Originally posted in the August 2012 edition of Corgentum Consulting's Operational Due Diligence Insights.

1. Is the Cloud a Viable Hedge Fund BCP/DR Solution?
Cloud computing based information technology and business continuity and disaster recovery
("BCP/DR") solutions have becoming increasingly popular in recent years among the hedge fund and
private equity communities. Indeed, many investors seeking to perform operational due diligence on
fund managers may have come across more and more funds utilizing the cloud as of late.
It is important for investors to understand exactly what the cloud is and both the challenges and
opportunities it presents to fund managers, particularly in relation to BCP/DR.
What is the cloud?
In the context of evaluating fund BCP/DR infrastructures, the
cloud can effectively be thought of by investors as an internet
based offsite solution.
There are three types of cloud computing, all of which are
typically classified with the ending, "as a service." They are:
 Platform as a service ("PaaS") - under this model
service providers provide a computing platform
solution to funds such as an operating system or web
server.
 Software as a service("SaaS") - this model allows funds to run and access applications on
cloud based servers.
 Infrastructure as a service ("IaaS") - under this model service providers offer funds access to
virtual machines, storage space and data centers via the internet.
How do fund managers utilize the cloud for BCP/DR planning?
Hedge funds and private equity funds are increasingly incorporating cloud based components into
their BCP/DR plans in several ways:
 Data storage - increasingly it is cost effective for firms to archive data offsite on cloud based
servers. This reduces expenditures on new servers and frees up office space for other
equipment and personnel
 Data backup - Cloud based data storage centers typically serve a high volume of customers
and
are therefore designed to handle large scale
data transfers. These facilities are also typically designed with BCP/DR planning in mind, and
may be more robust in both equipment and design than an individual fund manager’s system
 Application backup - Fund managers may utilize cloud based solutions to serve as a backup
location from which applications could continue to be run, in the event of a business
disruption or disaster type event. The continued operation of applications during such an
event may be particularly critical for quantitative or high-frequency trading strategies.

2. What should investors ask their fund managers about the cloud?
The cloud presents a number of attractive benefits to fund managers. As part of an evaluation of a
hedge funds BCP/DR planning, investors should take the time to understand how their fund
managers may make use of such technologies. Some key issues investors may want to consider
addressing include:
 What measures has the hedge fund taken to evaluate the BCP/DR planning procedures of
the cloud provider?
 How does the hedge fund monitor the testing and oversight of the BCP/DR plan at this
provider?
 What measures has a hedge fund taken to address security concerns related to storing data
and running applications at third-parties?
 Does the fund manager incorporate testing of access to cloud based data and applications
as part of its own BCP/DR tests?
 Has the fund evaluated the cost benefit analysis of utilized cloud based technologies versus
bringing such technologies in house? At what point would any cloud benefits be outweighed
by internal cost considerations?
While the increased use of the cloud may be the hottest trend among hedge funds for BCP/DR data
storage and application development. Investors should take care to understand if a hedge fund has
carefully evaluated their use of this new technology, or if they are simply jumping on the bandwagon.
Originally posted in the August 2012 edition of Corgentum Consulting's Operational Due Diligence
Insights.
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Corgentum Consulting is a specialist consulting firm which performs operational due diligence
reviews of fund managers.
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worth individuals, and family offices to conduct the industry's most comprehensive operational due
diligence reviews. Corgentum's work covers all fund strategies globally including hedge funds, private
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diligence allows Corgentum to ensure that the firm's clients avoid unnecessary operational risks.
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