Systematic hedge funds are increasingly looking to blend the use of outsourcing and in-house development to build their front-office technology stacks, suggests a recently published report.
For years, systematic hedge funds have eschewed the use of third-party software for their trading operations.
Instead, the focus has been on in-house development in order to protect intellectual property and to provide differentiation in a fiercely competitive market.
However, research from tech vendor Acuiti and fintech Broadridge found that 58% of the surveyed firms are using a combination of outsourcing and in-house development for their trading technology.
So-called ‘buy and build platforms’ have emerged as the alternative to choosing between off-the-shelf products or in-house development, according to the report.
The biggest factor in deciding to outsource is latency, according to the research. The more value a hedge fund puts on latency, the more likely it is to continue developing in-house.
The front-office functions most likely to be outsourced are execution management systems, market data feeds and front-end trading screens.
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