Case Study

  • Tuesday, September 22, 2015
Case Study


  • Type:  Registered Investment Advisor managing two hedge funds, a mutual fund and several institutional managed accounts
  • Strategy:  Long U.S. equity and/or short index call option overlay
  • AUM/AUA:  $500 million
  • Years in business: 19


  • Existing technology infrastructure expensive to operate, maintain and support;
  • Desire to implement robust commercially-available technology solution to meet institutional investor standards; and
  • Specialized need for real-time options trading and valuation capabilities.


  • Single platform to manage equity and options strategies from trade inception to portfolio management and reporting;
  • Custom-built front-end to manage options overlay strategies in real-time; and
  • Outsourced T+1 reconciliation processes and maintenance of trade database for portfolio accounting reporting.


  • Expected to reduce technology and operations costs by 25-50%;
  • Infrastructure passes DDQ with institutional money managers; and
  • Reduced time to market when launching new accounts/products.


Nothing succeeds like success. With more than $500 million in assets under management/advisement and a nineteen-year track record, The Gargoyle Group’s asset management business is in the midst of another growth phase and is using modern technology from Liquid Holdings to facilitate its business transformation. Since 1988 Gargoyle has been at the forefront of the options-trading marketplace and continues to draw upon its past experience to drive success. “Gargoyle was an options market maker for twenty-five years— we ultimately decided to exit the proprietary trading business in 2013 to focus exclusively on our alternative investment strategies which date back to 1997,” said Alan S. MacKenzie Jr., Gargoyle’s COO & CFO. “The strategies we use today across our hedge funds, mutual fund, and managed account products are all options-centric, leveraging the knowledge we acquired over those years. We have exhibited flexibility by taking our core area of expertise and redirecting it into another area of Wall Street that has allowed us to continue to grow the business.”

Fast forward to today, Gargoyle is the first sub-advisor on TCW’s newly-formed Alternative Mutual Fund platform—a move that should help Gargoyle substantially grow its assets in the future.


Gargoyle’s investment process was and remains technology-driven—it takes a fundamental approach to building diversified stock portfolios. Gargoyle designed a quantitative stock-ranking process that imports, analyzes and weights fundamental metrics on the largest 2,500 U.S. listed equities by market capitalization. This system generates the buy and sell signals that are then implemented by the Firm’s investment team. The resulting equity portfolio(s) are then hedged with an options-overlay strategy. Gargoyle originally built and maintained its own trading infrastructure to protect its unique intellectual property and give its traders an edge in the market. Its infrastructure strategy required Gargoyle to staff development and operations teams to make sure the business operated without disruption. It was customf-fit, and worked well, but was very expensive to support.

With the shift in focus to alternative investment strategies and asset management, Gargoyle also shifted its infrastructure strategy from building tools in-house to sourcing third-party technology to reduce cost and maintain cutting-edge trading tools.  “When you run a proprietary trading firm, you are not subject to the operational due diligence that institutional investors put asset managers through,” said Phillip Martin, Gargoyle’s Chief Technology Officer. “We learned that the institutions wanted their underlying managers to use third-party, robust systems that were actively maintained and supported by a full-time technology staff.”


In 2013, Gargoyle put out several Requests for Proposal (RFP) to manage the various aspects of its technology infrastructure, which included finding:

  • An options-focused Execution Management System (EMS) to replace its homegrown front-end;
  • An Order Management System (OMS) and trade database; and
  • Portfolio accounting capabilities.

Gargoyle’s management team was confident this infrastructure shift would help the Firm meet institutional investor standards, which have grown from a short assessment of the investment team into a highly quantitative and detailed analysis of the fund, the risks taken to achieve performance, and the infrastructure in place to safeguard assets. Gargoyle examined a range of technology vendors. The firm selected the Liquid platform because it addressed requirements across the different projects through a single cloud-based solution as well as the standards for ‘institutional infrastructure’ from its larger investors.



As Gargoyle’s stock ranking methodology generates buy and sell signals, the Liquid platform is used to initiate and manage its stock orders, as well as to check P&L and other security and portfolio level analytics.  As important, Liquid boasts a sixty-person technology team that worked together with Gargoyle to develop a custom front-end to manage its options strategies.  “Options trading is a big part of our business,” said Mr. MacKenzie. “Many of the vendors that we looked at had poor support for valuing and trading options—the difference with Liquid was its nimbleness to accommodate custom development work to handle our options strategies. We often did not have that choice with other providers.”

