10 Factors driving hedge funds to implement a new PMS/OMS

Investment managers are constantly striving to optimise their processes, improve accuracy, and bolster investor trust. As funds expand and adapt, the need for a reliable and effective Portfolio/Order Management System (PMS/OMS) becomes increasingly apparent.
4 Jul, 2023

This blog explores the primary motivations and objectives that drive the adoption of a new PMS/OMS, encompassing the desire to accommodate growth, enhance operational efficiency, expand asset coverage, attain accurate valuations, strengthening risk management, and fostering investor confidence.

1. Accommodating growth

One of the primary reasons for considering a new PMS/OMS is when an existing fund outgrows its current system. As your fund grows, managing an increasing number of portfolios and strategies becomes more complex. Legacy systems may struggle to handle the scale and complexity of operations. A modern PMS/OMS can provide the scalability required to efficiently manage a growing fund, ensuring smooth execution, order routing, and trade allocation. Moreover, it can provide flexibility to accommodate different investment strategies, asset classes, and trading instruments, empowering you to adapt to changing market conditions and capitalise on diverse investment opportunities.

2. Operational efficiency

Efficiency is a critical factor in today’s competitive investment landscape. Outdated or fragmented systems can hinder operational processes, resulting in inefficiencies, manual workarounds, and potential errors. By implementing a new PMS/OMS, investment managers can automate workflows, streamline trade processing, and optimise data integration and management. This enables faster execution, reduces operational risks, and frees up valuable time for portfolio managers to focus on strategic decision-making.

“With Quantifi, we have access to market-leading analytics that are flexible and scalable. One of the key benefits is the ability to call Quantifi from Python. This makes it easy for us to extend the high-level functionality of the model library, which gives us an array of manipulation capabilities to perform advanced analysis.”

Jeysson Abergel, Head of Trading and Cross-Asset Strategy, Arini

3. Broader asset coverage

Expanding into new markets or asset classes often requires an upgrade to a more sophisticated PMS/OMS that can handle both vanilla and complex products. Traditional systems may lack the necessary functionality to handle complex instruments or global trading capabilities. With a new system in place, investment managers can gain access to a wider range of investment opportunities, diversify portfolios, and seize emerging market trends. Improved asset coverage empowers portfolio managers to make informed decisions and capitalise on market inefficiencies.

4. Cost efficiency

Cost efficiency is a significant factor that firms consider when looking for a new solution. Aspects that these firms may take into account include implementation costs, ongoing maintenance, and customisation costs. Efficient PMS/OMS solutions can reduce operational costs by automating manual tasks and streamlined workflows. Cloud based solutions also eliminate the need for substantial upfront infrastructure investment.

“Quantifi’s cloud-enabled platform will also allow us to scale faster and more efficiently as the fund expands. As a start-up fund we wanted to get up and running in a predictable timeframe.”

Michael Phelps, CIO, Tresidor

5. Timely, accurate valuations

Timely, accurate valuations are key for performance measurement, and risk management. A new PMS/OMS that leverages advanced modelling and data integration capabilities can provide precise valuations that align with bank counterparties and prime brokers . This alignment fosters greater transparency, reduces discrepancies, and enhances overall operational integrity.

6. Risk mitigation & management

Risk management lies at the core of successful investment management. Outdated systems may lack comprehensive risk assessment capabilities, making it challenging to identify and mitigate potential risks effectively. A modern PMS/OMS integrates sophisticated risk analytics tools, enabling asset managers to assess risk at multiple levels, analyse portfolio exposures, and perform stress testing. This comprehensive risk management approach enhances decision-making, safeguards against market volatility, and ensures regulatory compliance.

“With Quantifi’s strong emphasis on quantitative techniques for modelling and comprehensive risk management capabilities, we have enhanced how we track, trade and risk monitor investment opportunities and its platform facilitates the active management of our portfolios.”

Michael Hattab, Senior Portfolio Manager, LFIS

7 . Enhanced order execution

The order management capabilities within a portfolio management solution optimise order routing, minimise trading costs, and ensure regulatory compliance. With features such as order routing, algorithmic trading, and access to multiple liquidity venues, portfolio managers can execute trades more effectively and seize opportunities swiftly.

8. Complete connectivity

Hedge funds are looking for systems that easily integrate with existing solutions and also offer seamless implementations and upgrades, with minimal disruption to their existing workflows and processes. Open APIs give users the flexibility to integrate open-source data science packages and programming environments with more traditional MtM risk platforms. This enables innovative integration between a standalone risk platform and programming environments that quants and traders can easily use on their desktops.

9. Investor confidence

Investor confidence is a critical aspect of fund management, particularly when managing third-party capital. A new PMS/OMS can instill trust and confidence in investors by providing transparent and accurate reporting, robust compliance controls, and improved risk monitoring. Enhanced operational efficiency, accurate valuations, and comprehensive risk management contribute to a credible and professional image, attracting and retaining investors over the long term.

10. A modern PMS/OMS for sustainable success

Adopting a new PMS/OMS is a strategic decision aimed at addressing the evolving needs of asset managers and fund operators. The desire to accommodate growth, achieve operational efficiency, broaden asset coverage, ensure accurate valuations, enhance risk management, and instill investor confidence are key drivers behind this decision. By embracing modern technology solutions, fund managers can optimise their operations, seize new opportunities, mitigate risks, and provide a solid foundation for sustainable growth in an increasingly competitive investment landscape.

Quantifi’s PMS/OMS delivers cross-asset trading, front-to-back operations, position management, enterprise risk management and regulatory reporting, all on an integrated platform. As well as supporting the key regulatory requirements, Quantifi’s investment in the latest technology – including data science, machine learning and APIs – provides clients with new levels of usability, flexibility and integration. This translates into dramatically faster time to market, lower total cost of ownership and significant improvements in operational efficiency.

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