Until hedge funds started to become popularized in the late 1990’s we really had a stagnant software market for the sophisticated investor. Since hedge funds tend to push the limits of traditional investing in their pursuit of profits it was a natural extension for them to go looking for new ways to profit and extract alpha or profit.
Over the last fifteen years or so all manner of hedge funds whether they be a global macro trader or a guy doing volatility arbitrage have all built and used more and more sophisticated software and computing power to get more of the ever alluding edge that we all want.
For instance some hedge funds that are engaged in high frequency trading have gotten to the point where they even co-locate their computers and server farms to rooms that they rent in the exchanges itself all in an effort to reduce trading latency. When your profit and loss depend on the speed of execution this is the obvious choice but who would have thought that one millionth of a second mattered to their trading? It turns out it can mean a lot.
Another area where hedge funds and especially global macro funds and arbitrage guys really excel in terms of software is the prime brokerage. if you use four different brokers how can you reconcile all of the trading? Easy if you have built or use a third party accounting application to aggregate all your trades and positions, along with leverage and other risk management tools then you are ahead of the game and have a better idea of what to do then someone who does not.
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