How Technology Can Serve Hedge Funds

A prime broker is able to offer hedge funds its technology resources to facilitate its daily operations.  The fund managers are allowed to concentrate on running their funds by outsourcing them.  Here are some functions that the prime broker offers funds.

Reporting

Prime brokers offer bespoke reporting with the ability to analyze the fund's whole portfolio.  The reports can measure the performance of the fund, calculate the Net Asset Value (NAV) and provide risk management reports in real-time.  They can run performance reports comparing the cost of a trade against an industry benchmark (i.e. VWAP or TWAP).  Being able to calculate the value across all positions allows for accurate portfolio margining.

Trading

Prime brokers can give hedge funds access to their electronic trading platforms.  These include direct market access (DMA), algorithmic trading and program trading.  The best platforms allow fund managers to execute their trades anonymously and without affecting the market.  Credit Suisse's Advanced Execution Services and Goldman Sachs' REDIPlus are the best that are out there.  The field is very competitive and every firm is constantly improving their services.  Speaking of anonymity, there are a number of dark pools run by investment banks such as Credit Suisse's Crossfinder and Goldman Sachs' SIGMA X.

Research

Prime brokers offer access to research created by their equity, fixed income and derivatives analysts.  This can be distributed through the banks' proprietary web portals.