Technology investment remains a priority across the hedge fund industry, but increased spending does not necessarily translate into operational progress. Our recent report, produced in collaboration with Hedgeweek, surveyed more than 100 hedge fund managers globally to examine where firms are investing, what results they are achieving and where operational challenges remain.
The survey shows 61% of funds increased their technology budgets over the past 12 months, and none reported a significant decrease. However, the more important story lies in where those investments are being directed, whether they are delivering measurable value and how firms are prioritizing technology initiatives.
Technology Investment Becomes More Targeted
Technology investment is becoming more targeted, with firms concentrating spending in a smaller number of strategic priorities. Among funds that increased budgets, nearly four-fifths of investment focus was concentrated in three categories: AI and machine learning, trading and portfolio management systems, and data infrastructure and analytics. The findings suggest that firms are becoming more selective in their technology priorities, although questions remain about whether investment strategies are aligned with operational requirements.
AI remains the industry's leading area of technology investment, but measurable operational benefits remain concentrated in a relatively narrow set of use cases. Document processing is the one workflow where AI has delivered broad, tangible results, cited by 42% of respondents as the area of greatest impact. Beyond that, 30% of funds reported that AI has not yet produced a meaningful operational benefit. The gap between investment and realized value remains significant for many firms.
Different Priorities Across Fund Segments
The picture becomes more nuanced when viewed through the lens of fund size. The largest funds, those managing more than $5 billion in assets, continue to invest heavily in AI, as do many smaller managers building infrastructure from the ground up. Mid-sized firms are taking a somewhat different approach, prioritizing trading systems and foundational data initiatives ahead of AI investment. This reflects differing operational priorities across fund segments, with many mid-sized managers focusing on core infrastructure before expanding AI initiatives.
Why Investment Sequencing Matters
One-quarter of managers describe their technology infrastructure as behind where it needs to be. Among those firms, nearly two-thirds are prioritizing AI or trading systems as part of their modernization efforts, while just 7% are prioritizing data infrastructure. The findings suggest that some firms may be focusing on front-end capabilities before addressing the underlying data and infrastructure requirements needed to support long-term scalability.
The expansion of hedge funds into less liquid asset classes is adding further pressure to operational environments that were not originally designed to support them. Among funds that have moved into private credit, direct lending or structured products, 73% increased their technology budgets, and 63% encountered unanticipated operational challenges. The operational implications are already evident in the form of manual processing bottlenecks, data gaps and systems designed for more traditional hedge fund strategies.
Technology Readiness as a Due Diligence Consideration
For allocators, our report offers an additional perspective on operational readiness. The findings provide insight into how managers are approaching technology modernization and whether investment priorities align with broader operational objectives. As operational complexity increases, technology strategy is becoming an increasingly important component of operational due diligence.
The report also highlights an important distinction between technology investment and technology readiness. While spending continues to increase across the industry, the findings suggest that firms may achieve stronger outcomes when technology initiatives are supported by clear operating models, robust data foundations and well-defined processes. As technology strategies continue to evolve, the sequencing of those investments may prove just as important as the investments themselves.
Download the report to learn more about technology investment trends across the hedge fund industry.