What financial industry event is complete these days without some discussion of ESG and its impact on market players?

The session at the annual 11^th HedgeNews Africa Symposium, held last week at the Vineyard Hotel in Cape Town, was entitled “ESG and hedge funds: oxymoron or doing well from doing good?” It cut to the heart of perhaps the most crucial question facing financial markets today: is action on climate change compatible with the industry’s traditional goal of optimizing returns?

The annual HedgeNews Symposium is an opportunity for the leading Africa-focused hedge fund managers, investors and service providers to gather to discuss important issues. With in-depth discussions spanning investment opportunities, operational issues and investor concerns, this year’s event provided invaluable insights and talking points for participants as they seek to make sense of the world around them.

Many familiar topics were on the agenda; an early morning panel session examined shifting global market trends and how they are changing the game. Another session assessed the way alternatives can rethink and reshape portfolios for family offices, pension funds and private banks, while the Pan-Africa Roundtable discussed panelists’ varying approaches to accessing Africa’s growth potential and achieving sustainable returns.

As we head into a new decade, the discussions also turned to some of the biggest emerging threats and opportunities.

The US/China trade war and the changing relationship between the 21^st century’s two superpowers was a key topic. As was ESG. Not without mentioning my session about “Infrastructure, risk and rewards.”

The role technology plays in hedge funds’ success is a theme that comes up year after year in the Symposium conference sessions, as well as our conversations with attendees. Technology continues to be ever more central to hedge fund managers’ value proposition and ability to achieve a competitive edge. The question remains how best to take advantage of the opportunities on offer.

The obvious answer—as we discussed during our Symposium session—is to outsource the system deployment.

Time-to-market is one of the big benefits of technology outsourcing (or solution hosting, if preferred). Platform rollouts are much faster than for in-house implementations, plus users can take advantage of stable, functionality-rich resources that are market ready and market proven. After all, why reinvent the wheel?

Any subsequent upgrades or upsizing will also be far quicker and easier, since these can be tested and rolled out behind the scenes by the provider’s team of experts—making it simple for users to stay up-to-date on the latest versions, rather than being marooned on legacy platforms.

The risk (as with any vendor process) is of winding up with a provider that isn’t suitably provisioned, that oversells its capabilities, and can’t deliver the service quality and coverage you need. Which is why proper due diligence is vital.

Ultimately, you get what you pay for. In his keynote speech, Kevin Gundle of Aurum Fund Management noted how hedge funds with high management fees have significantly outperformed. So while more expensive doesn’t always mean better, cheaper is often a false economy too.

The same applies in technology and operational outsourcing. What matters is doing your due diligence, reviewing the solutions and disaster recovery infrastructure and KPIs, and picking a tried and tested provider—because the efficiencies and operational risk safeguards offered will pay dividends in the long term.

Over the years of attending the Africa Symposium, we’ve seen how industry attitudes have changed. Three to five years ago, many hedge funds considered hosted solutions too much of a risk. Today it is often a firm’s first choice.

Not only does hosting relieve hedge funds of the headaches of running and maintaining their mission-critical systems themselves, but the evolution in deployment models allows us to provide users with more flexible operating options. Forward thinking firms are constantly reviewing their operating models to ensure both optimal efficiency and agility.

For instance, through our managed services capability, we can take on low-value, time-consuming tasks like reconciliations. By switching from a product ownership model to a subscription-type service, firms get the same (or better) results with less overhead and can deploy focus and investment in other areas of the business.

Operating models are changing and this presents an array of opportunities to expand and improve the client experience. Which is why we expect take up and use cases in Africa’s hedge fund industry to have moved even further along by next year’s Symposium.