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Computing Power Step into Unknown as Funds Outsource to Hedge the Cloud


11/19/2016


Computing Power Step into Unknown as Funds Outsource to Hedge the Cloud
Seven people run a $200 million hedge fund following artificial intelligence formulas and are tucked into the attic of a Georgian building in London's West End. But nowhere to be seen are the supercomputers that process their complex algorithms.
 
Piquant Technologies outsources all its IT to third parties via the cloud, where multiple computing resources are shared by multiple and often unrelated users even while most established hedge funds keep their trading systems at close quarters.
 
Compared to storing servers in an office in Mayfair and may even provide security in anonymity, moving data off-site to cloud providers may be physically safer.
 
Apart from halving hardware costs and hiring one less person for maintenance are the advantages of their trading and back office systems on external platforms, says Piquant co-founders James Holloway, 32, and Iain Buchanan, 36.n "Do not burgle Piquant - it's not worth it. In our office we have really no hardware except for a mouse, a keyboard and a screen," said Holloway, the fund's Chief Investment Officer.
 
But risks lurk if data is not properly protected. 20 percent - or 115 - of them funds moved some operations to the cloud last year, said technology provider RFA, which has 576 hedge fund clients globally.
 
Asset managers who gain access to the latest supercomputers without having to buy any hardware, are the new customers that the likes of Amazon, Google and Microsoft are winning.
 
Concerns are being raised about how well the risks are monitored even as regulators are trying to keep up.
 
Use of the cloud must not "erode, impair or worsen the firms operational risk", Britain's Financial Conduct Authority spelled out in guidelines earlier this year.
 
It said "some respondents" wrote in to challenge that prerequisite.
 
Funds were also asked to actively supervise and test arrangements by the regulator. The Monetary Authority of Singapore added the topic to its guidelines. Even though many address outsourcing generally, no guidelines specifically on cloud usage have been put by regulators in Germany, Spain, Italy and the United States. They declined to comment on whether they might provide future guidelines.
 
A spokesman at the Swiss regulator said they were "aware of the topic" but had no plans to bring out FCA-style guidelines.
 
Piquant's founders set up their fund in 2013 and later outsourced all their IT.
 
Reluctant to trust third-party providers with their trading systems are most other hedge funds - worried by the risks of cyber-attacks and data centres going down. They are outsourcing less sensitive areas such as email.
 
"We are putting our toe in the water, starting to use infrastructure and other services on the private cloud," said Iain Anderson, Chief Technology Officer at $15 billion hedge fund Cheyne Capital.
 
an off-site location dedicated solely to their firm was the place where Cheyne has moved investor relations and marketing applications to. "Public" cloud platforms such as Amazon's, where hardware is shared by multiple users who require technological aptitude to use it securely is not currently being used by it.  For example, clients should encrypt their own data to keep it totally safe, Amazon says.
 
(Source:www.reuters.com) 


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