Installing the hardware and software to run a hedge fund operation is one of the most expensive parts of the start-up process. It is also one of the areas that managers may know least about. Any temptation to cut corners should be strenuously resisted. Time and time again this proves to be a false economy.
A successful hedge fund group will need everything from automated back-ups to reliable data communications with prime brokers and administrators, a front-end trading platform and portfolio management tools.
Get any one of these items wrong and it will either create an enormous nuisance or seriously endanger the business, as trades go astray and managers lose track of their portfolio on a minute-by-minute basis.
Of course, this doesn't mean that hedge fund companies can't get off the ground with Excel spreadsheets and a couple of PCs. They can and have. However, this approach reduces the chances...