A global study by Beacon Platform Inc. reveals that 73% of hedge funds waste time using spreadsheets for portfolio analytics, leading to increased risks, including errors, missed opportunities, and regulatory fines. Funds that rely heavily on spreadsheets also struggle with scalability, accuracy, and navigating changing regulations.
A recent global study commissioned by Beacon Platform Inc. reveals that many hedge funds continue to devote a significant portion of their time to spreadsheet-based portfolio analytics and optimisation. The independent research, conducted by Pure Profile in August 2024 using an online methodology, involves 100 senior hedge fund executives from the US, UK, Germany, Switzerland, France, Italy, Sweden, Norway, and Asia, collectively managing assets totalling $901 billion.
The study shows that 73% of funds or departments acknowledge that they are wasting valuable time with manual or spreadsheet-based processes. A detailed breakdown of spreadsheet usage across the surveyed funds indicates that:
- 17% of funds rely on spreadsheets for more than 50% of their work,
- 59% utilise them for 25% to 50% of their processes, and
- 24% depend on spreadsheets for 10% to 25% of their operations.
The findings suggest that the extensive use of spreadsheets not only leads to inefficiencies but also exposes funds to a range of risks. These risks include missed opportunities, reputational damage, potential regulatory fines, and investment losses due to slow processing times or errors in complex calculations. Moreover, funds that are the heaviest users of spreadsheets are half as likely to believe they are over-reliant on these manual tools compared to those using spreadsheets less frequently.
Varying usage patterns across fund sizes
The study highlights notable differences in spreadsheet usage across funds of varying sizes. Smaller funds, with under $1 billion in assets under management (AUM), exhibit higher average usage. In contrast, mid-range funds, managing between $1 billion and $25 billion AUM, show a reduction in usage by around 20%.
However, the largest funds (with more than $25 billion AUM) experience a 34% increase in spreadsheet dependency. Furthermore, funds with a higher reliance on spreadsheets report greater difficulty in navigating changing regulations, diminished visibility of current risks, and fewer improvements in risk management practices over the past two years.
The research also finds that the highest users of spreadsheets are 30% more likely to express concerns about their exposure—which includes factors such as correlation, covariance, and value-at-risk calculations—as well as the coverage of assets and products traded within the same system, compared to the lowest users.
Impacts on scalability and accuracy
Spreadsheet dependency appears to have a negative effect on both the scalability and accuracy of risk management systems. Funds that utilise spreadsheets for only 10% to 25% of their risk management processes are two to three times more likely to rate their systems as ‘Excellent’ in terms of scalability and accuracy.
Scalability here refers to the ability to quickly and cost-effectively respond to demands for increased computing power and larger datasets, while accuracy pertains to achieving mark-to-market valuations on all exchange-traded products and adopting industry-standard models.
Kirat Singh, Co-Founder and CEO of Beacon Platform Inc., comments:
“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.”
About Beacon Platform Inc.
Beacon Platform Inc. is a financial technology firm that provides quantitative developers with the necessary tools to rapidly build, test, deploy, and share trading and risk applications, analytics, and models. With a team possessing extensive financial markets experience, Beacon’s unified platform offers the applications, tools, and infrastructure required to migrate software and infrastructure to the cloud, manage risk across all asset classes, and focus on developing innovative strategies that provide a competitive edge.
Himani Verma is a seasoned content writer and SEO expert, with experience in digital media. She has held various senior writing positions at enterprises like CloudTDMS (Synthetic Data Factory), Barrownz Group, and ATZA. Himani has also been Editorial Writer at Hindustan Time, a leading Indian English language news platform. She excels in content creation, proofreading, and editing, ensuring that every piece is polished and impactful. Her expertise in crafting SEO-friendly content for multiple verticals of businesses, including technology, healthcare, finance, sports, innovation, and more.
