Fund of funds: the last great untapped technology space?

Fund of hedge funds are crying out for an IT solution, and are currently paying top dollar for elite technologists.

A report by consultants Aite Group, 'Hedge Fund of Funds: Operations and Technology', reckons hardly any software vendors are targeting this space, despite the fact the firm tipped assets to top $2trillion by 2011.

"While there are many vendors serving hedge funds, only 12 to 24 firms are focused on funds of hedge funds, up from almost none seven years ago," says Denise Valentine, senior analyst at Aite and author of the report.

Oliver Hinchcliffe, senior consultant at recruiters Project Partners, says fund of funds are taking trade order management systems and straight-through processing systems from other areas, such as wealth management, and tweaking them for their own purposes.

"They demand the best asset management technologists for this," he says. "Candidates need to have experience of implementing or building systems, whether it be off-the shelf or in-house, and have expert understanding of the trade flow within asset management to be able to customise it for the fund of funds."

Paul Elworthy, associate director in the IT and banking finance division of recruitment firm Hudson, agrees: "A fund of funds will want the best people to get gain an edge on the competition when tailoring a third-party system, in the same way a regular hedge fund would."

And if some plucky vendor does get its act together and create the ultimate software for fund of funds, would you want to work for it anyway? Elworthy reckons investment banks pay 25% more than vendors on base alone. He says, however, that vendors are a fertile hunting ground for i-banks looking for technologists.

Hinchcliffe says those working for fund of hedge funds are currently enjoying lucrative times. A project manager in this space can earn between 100-110k, plus 50-100% bonuses often guaranteed. Meanwhile, business analysts and developers can expect 70k-90k.