The study by Beacon Platform Inc. with 100 hedge fund executives in the US, UK, Germany, Switzerland, France, Italy, Sweden, Norway, and Asia responsible for a collective $901 billion assets under management, found that 73% say their fund or department is wasting time with manual or spreadsheet-based portfolio analytics and optimisation.
Hedge funds, risk management, and spreadsheets by the numbers
• 17% of funds – More than 50% of work is in spreadsheets
• 59% of funds – 25% to 50% of work is in spreadsheets
• 24% of funds – 10% to 25% of work is in spreadsheets
There is more at risk than just spending too much time
There are significant risks of relying too heavily on spreadsheets beyond wanted time. Missed opportunities, reputation damage, and even billions of dollars in regulatory fines and investment losses are at risk as a result of slow processing times or errors in complex calculations within spreadsheets.
Are heavy spreadsheet users aware of the risks they face? Maybe not. Funds with the highest amount of spreadsheet usage were half as likely to think they were spending too much time with spreadsheets than those with the lowest usage.
Spreadsheet usage patterns across different groups and outcomes
● Average usage is higher at the smallest funds (under $1 billion AUM), drops by around 20% in the mid-range funds ($1 billion to $25 billion AUM), and then jumps up by 34% for the largest funds (more than $25 billion AUM).
● Funds with a higher usage of spreadsheets thought that it would be harder to navigate changing regulations.
● Greater spreadsheet usage was associated with lower visibility of the current risks facing the fund and less likelihood of improvements in risk visibility over the past 2 years.
● The highest users of spreadsheets were 30% more likely to be concerned about their exposure (the ability to look at correlation, covariance, VaR, and other relationships between all asset types) and coverage (including all assets and products traded in the same system) than the lowest users.
Spreadsheet usage negatively affects scalability and accuracy
Light users of spreadsheets (10% to 25% of risk management processes) were 2 to 3 times as likely to rate as “Excellent” the scalability (how quickly and cost-effectively they could respond to demands for greater computing power, larger datasets, or other performance demands) and accuracy (if they could get mark to market on all exchange-traded products and adopt industry standard models for all products) of their systems, compared to the heaviest users (50% or more of risk management).
Kirat Singh, Co-Founder and CEO, Beacon Platform Inc. said: “Excel spreadsheets clearly have a place in managing trading activity and risk management in the hedge fund sector. However, with so many saying that they are spending too much time on spreadsheets, there is a strong case for greater use of the available technologies. Leading funds are turning massive spreadsheets with millions of cells into cloud-enabled analytics, increasing the scale and speed of their analysis and decision making.”
