutions/liquid-mobile.

3. Investor Transparency

There is still a degree of intransigence among some hedge fund managers when it comes to embracing real-time data management, be it for portfolio or risk management. O’Boyle refers to one particular client with whom he regularly debates the virtues of real-time data. Time and again, the stock responses are, ‘I don’t need real-time, we look at risk at the end of the day’ and ‘yes, it would be a nice-to-have option’. O’Boyle argues that having actionable data should not be a nice-to-have option.

“I’m fairly sure that managers have at one point received a phone call from one of their investors and been asked a specific question about the fund, and they have probably responded ‘That’s a great question, let me get back to you’. Right away, the manager has missed the opportunity to grab the information and answer the investor while still on the phone. That level of trust building and demonstration of being in total command of the fund is only going to lead to one thing: more allocations. People want to put their money with managers they completely trust and trust is going to be impacted in a positive or negative way by how effective the manager is at communicating with their investors.”




By utilizing the full capabilities of the cloud, managers can put themselves in a position where they are able to respond when their investors require it, not when they feel like it. It’s a subtle shift, but one that could lead to the manager next door getting the allocation while you watch your AUM plateau.

4. Managed Services

Managed services is a key component of Liquid Holdings’ platform and another example of where the cloud can offer managers a practical solution. This is especially the case when it comes to outsourcing middle- and back-office processes. As O’Boyle says, “we’re not portfolio managers but we are good at data management and problem solving”.

In this instance, not only does the cloud eliminate IT and provide a scalable data structure, it also provides the operational support to help hedge funds eliminate the cost of operational headcount.