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Hedge Funds Can Enhance Infrastructural Alpha with the Right Technology Partner

AYU Digital Asset Fund Forum

Media

Hedge Funds Can Enhance Infrastructural Alpha with the Right Technology Partner

Introduction

AYU Digital Asset Fund Forum

Talos recently sponsored the AYU Digital Asset Fund Forum in London, an event for hedge funds and family offices who are active or interested in digital assets. .  

Talos’s Head of Quantitative Execution Services, Eliad Hoch, shared insights on the panel “Infrastructural Alpha - Can funds improve returns and the chance of LP investment through the service providers they choose?” chaired by Stephanie Ramezan, former CEO of Gemini, and joined by fellow panelists Tom Threifall from JellyC and Gary Murphy from Zodia Custody. 

AYU’s “Infrastructural Alpha” panel 

Here are three key takeaways from the panel:

Ensure your service provider is using the same data they’re sending you 

  • Some providers might be creating a "noise-in-noise-out" scenario by offering data and services not used by their own products.. For example, you should expect that your technology provider consumes state-of-the-art, production-ready data, including DeFi-native datasets, to develop the quantitative models and execution alphas used by their trading and transaction cost analysis solutions. 

Choose a partner that prioritizes product co-development

  • Good products are made with continuous user feedback. It’s a good sign when your provider invites you or their other clients to co-create products in partnership as a design partner. Hedge funds can have very different strategies and trading styles. For example, a client who trades large sizes in a rapidly moving market may benefit from aggressive but intelligently timed execution, rather than sweeping the order books, which may yield unwanted permanent price impact. Make sure that your provider has built a product that supports your particular approach to trading and workflows.  

Focus on your area of expertise 

  • The digital assets ecosystem is vast and made up of a diverse range of participants, each focused on their area of expertise, including exchanges, OTC desks, lenders, DeFi protocols, custodians, infrastructure providers and more. It’s most often more efficient to rely on a specialist in a given area of expertise than trying to develop that expertise in house. If you’re a hedge fund, it’s generally best to rely on a technology infrastructure provider than to build it yourself, so you can focus on your expertise in creating alpha.  

Learn more about how Talos consumes its own data into its core trading platform, works with clients as design partners, and provides the infrastructure that connects hedge funds to their chosen digital asset ecosystem. 

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