Pressure to focus on the core of their business is driving hedge funds to outsource many of the operational aspects of their business, including data management, explains Bart McDonough, CEO and founder of the new vendor on the managed services block, Agio Technology. Following nearly nine years of working in a systems architecture role for hedge fund SAC Capital Advisors, McDonough decided to strike out on his own and, in January this year, established his own firm to support this industry trend for managed services and outsourcing.
The trend towards outsourcing within the buy side community has been noted by many vendors of late and recent surveys, such as the one conducted by Citi in June, indicate that these claims are not being made without due cause. No surprise then that vendors such as Agio Technology are springing up to capitalise on this market trend, and with some success: the vendor has already bagged itself 14 clients, 12 of which are hedge funds. Not bad going for a firm that’s only been around for the last eight months.
Agio Technology is now focusing on scaling up its business through the addition of new key staff members such as former UBS exec Nicole Nakashian this month and plans to open a follow the sun support office in Hong Kong in the fourth quarter this year. The vendor currently has offices in Boston and New York and is headquartered in Oklahoma, with around 47 staff members across these locations.
The focus of the business is on providing managed services for the hedge fund community, ranging from support for individual applications or servers to outsourcing of full database and data management functionality. This means that the client onboarding process can take anything from a week to three or four months, dependent on the size of the client and the complexity of the functionality required.
“Hedge funds need to focus on what they do best and the operational functions do not usually act as a competitive differentiator for their businesses. We provide them with critical but non-differentiating services,” explains McDonough. The vendor is therefore targeting the chief technology officers within these individual hedge funds in order to get its case heard. As such, this means that Agio’s focus is on the larger players in the market, the top 200 or 250, or those that plan to add a chief technology officer in the near future.
McDonough reckons that around half of the top 200 hedge funds are likely to be open to the idea of outsourcing their operations to some extent, thus giving the start up a fairly healthy goal to aim for. Given its broad range of offerings, he notes that the vendor is most likely to come up against other hedge fund focused vendors in this endeavour, such as BNY Mellon owned Eze Castle. However, Agio Technology’s solution set and customer target (the larger rather than smaller end of the spectrum) are sufficiently different from others out there to give it room to grow, says McDonough.
Up until now, the vendor has relied on the informal route to new clients via customer referrals, but it is now keen to become much more of a consultative force within the market. So, hedge funds can expect to see a much more aggressive approach to the sector being adopted by Agio Technology in the near future. It will also be looking to extend its solutions much further into the middle office in terms of applications support, with plans to engineer solutions around order management systems functionality.