Hedge Funds and Bloomberg

Many hedge fund managers were introduced to the Bloomberg terminal when they began their trading careers.  The terminal, with its iconic user interface which has changed only by small increments over time, can be found in most large asset management companies as well as in smaller groups like family offices, fund of hedge funds, hedge funds and even single manager investment advisory firms.  The breadth and depth of the Bloomberg services may be matched by other similar financial information and news services (like Thompson/Reuters), but managers and traders seem to be drawn to the Bloomber services nonetheless.  Below is an overview of information we compiled on the Bloomberg services – please feel free to share any thoughts in the comments below.

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Bloomberg Terminal Information Overview

What is Bloomberg?

The Bloomberg terminal is a computer system that enables financial professionals to access the Bloomberg Professional service through which users can monitor and analyze real-time financial market data movements and place trades. The system also provides news, price quotes, and messaging across its proprietary and secure network. Most large financial firms have subscriptions to the Bloomberg Professional service, and many exchanges charge their own additional fees for access to real-time price feeds across the terminal.

What services does Bloomberg offer?

Bloomberg offers financial professionals access to a top-of-the-line financial, regulatory, and market database. The system is of particular benefit to investors, as it allows them to simultaneously:

  1. access, process, and store information on the companies they wish to monitor;
  2. teleconference with colleagues around the world; and
  3. monitor the relationship between domestic and foreign currencies.

The activities for which Bloomberg users most commonly subscribe to the service include, but are not limited to:

  • Earnings Estimates
  • Analyst  Recommendations
  • Related Securities
  • Various graphs of a company’s stock price
  • Stock screening search: Search for equities based on user-defined criteria
  • Corporate Actions: Calendar of events that might impact markets
  • Corporate actions of a specific company
  • Broad information on U.S. Treasury and Money Markets
  • U.S. Economic surveys and releases
  • Mergers & Acquisitions Home Page
  • Current news and deals

Bloomberg Mobile, which is a free mobile application for iPhone and Blackberry users,  doesn’t offer quite the same level of functionality as the full Bloomberg terminal, but it is a beautifully designed app that provides up-to-the-minute news, stock quotes, company descriptions, and price chart and market trend analysis. The My Stocks feature is a more detailed replacement for Apple’s Stocks app. Additionally, Bloomberg Mobile takes full advantage of the iPhone’s position sensor by providing larger charts when you rotate the phone to a horizontal position.

The Bloomberg Platform & Equipment

The Bloomberg terminal implements a client-server architecture with the server running on a multiprocessor UNIX platform.  Although the look and feel of the Bloomberg keyboard is very similar to the standard computer keyboard, there are several enhancements that help a user navigate through the system.  Originally a self-contained operating system running on custom hardware, the Bloomberg Terminal now functions as an application within the Windows environment.  There are essentially three levels to the system:

(1) The Core Terminal:

This is the original system, consisting typically of 4 windows, each containing a separate instance of the terminal command line. By entering tickers and functions, data can be displayed and programs run to analyze it. This seemingly large number of windows allows users to call up several entirely different sets of data, and compare it quickly; for those users who have more than one computer display, each terminal window can be assigned independently, creating, in effect, four terminals.

(2) The Launchpad:

Launchpad is a customizable display consisting of a number of smaller windows, called ‘components’, each of which is dedicated to permanently displaying one set of data. A typical user would be a stockbroker who wishes to keep a list of 30 stocks visible at all times: Launchpad creates a small component which will show these prices constantly, saving the broker from having to check each stock independently in the terminal. Other functions, such as email inboxes, calculation tools and news tickers can be similarly displayed. The Instant Bloomberg messaging/chat tool is another Launchpad component that allows brokers to communicate instantly with other Bloomberg users.

(3) Application Programming Interface:

The final level of the Bloomberg system is the ability to export data from the terminal to 3rd party applications, such as Microsoft Excel. A user might wish to use Bloomberg data from the terminal to create his or her own calculations; by exporting the live data into another program, they can build these formulae. Bloomberg supports this through a range of add-ins which are packaged with the terminal software.

How much does Bloomberg cost?

While Bloomberg offers a great variety of services, it is relatively expensive.  Monthly rates can be as high as $1,500 – $1,800 per month.  However, as Bloomberg saw a decline in revenue over 2007 and 2008, it is to be expected that the rates will come down  by the end of 2009.  Although Bloomberg has become an institutional cornerstone in the finance world, leading competitors for electronic financial data provision include Thomson/Reuters, Morgan Stanley, FactSet Research Systems, Jackson Terminal, Advantage Data Inc., Fidessa and Dow Jones.

Conclusion

Bloomberg Terminal currently caters to more than 300,000 users worldwide, and is highly regarded by financial professionals as a powerful data-warehouse for institutional investors.  Since the relatively high ongoing cost makes it unfeasible for individual investors with relatively small amounts of capital to purchase, the product targets a unique subsector of investors with the purchasing power to enjoy the benefits of comprehensive access to the financial marketplace.

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Please contact us if you have any questions or would like to start a hedge fund.  Other related hedge fund law articles include:

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