Skip to content
    1. Overview
    2. Alternative Managers
    3. Consultants
    4. Corporations
    5. Family Offices
    6. Financial Advisors
    7. Financial Institutions
    8. Individuals & Families
    9. Insurance Companies
    10. Investment Managers
    11. Nonprofits
    12. Pension Funds
    13. Sovereign Entities
  1. Contact Us
  2. Search
  3. Client Login

Subscribe to Asset Servicing & Fintech Insights

Discover more information in our monthly publication, the AXIS newsletter, including industry trends, product innovation, Fintech and more from our team of experts.
SUBSCRIBE NOW
October 13, 2021

Transforming Hedge Funds Through Digitization

By Vincent Molino

As seen in The Hedge Newsletter

The impact of digitization in the hedge fund and alternative investment space is taking effect right now. Technologies in artificial intelligence (AI), blockchain applications, and data management are impacting investment and operational functions. The range of capabilities derived from these technologies span from data aggregation, improved research, liquidity management and enhanced workflows. As daily functions evolve, the pivot to digitization will become both apparent and necessary.

In general, the benefits from AI are scale and efficiency, providing higher quality data and reducing the need for manual input. Two subsets of AI technology that shows promise for hedge funds are machine learning and natural language processing.

Machine learning has been used to automate data recognition and document extraction, while recent developments in natural language processing, optical character recognition and visual relationship detection enable systems to extract unstructured data from documentation. As documents are collected, machine learning algorithms become increasingly accurate, automating the analysis of such information, translating text into analyzable data, supporting investment research and portfolio decision making.

Blockchain technology, such as distributed ledgers, can be used to automate transactions from multiple parties in a single and connected record. These applications provide real-time transparency not only to the counterparts of a transaction but interested parties, such as investment managers, brokers, custodians, administrators and fund investors. As all parties have instantaneous access to a chain of transactions, execution, settlement and reconciliation happens in nearly parallel time.

Earlier this year, a trade settlement firm completed same-day settlement with two global brokerage houses through a blockchain. For hedge funds, blockchain’s capabilities on same day settlement and smart contracts have huge implications. For example, the redemption or withdrawal terms many funds currently provide in their offering documents, such as notice periods and gates, may be hard-pressed to continue in their current form if portfolio holdings of different liquidity can be transacted and settled the same day.

Data management, through cloud and related computing, can help investment managers harness disparate data sets by condensing siloed information or organizing it in such a way as to allow different systems (i.e., portfolio management, risk management, compliance or accounting) to quickly connect related data from different pools of information.

Increasingly, fund investors and their consultants are demanding greater levels of transparency within performance monitoring and due diligence practices. A hedge fund manager that has greater access and speed to respond to such requests will benefit from connective data management solutions.

Northern Trust Front Office Solutions is a holistic digital and service solution designed for modern institutional portfolios. We simplify investment data management for asset allocators and managers with complex, multi-asset class portfolios to improve portfolio analysis and investment decision making. Our offering integrates multiple data sources into one system and offers extensive customization to organize that data to what is most important to your organization. We support the most sophisticated clients including endowments, foundations, pension plans, corporations, healthcare organizations, family offices, and OCIOs.
Let us show you what sets us apart

  

Related Content

In our three-part webinar series, our panel of experts discuss the evolving landscape of alternative investing and how artificial intelligence (AI), blockchain and data management are driving the digitization of alternatives.

Watch the series

Investors holding alternative assets have long endured frustrating, tedious chores in overseeing their portfolios. Ground-breaking automation solutions are finally streamlining these processes.

Read Now

As asset owners have increased their allocations to alternative assets, many have been challenged in aggregating an accurate picture of their portfolios. New technology solutions can change that experience.

