Global IT spending by hedge funds will reach $1.35bn by the end of this year, representing a decrease of 20.5% year-over-year, says financial research firm Celent.
In a report, Hedge Fund IT Spending: The Inevitable Contraction, Celent assesses the consequences of the financial crisis and the resulting reorganisation of capital markets on the hedge fund industry, hedge fund IT spending and technology priorities.
With uncertainty surrounding capital markets and the scarcity of credit likely to spill into 2009, a substantial contraction in IT spending is inevitable, said Celent.
Growth rates will drop across all regions and contribute to lower total spending. However, cuts will be more pronounced in Europe and Asia, given the particularly dire performance of both regions' hedge funds.
The overarching theme of IT strategies in 2009 will be a focus on realising efficiency wins from existing applications infrastructure, whilst lowering maintenance costs or at least keeping the status quo, said Celent.
Spending on new technology will take a back seat. Unless faced with a collapsing platform, large system acquisitions or replacements are expected to be postponed.
"Approaches to thinking about and using technology will be transformed. Many of these changes will be transitory, some permanent. For the time being, cost-minimisation and operational efficiency are at the top of the operational agenda," said Isabel Schauerte, a Celent analyst.