Bloomberg's HBOX Tackles Risk, Traders' Needs

If you want to know how the concerns of hedge fund managers have evolved and matured in recent years, just ask the vendors that provide the technology to help them do business.

According to Bloomberg officials, hedge fund managers have a new and urgent concern: compliance. "Two or three years ago when we would talk about the Bloomberg solutions with a hedge fund, no one talked about compliance or the features that we had," says Dan Matthies, global head of Bloomberg Asset & Investment Manager products.

Says Matthies, "Today, that is the starting point of the conversation."

Last week, Bloomberg officially unveiled a hedge fund solution suite after a long gestation period -- HBOX. Not to be confused with Microsoft's Xbox, the market data and trading technology company told Advanced Trading that the solution offers trading, data and risk management tools and has been used inside hedge funds for some time. Andrea Danese, global head of Bloomberg Data Solutions, says Bloomberg is signing three to six new hedge fund clients onto the HBOX platform a month.

In a Bloomberg press statement, Marc Robert, chief operating officer of Water Asset Management, gave his reasons for choosing the new solution. "We chose Bloomberg's HBOX model for a few reasons, but what we really liked was that we had access to the many OMS features included with HBOX through the Bloomberg terminal so there is no need to install new hardware or software," he says.

The inspiration for the buy-side suite is to give some of the same offerings to hedge fund traders who relied on Bloomberg tools from the days when they worked at larger, well-known investment firms.

"A hedge fund gets everything they need through the Bloomberg terminal through HBOX. It has just about everything from risk management to trading and regulatory and operations stuff," says Matthies.

The Bloomberg solution also helps a hedge fund to appear and operate in a more established way, suggests Matthies. "Another thing is looking impressive to investors. If [a small and new] hedge fund needs the power of institutional grade platforms, HBOX gives you the same platform that the $20 million managers use as well as multi-billion hedge funds use for less that $100,000."

What Hedge Funds Want

With forthcoming hedge fund registration and the Dodd-Frank rules, the days of hedge funds operating in shadows are over. And the hedge fund managers know this. "The rules of engagement for a hedge fund are starting to be the same rules for an institution," says Matthies.

According to Danese, hedge funds must prove that they have they have the data in order to operate within the compliance guidelines. "If you are a hedge fund and if you are compliance, now you have to prove ownership. If you don't have a data structure across the asset classes or at least a description of them, it as a challenge to prove compliance," he says. "That is an interesting dynamic."

According to Matthies and Danese, Bloomberg is seeing another new trend among hedge funds: A push beyond their regions. "Investors are looking to build a global focus. A lot of the G8 and G12 nations have had a low yield of fixed income and unpredictable equity markets. A lot of the opportunities are outside of their markets and in the emerging markets and outside of their asset classes, such as the volatility in commodities and FX," says Danese.

"So your ability to expand is limited by your ability to pursue opportunities as the returns present themselves as diversification opportunities," says Matthies.

This is further proof that while regulations might be containing hedge funds into a smaller box, the opportunities for growth and profit are often outside that box.

Phil Albinus is the former editor-in-chief of Advanced Trading. He has nearly two decades of journalism experience and has been covering financial technology and regulation for nine years. Before joining Advanced Trading, he served as editor of Waters, a monthly trade journal ... View Full Bio