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Northern Trust launches gating impact assessment service

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Northern Trust has introduced a feature that enables fund of hedge fund managers to assess the impact of gates on their liquidity in real time.

Northern Trust has introduced a feature that enables fund of hedge fund managers to assess the impact of gates on their liquidity in real time.

It is available to Northern Trust’s FoHF clients worldwide, through its Hedge Fund Monitor product, which is available through Northern Trust’s relationship with financial applications company youDevise.

Gates are set up by hedge fund managers to limit redemptions from the fund, preventing a run on the fund, which could have a negative impact on operations as the manager may be forced to sell off positions to generate cash to meet redemptions.

This new feature enables Northern Trust Hedge Fund Monitor to incorporate all such gating terms into the liquidity calculations, so FoHF automatically know how much and when they can access cash from their underlying hedge fund investments, in a manner fully integrated with core fund administration and custody records.

Ian Headon, Northern Trust’s asset servicing product manager for alternative investments, says: ‘The FoHF industry faces many challenges in today’s market, and accurately monitoring and projecting liquidity is at the top of the list – we have seen a growing number of hedge funds imposing gates, particularly over the last 12 months. Through this latest product enhancement, Northern Trust is able to assist our FoHF manager clients to make decisions faster and more effectively, take better advantage of market opportunities, and demonstrate to their investors the level of control, reporting and transparency that they demand.’

Northern Trust can already model underlying hedge fund redemption and fee terms, enabling users to generate reports showing amounts that could be liquidated in a given number of days and at what cost, taking into account redemption notices, penalties, lock-ups and other terms.

‘With the product’s new functionality, we are now adding gating terms to these models and reports. This will also enable our clients to generate worst case liquidity scenarios where gates have been imposed by any number of their underlying hedge funds,’ says Headon.

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