Portfolio management technology will play a pivotal role in facilitating consolidation in the fund of hedge funds industry, a trend that is increasing in light of significant changes over the past year in the hedge fund world, says Richard Koppel, managing director of youDevise.
In response, youDevise is finalising new features on its Hedge Fund Information Provider (HIP), which will automate the data loading, error checking and recovery processes that youDevise currently uses to migrate different funds onto its FoHF online portfolio management platform.
In addition, youDevise is expanding HIP’s front office capabilities to provide more robust analysis, pre- and post-trade compliance, and “what if” scenarios across multiple FoHFs operating in a consolidated structure.
Industry leaders have said they anticipate widespread industry consolidation as FoHFs have been ravaged by a “perfect-storm” wherein investors have redeemed holdings, hedge funds have imposed gates, and FX market volatility has significantly increased counterparty margin calls.
According to Koppel, 75 per cent of FoHFs rely on informal spreadsheets to manage their accounts and other data, which dramatically increases the cost of integration and lengthens the period before the benefits of consolidation are realised.
Some participants – particularly those with the technology in place to manage liquidity, handle foreign exchange risk, and demonstrate transparency to their investors – have been able to weather this storm. These players are seizing on the present situation as an opportunity to increase scale by acquiring weaker competitors.
Koppel helped to create the HIP in 2006 as the first online portfolio management system used by FoHFs and their administrators, such as Northern Trust. The HIP incorporates all standard industry formulas into a platform that can be tailored to fit the needs of any FoHF.