AQR is a Global manager founded in 1998, they currently have 871 employees, with $208 Billion assets under management focusing on traditional and alternative investment strategies.
Another significant financial firm has just embraced the benefits of blockchain and has started the discovery process of investigating the further applications for their trading platforms.
The hedge fund is hoping to utilize the emerging tech as other firms are, to make their systems more efficient, thus increasing their security and effectiveness without additional frictions that are typically faced when integrating new tech.
Entrenched hedge funds, surprisingly, have been rather slow, (even slower than banks), to announcing their intent to adapt using blockchain.
Yet, the specific sector is looking to seek new ways to cut costs and as they are implicitly mandated by investors to keep their costs down and bring in expected appropriate returns. There is more attention being paid by investors to the costs that are taken on by hedge funds in running their operations and these firms are responding by looking into what blockchain can offer.
Kabiller is cautiously optimistic about the possibilities.
“How long [the technology] takes to get there and what becomes the standard is unclear, there’s a big entrenched infrastructure there, but there is potential for more efficiencies that can be gained by blockchain,”. “we’ve also assigned Steve Mellas, our head of operations, the job of looking into the potential uses for blockchain in a trading environment” he said.
Their research on the nascent technology of blockchain, or distributed ledger technology, comes at a time when a majority of banks and payment companies like AMEX are adjusting to the changes, implementing the tech in a manner that makes sense for their operations. Funds are starting to look at blockchain in a serious way now, but it will take two to four years for it to become ubiquitous.
These companies are focusing on the areas such as trade reporting which can gain a large advantage from the aspects of transparency and decentralization present in DLT.
Infosys earlier this year found that 50% of banks have invested in blockchain technology or planned to do so in 2017, and the average investment in blockchain projects was $1m.
Hedge funds need to utilize tech to be able to quickly make the right changes, seize profit and cut cost centers sooner than later to stay competitive in the fierce market environment. As such, we’ve seen that new hedge funds have already made various plays into the space, over a hundred hedge funds have started up to cater to this crypto market.
Overall: They are seeking to stay lean and mean in a competitive environment and this technology may be another key integration to helping them achieve that goal.
AQR is a global investment management firm built at the intersection of financial theory and practical application. We invest on behalf of our clients — including institutional investors, such as pension funds, defined contribution plans, insurance companies, endowments, foundations, family offices and sovereign wealth funds, as well as RIAs, private banks and financial advisors. Our commitment to these clients is to help them exceed their long-term objectives. We do this by filtering out market noise to identify and isolate what matters most, and by implementing ideas that stand up to rigorous testing.
This is without doubt another major update for blockchain technology and we are very quickly witnessing what mass adoption looks like.