SEI has expanded its capabilities related to the processing and accounting of side pocket investments for fund managers.
SEI spearheaded the design and development of expanded functionality intended to provide managers with greater processing control, efficiencies, and risk reduction capabilities related to these pools of separate illiquid assets.
Over the past several years, side pocket investments have become more prevalent in hedge funds amid liquidity issues in the market, and as a result, the processing of these assets has come under greater scrutiny.
Side pocket investment processing is typically performed manually because methodologies are unique across managers and complex in nature.
SEI, which uses SunGard's InvesTier, a partnership and investor accounting solution, reviewed the practices of SEI's client base that have side pocket investments with SunGard to identify a set of standardised best practices that could be automated across liquid and illiquid assets.
Specific capabilities that were automated include incentive fee calculations, capital transfer activity, income and expense allocation methodologies, as well as an expanded cost basis release methodology on redemptions.
"We are always looking for new ways to reduce risk and expand our operational outsourcing capabilities to support our clients - side pockets is an area where there was a clear opportunity to make an impact," says Phil McCabe, senior vice president and solution head, SEI's investment manager services division. "By collaborating with SunGard on this project, SEI is the first InvesTier client to license and implement the new side pocket processing functionality enhancements on behalf of our clients. In the end, it's about giving our clients more confidence in SEI's calculations and eliminating the need for them to run parallel processing in-house."
Gayle Alexander, chief operating officer for SunGard's InvesTier business unit, says: "Our relationship with SEI's investment manager services division, coupled with some additional side pocket features and requirements gathered by SEI, helped extend and enhance the development and implementation of our side pocket management modules within InvesTier."