Gargoyle’s equity and options strategies are implemented and managed through Liquid’s front-end which allows the investment team to continuously analyze delta-exposures and make adjustments to holdings throughout the day. This allowed Gargoyle to de-commission internally built systems and servers, and re-allocate resources that supported the options-overlay strategy.


During the consultative process, the business identified ‘manual workarounds that kept the portfolio data up-to-date’ as a pain point.  Mr. Martin remarked “Start-of-day processes were a big part of what we did each morning.  We downloaded the positions and trades from our custodians, read trade files from our brokers, compared the files to the positions in our database, and finally, addressed any trade breaks. Being able to outsource that was a big plus.”

Liquid handles a range of services on behalf of Gargoyle which include reconciling trades and handling breaks across any number of counterparties to ensure the integrity of the firm’s portfolio data. The resulting data is continuously updated and stored in a secure repository that provides Gargoyle with a single, accurate source of portfolio data for investing and reporting purposes.


As part of the service, Liquid maintains connectivity between Gargoyle and its counterparties, trading venues and market data feeds. Liquid eliminates multiple points of failure and milliseconds of latency that can erode performance.  It also allows Gargoyle to execute and clear trades with the executing and prime brokers of choice, and update those relationships as Gargoyle sees fit without relinquishing any parts of their infrastructure or data.  Connectivity does not stop with the ecosystem of vendors supporting Gargoyle—connectivity also extends to its investors. Through Liquid, investors can now get access to portfolio-related information which includes fund and account information, transaction history and performance. It goes a long way in satisfying the transparency demands of their latest institutional investors.


Lastly, Gargoyle selected Liquid to maintain its systems infrastructure in secure data centers in the U.S., and to automate business continuity and disaster recovery planning. As an SaaS-delivered platform, Liquid ensures Gargoyle has access to the latest platform advances without disruption to their day-today business. It also allows Gargoyle to get access to and manage its investments at the desk and from a mobile device. Together, this helps the Firm eliminate extra time, money and resources to replace hardware or software, or update parts of their infrastructure to support new requirements such as mobile access.




accessible through the web and optimized for mobile devices



data repository; corporate actions; reconciliation services



low latency connectivity to trading venues and counterparties



business continuity, disaster recovery, enhancements without client disruption


Liquid’s combination of modern technology and services, and access to development resources helped to assure Gargoyle that the Liquid platform was the best fit to meet its present and future business requirements.  “From our first meeting, it was clear that a lot of thought had been put into the design of the Liquid platform to support a hedge fund’s operations,” said Mr. MacKenzie.  “Combine that with their willingness to build the additional capabilities that we needed, we felt very comfortable that we had found the right partner to meet our trading technology needs.”


Gargoyle is beginning to realize cost savings month over month by converting variable operations, systems and IT maintenance costs into a single fixed-fee for the Liquid platform. In lieu of contracting with several different technology vendors that could have cost over $400K per year, the Firm relies on a single vendor to manage its investment workflow needs for less than $130K per year. In terms of immediate cost savings to the business, Gargoyle did not renew a contract with the incumbent EMS provider, has re-allocated technology and operations personnel to other projects, and is in the process of de-commissioning its reconciliation applications and historical trade database. The Firm is quick to point out that the project’s ROI will be easier to quantify in 2016, but is confident this project will save the business upwards of $500K because of the development and operations staff that was required to support its internally built systems and processes.

Aside from present and future cost savings, the business has received qualitative improvements to the integrity of its portfolio data and the accuracy of real-time Greeks; its ability to complete strategic initiatives by using a third-party development team and the firm’s ability to raise capital from institutional money managers who expect its sub-advisors to have institutional infrastructure in place to safeguard assets. Mr. MacKenzie later remarked, “we are confident that when we get to the end result and are no longer maintaining our own trade-database and related applications, it will be a very good ROI. Some of our cost savings are not as tangible—a lot of the ROI comes from how we have redeployed our technology and operations teams.”


The common perception of a nineteen year-old asset management firm might be one that’s steeped in tradition— typically slower moving and at times more deliberate. Conversely, the global financial markets are more volatile, moving at sub-millisecond speeds. Teamed with Liquid Holdings, Gargoyle Group is taking advantage of market opportunities through modern technology and services that when combined with their experience, judgment and investing knowledge, is helping to improve performance and attract more assets.

For a free evaluation of your infrastructure and to test drive modern technology that can help you raise capital in today’s competitive environment, contact us today.