By Chris Cattermole - The hedge fund industry is experiencing change as a result of money from pension funds and other institutions flowing back into the market. In the past this money would go principally to large firms with upward of USD5bn in assets under management, but in the current environment mid-tier to large managers with lower asset totals are also starting to benefit.
Investors are increasingly open to the prospect of better returns from this class of manager, especially those firms that have reinvented themselves over the past couple of years in the wake of the financial crisis and its fall-out on the hedge fund industry. Such managers have taken the opportunity to examine how they needed to improve their operational infrastructure, make themselves more scalable and increase their product offering, without having to add staff or rely on offline processes.
According to Hedge Fund Intelligence, between the end of 2007 and mid-2010 UK hedge funds lost 64 per cent of their assets through negative performance and/or investor redemptions. This has been especially difficult for managers that are still operating with the same number of staff as in 2007. They are now looking at options for reallocating their resources to allow them to offer a broader spectrum of products, for instance Ucits funds or managed accounts.
They are also under pressure from investors seeking not only increased transparency and insight into managers’ operations but more detailed and more frequent reporting. With the opportunity to attract these institutional inflows and grow in size, managers must think radically about how to organise their operating model more efficiently in order to provide superior client service without incurring additional costs.
Against this backdrop, Advent’s Geneva system enjoys the benefits of a well-known brand in the alternative space, a single platform capable of handling multiple asset classes and product types. This is important because traditionally many hedge fund managers have used a multiplicity of applications within their organisation that provide the separate reporting capabilities and toolsets required by each asset class.
Although applications for asset classes such as equity, debt and swaps might work well within their individual silos, problems arise if an institutional investor asks to know the fund’s exposure to a certain issuer across all asset classes, which might include structured credit notes or credit default swaps.
Assembling the information from a patchwork of systems takes hours and contributes significantly to hedge fund staff generally being so overworked, whereas Geneva can deliver the cross-asset class transparency required by investors today at the touch of a button.
A system like Geneva can therefore open new vistas for an organisation and its staff alike, freeing people to spend time on their core activity of managing clients’ money. Jobs can change from tactical response functions, hunting and pecking through spreadsheets and working with off-line processes, to higher-added value functions within the organisation.
This is an important consideration for management firms that often embrace much of the ethos of family-owned businesses, and for which a decision on changing system requires consensus across the organisation, from operations and IT teams to trade support and investor relations.
Not only does a comprehensive system like Geneva remove dependence on asset class specialists with expertise in their particular silos, it gives executives a much more strategic, consolidated view of the firm’s investments, performance and exposure, facilitating decisions in the firm’s best interests.
Chris Cattermole is Geneva sales manager for Advent Software EMEA
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