Desired Features In Hedge Fund Management Software

By Adriana Noton

Hedge fund management software automates and integrates functions in the front, middle and back office, with the general ledger at the core of its functionality. An ideal system will be able to capture trades and integrate portfolio management with investor accounting to provide an end to end solution with real-time updates. But the real value is in the platform’s ability to work with different currencies and global financial instruments and derivatives.

Let’s take a look at the features an investment manager would want in this system. In the front office, it will provide real-time monitoring and order management. Scenario analysis tools and FIX connectivity to interface with brokers are definitely on the desired features list, and so are hedging overlays and modeling.

To provide some serious ROI, the system needs to be able to handle a wide range of instruments and all major currencies. This includes equity derivatives, futures and options, bank debt and swaps, and fixed income instruments like asset backed securities. If it can handle all these and more, the system will quickly out-perform comparable funds doing the same things with multiple packages and manual work.


Starting with trade capture, the system needs to use a single data point of entry to populate and update all the other tools, automation functions and reports. The system takes care of order management and routing. It has to provide reconciliation and should completely automate corporate action processing like stock splits, coupon payments and dividends.

Full workflow automation all the way from trade execution interfaces to investor accounting allows the firm to take on more clients, higher trading volumes and additional products. A scalable system ensures that there are no additional overheads or staffing needs for this growth. Audit trails with pre and post-trade compliance are standard features expected in all hedge fund management software, regardless of who the provider is.

Most systems these days are able to plug in to market data and have a dashboard for reports. Once the trades have been processed by the front and middle office, the information has to flow into the general ledger. Since all transactions impact general ledgers, they can be used as data warehouses to generate reports.

More reports and filtering options will allow the investment manager to minimize risks with drilled-down exposure reporting and performance attribution categorized by strategy, funds, sector and trader. Realized, unrealized and net P&L should be visible for the day in question, month to date and year to date, not to mention open to date. The Profit & Loss data is automatically updated as the markets fluctuate and positions change.

Hedge fund management software won’t replace the investment manager, but it will soon become irreplaceable as fund managers learn to rely on it. A high growth strategy can be initiated with a range of new products and clients, all without incurring any new administrative expenditure. Note that a hosted SaaS package for investment managers is even more desirable, since it will eliminate the need to buy, install and maintain any IT hardware and software for this purpose.

About the Author: To help businesses to practice informed risk-taking, the leaders of

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, provide practical risk intelligence through software that presents complex information in a fast and clear manner.


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