Read Now

Confidentiality Notice:  This communication is confidential, may be privileged, and is meant only for the intended recipient.  If you are not the intended recipient, please notify the sender as soon as possible.  All materials contained in this presentation, including the description of Northern Trust, its systems, processes and pricing methodology, are proprietary information of Northern Trust. In consideration of acceptance of these materials, the recipient agrees that it will keep all such materials strictly confidential and that it will not, without the prior written consent of Northern Trust, distribute such materials or any part thereof to any person outside the recipient’s organization or to any individual within the recipient’s organization who is not directly involved in reviewing this presentation, unless required to do so by applicable law.  If the recipient is a consultant acting on behalf of a third party client, the recipient may share such materials with its client if it includes a copy of these restrictions with such materials.  In such event, the client agrees to comply with these restrictions in consideration of its accepting such materials.

© 2022 Northern Trust Corporation. Head Office: 50 South La Salle Street, Chicago, Illinois 60603 U.S.A. Incorporated with limited liability as an Illinois corporation under number 0014019. Products and services provided by subsidiaries of Northern Trust Corporation may vary in different markets and are offered in accordance with local regulation. This material is directed to professional clients only and is not intended for retail clients. For Asia-Pacific markets, it is directed to expert, institutional, professional and wholesale clients or investors only and should not be relied upon by retail clients or investors. For legal and regulatory information about our offices and legal entities, visit northerntrust.com/disclosures. The views, thoughts, and opinions expressed in the text belong solely to the author, and not necessarily to the author's employer, organization, committee or other group or individual. The following information is provided to comply with local disclosure requirements: The Northern Trust Company, London Branch, Northern Trust Global Investments Limited, Northern Trust Securities LLP and Northern Trust Investor Services Limited, 50 Bank Street, London E14 5NT. Northern Trust Global Services SE, 10 rue du Château d’Eau, L-3364 Leudelange, Grand-Duché de Luxembourg, incorporated with limited liability in Luxembourg at the RCS under number B232281; authorised by the ECB and subject to the prudential supervision of the ECB and the CSSF; Northern Trust Global Services SE UK Branch, UK establishment number BR023423 and UK office at 50 Bank Street, London E14 5NT; Northern Trust Global Services SE Sweden Bankfilial, Ingmar Bergmans gata 4, 1st Floor, 114 34 Stockholm, Sweden, registered with the Swedish Companies Registration Office (Sw. Bolagsverket) with registration number 516405-3786 and the Swedish Financial Supervisory Authority (Sw. Finansinspektionen) with institution number 11654; Northern Trust Global Services SE Netherlands Branch, Viñoly 7th floor, Claude Debussylaan 18 A, 1082 MD Amsterdam; Northern Trust Global Services SE Abu Dhabi Branch, registration Number 000000519 licenced by ADGM under FSRA #160018; Northern Trust Global Services SE Norway Branch, org. no. 925 952 567 (Foretaksregisteret) [VAT if applicable], address Third Floor, Haakon VIIs gate 6 0161 Oslo, is a Norwegian branch of Northern Trust Global Services SE supervised by Finanstilsynet. Northern Trust Global Services SE Leudelange, Luxembourg, Zweigniederlassung Basel is a branch of Northern Trust Global Services SE. The Branch has its registered office at Grosspeter Tower, Grosspeteranlage 29, 4052 Basel, Switzerland, and is authorised and regulated by the Swiss Financial Market Supervisory Authority FINMA. The Northern Trust Company Saudi Arabia, PO Box 7508, Level 20, Kingdom Tower, Al Urubah Road, Olaya District, Riyadh, Kingdom of Saudi Arabia 11214-9597, a Saudi Joint Stock Company – capital 52 million SAR. Regulated and Authorised by the Capital Market Authority License #12163-26 CR 1010366439. Northern Trust (Guernsey) Limited (2651)/Northern Trust Fiduciary Services (Guernsey) Limited (29806)/Northern Trust International Fund Administration Services (Guernsey) Limited (15532) are licensed by the Guernsey Financial Services Commission. Registered Office: Trafalgar Court, Les Banques, St Peter Port, Guernsey GY1 3DA. Northern Trust International Fund Administration Services (Ireland) Limited (160579)/Northern Trust Fiduciary Services (Ireland) Limited (161386),  Registered Office: Georges Court, 54-62 Townsend Street, Dublin 2, D02 R156, Ireland.