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Remedy for Reference Data

Hedge fund Citadel has reinforced its stronghold on Wall Street with a new data-management platform.

Off-the-Shelf Data Management

Citadel's vendor selection highlights an industry trend of focusing on data management, particularly in the area of reference data. Framingham, Mass.-based consultancy TowerGroup estimates that globally, financial institutions are spending $5 billion annually on the infrastructure to manage historical and client or counterparty data, including the staff for operations and IT development. A December 2003 report adds that, while vendor solutions are still a small percentage of this market, "third-party applications and outsourced solutions will increase their relative market share as this market matures."

Hirschfeld cites the evolution of the marketplace as a driver for Citadel's investment. "The market has finally matured to a point where we felt comfortable turning to a vendor. I don't think we would have done it a year or two ago," he adds.

He stresses that bringing in the vendor was not a question of saving costs or cutting heads. "We are constantly on the lookout for talented people and opportunities to leverage our existing resources," he says, noting that the solution lets the firm do just that by freeing up technology people to work on other projects.

While AC Plus has provided many pieces in Citadel's data-management puzzle, Hirschfeld points out that it isn't a silver bullet. "Nothing is perfect; we're still developing the solution, and we expect to enhance the suite substantially with our own proprietary development," he says.

The work Citadel has to do on its own includes integrating proprietary data and applications, mapping the data to downstream systems and establishing rules for the arbitration of the data, Hirschfeld says. He adds that he expects Citadel to maintain an ongoing relationship with Asset Control, to establish the hedge fund's needs and ensure that the vendor addresses them in updates of its AC Plus product.

"Citadel is a major hedge fund with high demands in volume and speed," a spokeswoman for the vendor says. "Co-development agreements like this create symbiotic relationships."

Though Citadel has not committed to future implementations with Asset Control, says Hirschfeld, it will continue to monitor the vendor, especially in light of Asset Control's potential relationships with consulting firms, including Accenture.

Citadel is currently in the testing phase of the AC Plus implementation, and Hirschfeld expects to have Citadel's first clients live on the system by September. Since the solution is not yet in production, the hedge fund has yet to see tangible benefits from the firm's investment, a cost Hirschfeld declines to reveal. Still, he expects the firm to realize a return on investment via "great efficiencies and higher data quality across multiple dimensions."

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