The highly controlled world of hedge funds hasn’t always been trusting of outsourcing, but the pace of uptake over the past few years indicates that hedge funds now feel more confident with outsourcing. Previously, outsourcing among hedge funds was mostly limited to small firms looking to control overhead. Now, firms of all sizes outsource some or nearly all of their back and middle office, with a smaller portion of front-office activities being outsourced. We recently produced a report with Hedgeweek exploring the current trends in hedge fund outsourcing, the driving forces behind recent changes, the key functions most likely to be outsourced, and the remaining resistance some managers feel.
One-third of hedge fund firms are planning or considering an increase in outsourcing. While cost management has historically been a main driver, and remains a key driver today, innovation has stepped up in importance. Managers feel pressure to do more with less and differentiate themselves, leading them to choose between innovating at an unsustainable scale or reconsidering their stance on outsourcing.
While many thought the outsourcing trend had peaked over the last year or two, we are now seeing strong signs that managers are once again prioritizing outsourcing. Our report with Hedgeweek shows that 34% of hedge fund managers who responded to our survey plan to increase outsourcing, or are considering it. Outsourcing can allow larger firms to innovate and diversify into new strategies and asset classes more quickly and with more flexibility.
Hedge fund firms of all sizes are recognizing that outsourcing more routine operations allows them to bring more value to their clients through their own expertise. To learn more about the drivers of increased outsourcing for hedge funds, investment managers and other capital markets participants as well as the functions most likely to be outsourced and the hesitations some firms still have, download the full report.
