For many, hedge fund investing evokes images of ultra-sophisticated investors using cutting edge technology to execute sophisticated strategies in pursuit of superior returns.
But for the world’s wealthiest people and institutions, the process of investing in those hedge funds is still handled in a very antiquated way.
And while most of us may think we’re done with the screeching dial tone of the facsimile, the financial industry still handles the majority of hedge fund clients’ assets via fax machine and e-mail.
Understanding that these methods are not only a bit on the outdated side, but also put their clients’ assets and information at a great deal of risk, Finomial – a financial services firm based in New York – developed an application that brings hedge fund investment into the 21st century.
“There are $3.6 trillion invested in hedge funds,” said Finomial’s COO Meredith Moss, who said that the golden days of fax and e-mail needed to meet the setting sun just in time for the dawn of cloud computing. “Investors needed an automated, secure online platform.”
With the advent of cloud computing, investors and hedge fund managers have found an improved method of interacting with these important documents that streamlines the process and increases security.
We have solved this problem with multi-party workflow on shared data and documents in the cloud,” said Subhra Bose, Finomial CEO. “In our workflow, the investor, the fund manager, and the administrator interact with each other via a web-based application. Data and documents never leave that cloud, nor are they sent over e-mail, copied within the organizational system. It’s highly secure; it’s one copy that all parties are interacting with.”
Of course, security is a huge consideration for anyone deploying systems into the cloud. And the Finomial team understood that their business handles very valuable information, making security even more of a consideration when building their software.
“In this industry, it’s extremely important,” said Paul Stirpe, Finomial Security Architect. “Our clients are very concerned about security, and that’s where Finomial has a great opportunity to make security very rigorous and convenient for our customers.”
To do this, the company looked to Microsoft Azure to host their cloud service.
Even though all cloud service providers offer technologies that enhance security for their customers, Finomial was given a wider array of security options when the company chose Azure as its cloud provider.
Not only does Azure provide the standard security measures, such as access controls and secure messaging with clients, but it also enables software development partners, like Finomial, to develop additional security elements to further prevent breaches.
Finomial takes advantage of this capability with several tools. First, the company encrypts all of its clients’ data in the data center. Then, every action taken and any change made to documents is scrupulously logged and stored in great detail in an audit trail. In this way, Finomial’s clients can see every move that’s been made in regard to the hedge fund investment process, including meeting critical compliance requirements.
Most companies turning to the cloud need some level of security, but unlike many software companies, Finomial had special requirements based on the location of their information that needed to be met when they were looking for a cloud provider.
For instance, regulations for handling investor and investment data differ depending on the jurisdication of the fund and the location of the data. Microsoft Azure makes it possible for Finomial to meet the needs of different fund managers to comply with different country regulations for data management, by enabling Finomial to provision the Microsoft Azure in specific countries for specific clients.
“Azure provides the same class of data center across all geographic regions in America, Europe, and Asia,” said Stirpe.
In addition, Finomial was looking for a way to avoid infrastructure maintenance costs, no matter where their cloud was operating. The company wanted to use its resources for developing their software application, focusing on their business model, and leaving the technical heavy lifting to their provider. The Azure platform gives them this option.
“Azure is the only cloud provider in the industry today who provides Platform-as-a-Service as opposed to typical cloud providers that offer Infrastructure-as-a-Service,” said Finomial CEO Subhra Bose. “We want to focus on the business and the application development, as opposed to cloud infrastructure and the management of it. One of the ideas of cloud is that our developers can focus on application development – as opposed to the infrastructure. Azure does that very well. We can easily develop and deploy financial services applications for our clients with the level of reliability and security we need.”
After all of the security and infrastructure-management boxes were checked, there was still the issue of availability that Finomial saw as one of Azure’s greatest strengths.
“There’s a lot of human interaction required to keep an infrastructure consistently secure and available, especially across multiple data centers,” Stirpe said. “We’re leveraging the enormous effort and funding Microsoft is investing in providing homogeneous operations management across its many Azure data centers.”
Also to reduce the risk of a system component crash taking Finomial’s application offline, Azure has the capability to replicate data automatically. Basically, Microsoft copies each piece of data three times in case the initial server fails. A backup server takes its place automatically, providing its clients and Finomial’s clients with identical information without interruption and without losing any data. This feature takes that burden and complexity off of Finomial’s team of engineers and allows Finomial to offer this high-availability feature to its customers, without its own team having to build it themselves.
In the financial services industry, security and availability are paramount. The peace of mind that Finomial gets in working with Azure allows the team to develop and roll out their product to their clients without worrying about maintaining the cloud infrastructure – quite a step up from fax machines and e-mail.