Like other investment fund companies, Kingdom Ridge Capital utilizes hedge fund industry technology vendors to assist with compliance because of the complex nature of reporting obligations and the expanding number of registered hedge fundadvisers. There are some specific areas where hedge funds rely on technology solutions to make their business more profitable.
Electronic communication archiving and review is one method of technology compliance that is now standard in the industry. Investment advisers need to retain and monitor all electronic communications. Another important areais portfolio monitoring, recording trade allocations, and monitoring for position limits. Personal account record retention and surveillance is another necessary step that involves the intake and review of employee personal account brokerage statements.
Marketing applications are also an important component of electronic communication, with many hedge funds now have Customer Relationship Management (CRM) systems that memorialize investor contacts.
Kingdom Ridge Capital stays current with hedge fund technology, using primarily cloud-computing technologies to fully be fully compliant with regulator and investor expectations. Compliance technology solutions have made this task much easier for investment firms. The increased difficulty of reporting obligations and the increasing number of hedge fund investment advisers now registered with the SEC and CFTC have made compliance technology a must for modern investment firms.
Kingdom Ridge Capital is a long/short hedge fund. Many would classify Kingdom Ridge as a TMT (Technology, Media and Telecommunications) firm but in fact the firm limits its research and trading scope to the technology sector. They do not invest in traditional media or telecommunications stocks as these businesses tend to lack the product cycles that cause the constant reshuffling of winners and losers that creates a rich stock picking environment. Kingdom Ridge Capital tends to limit its investments to stocks that trade on United States or Western European exchanges.
Kingdom Ridge Capital runs a best ideas long/short portfolio that tends to consist of high conviction stock ideas. Kingdom Ridge Portfolio Manager Chris Zepf works in a collaborative way with his fundamental research team to identify and vet ideas before putting the best picks into the portfolio. Zepf’s close involvement with the Kingdom Ridge research team – which includes Mark Zepf, Andy Cobb, Jim Jungjohann and Nick Caputo – helps him understand the potential upside/downside risks for each position so he can handle risk management himself instead of relying on analysts to bring a change in fundamentals to his attention.
Kingdom Ridge Capital’s thorough, careful approach involves high conviction investing. This process is characterized by a more detailed, in-depth analysis whereby investment managers are better able to gauge company performance based on a deep look into all the factors that impact that company’s long-term performance. This investment method requires patience and an understanding that this more detailed view of a company can better determine stock profitability in the future.
When starting a hedge fund, some of the most important decisions the firm’s founders can make relate to choosing infrastructure partners. From the start, Kingdom Ridge Capital founders Chris Zepf and Brian Thonn chose to align with some of the industry’s best in order to create a high quality platform that could support growth over the long term.
For their prime broker and administrator, Kingdom Ridge Capital chose to work with Goldman Sachs. This company’s prime brokerage is designed to provide services to assist hedge funds to manage risk, maintain liquidity, monitor their portfolios, and build their business further. For legal counsel, Kingdom Ridge has teamed with Seward & Kissel and Ogier. Theselaw firms assist Kingdom Ridge in such matters as trading issues, tax, and ERISA issues; regulatory and compliance matters; employment matters; and trademark protection. For auditing and accounting, the company turned to Rothstein Kass for assistance with tax planning, due diligence, management, and financial advisory services.
Today, Kingdom Ridge Capital continues to use each of these original partners. Over the years the names have sometimes changed – for example Rothstein Kass is now part of KPMG and Goldman Sachs administration is now IFS – but the relationships have been consistent. Kingdom Ridge management think having an infrastructure platform that is composed of world class partners provides robust business capabilities and gives peace of mind to investors.
Kingdom Ridge Capital’s team is highly experienced and accomplished in the investment arena. It is a core competency that provides Kingdom Ridge with a competitive advantage. While the firm clearly understands technology, that doesn’t mean they want to dedicate significant resources to an internal IT department. That is why Kingdom Ridge decided to go with an IT strategy that embraced the cloud. Cloud computing provides a small business like Kingdom Ridge with many advantages.
First, cloud computing provides significant cost-saving measures for investment firms. Instead of having to spend money on expensive computing infrastructure and communications rooms, a firm can simply outsource the infrastructure and access all applications and data from the web. Cyber-security is another important asset gained from cloud-based computing, as many investment firms are concerned for their clients’ privacy due to the sensitive nature of their business. Cloud-based computing provides as much if not more security than any in-house infrastructure. Finally, flexibility and reliability make cloud-based computing an attractive option for investment firms. Traveling analysts can always reach their applications and files no matter where they are around the world. There is always someone working at a world class cloud provider who is making sure that important computing ability is practically always available.
Kingdom Ridge Capital has been very satisfied with their strategy to outsource their IT infrastructure to the cloud. The decision to move most IT to the cloud provides them with a higher quality IT capability than they could afford on their own and allows them to focus their time and resources on things that make a difference for their clients.