When the clients or counterparties receive a phone call or an e-mail from a trader at PVE Capital, no one on the other end of the line knows if they're speaking to someone in the credit fund's London headquarters or their satellite office in Malta.
This is all possible thanks to the cloud.
The small macro credit fund manager, with roughly 14 employees that include five traders and manages an estimated $280 million in assets under management, relies on cloud technology whether they are in overcast (and at the moment freezing) London or in perpetually sun-blasted Malta just south of Sicily.
And so far, so good, says Joe Vittoria, founding partner and COO of PVE Capital, and a hedge fund veteran. "For my many sins I have been involved in small hedge funds - I happen to enjoy working on them very much because you get to do many little things," he says. "One of the big compromises is we could never match the big guys and even the medium-sized firms with the technology they had, their ability to hire people, and adopt systems with contingency plans."
With that in mind, PVE Capital recently adopted Options PIPE Core, a cloud-based financial office delivery and support system from Options IT shortly last year. The solution consists of e-mail, telephony, market data, IM, and regulatory tools that PVE Capital had to manage on its own when it opened its offices in 2009. But since last year, the Option IT solution now gives the small fund a method of managing its technology and maintaining a near seamless presence in its London and Malta offices, which are a three-hour flight away.
The Options PIPE platform requires two 100-megabit connections to two of Options IT's 17 data centers. "Our Bloomberg lines go into the Options IT datacenter and feeds us here. We are not an HFT shop and we're not normally measuring latency on pricing but from the perspective of our guys dealing in credit markets who talk to the trading house, we don't see any delays at all," says Vittoria.
"Nowadays the networking is so much more efficient," he adds.
According to Nigel Kneafsey, CEO of Options IT, his PIPE Core service is night-and-day different from a public cloud services like those offered by Amazon or Apple. "The key difference between us and a public cloud is the ability to locate your trading systems in a specific location for latency reasons," he says. "The market data, the application management, especially in PVE Capital's case, they use a product called PIPE Core which is e-mail, file, print, telephony, desktop support. You don't get that from a public cloud; you just get processing and storage."
At first, Vittoria admitted to having some worries about the service but his worries were soon eased. "The first concern is how are they going to treat me? Of course, they love you in the first week but how do they think about you after six months? How quickly do they pick up the phone and return calls to fix a problem?" he says.
After a summer of wicked market volatility, PVE Capital hasn't seen any lag in network performance from Options IT beyond an occasional e-mail delayed by about 20 minutes. "At a management meeting we run through how we feel about a variety of aspects of our business. It has been such a consistently high standard."
In fact, the only reason Vittoria could give for possibly bringing the technology back in-house would be if his firm grew phenomenally and latency was suddenly an issue. "I know a few firms that have decided to return to the in-house technology model after having gone external and [they have done so] only because technology was a very key component to their strategy and the investor base became concerned," he says.
"Let's say you're an algorithmic or a high-frequency trading and you tell someone 'we don't have any computers, they're all sitting in this other place' then the investor base starts getting worried about security."
He adds, "From our perspective I can't see bringing it back in-house."
Kneafsey agrees with Vittoria's point that investors are asking about a hedge fund's technology arsenal. "Investors are asking about faster recovery, how they run their apps, their up time, etc. If there's a big market move when their primary trading systems are out, they can potentially lose a lot of money and investors no longer find that acceptable where before they didn't ask so many questions," says Kneafsey.
He adds, "Before, hedge funds could get away with a server under the sink and a network in the cupboard."
One aspect of the cloud is that not only can it never go down, but cloud providers are working around the clock to make sure it's up and running. Vittoria recalls a colleague who tried to connect a new laptop to the firm's VPN (virtual private network) on Christmas day. "And just for a laugh he called the help desk and somebody answered," he says.
"I said if we had our own in-house people, trust me, it wouldn't happen. Certainly not here in Europe."
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