Modern Front-Office Data Management A Necessity as Regulations Continue
Before Dodd-Frank, hedge and private-equity funds with $25 million in assets under management typically had to register with the SEC—fast forward to today and both hedge and private equity funds can manage as much as $150 million in assets before being required to go through that same process.
Analyzing the universe of single-manager hedge funds by AUM, roughly 6,500 out of the active 8,200 hedge funds are managing less than $150 million in assets, leaving the bulk of our industry unregistered.
“The overwhelming number of hedge funds are smaller funds,” BarclayHedge President said. “And if they fall below a certain size, they are not required to register with the Securities and Exchange Commission. So if they are not registered, they may fall off the radar.”
On the regulatory front there is a call for modernization of the existing process. Industry experts predict that the prime broker and hedge fund business models will see rapid evolution over the next three years. The SEC is advocating for new hedge fund reporting procedures requiring registered funds to provide portfolio-wide and position-level holdings data to the Commission on a monthly basis. Additionally they would make online share holder reports and quarterly holdings for the past year mandatory.
Whether or not the legislation is passed, investors are demanding fund managers of all size provide detailed investor reports with the analysis coming from a third party, objective source.
This takes us full circle to a term we are already familiar with—IBOR or Investment Book of Record. The benefit of an IBOR is in providing complete and accurate investment and cash positions when required to power key functions such as performance reporting, shareholder accounting, risk data, and regulatory reporting. Aggregating portfolio data throughout the day to maintain a single, accurate view of all investment activity is not a novel concept, but with the wrong infrastructure, it can be manually intense, time-consuming and distracting to the investment team—the same team that relies on quality, real-time data to make informed decisions. Failing to provide the business with accurate, real-time data can erode performance, expose the business to potential compliance issues, and damage client relationships.
IBOR is put into practice when a CIO receives a call from its largest investor and needs to communicate how the portfolio is reacting to today’s market events, which holdings are contributing to or detracting from performance, and the market impact of liquidating the portfolio over a seven-day versus ten-day time horizon. Liquid was built on this premise—synchronizing a single source of accurate, real-time portfolio data with cohesive workflows across trading, portfolio and risk management, and investor reporting, all through a unified database.
Equally crucial, we ensure the quality and integrity of the data with a complete range of daily middle-office services that include the reconciliation of trading activity with counterparties and prime broker(s) of choice. What’s more, the data along with the hardware and workflows required to power the front- and middle-office are maintained on behalf of our clients in highly secure data centers that provide 24/7 business continuity and disaster recovery planning.
By eliminating multiple points of failure and milliseconds of latency, we are arming fund managers with the single version of real-time positional data to de-risk their business, enhance decision making, improve transparency, and ultimately put more money into their investors’ pockets.
Our next white paper– Tying the Front-Office Together with Modern Data Management – will dive deeper into this conversation. To continue this discussion email us at marketing@liquidholdings.com.
Analyzing the universe of single-manager hedge funds by AUM, roughly 6,500 out of the active 8,200 hedge funds are managing less than $150 million in assets, leaving the bulk of our industry unregistered.
“The overwhelming number of hedge funds are smaller funds,” BarclayHedge President said. “And if they fall below a certain size, they are not required to register with the Securities and Exchange Commission. So if they are not registered, they may fall off the radar.”
On the regulatory front there is a call for modernization of the existing process. Industry experts predict that the prime broker and hedge fund business models will see rapid evolution over the next three years. The SEC is advocating for new hedge fund reporting procedures requiring registered funds to provide portfolio-wide and position-level holdings data to the Commission on a monthly basis. Additionally they would make online share holder reports and quarterly holdings for the past year mandatory.
Whether or not the legislation is passed, investors are demanding fund managers of all size provide detailed investor reports with the analysis coming from a third party, objective source.
This takes us full circle to a term we are already familiar with—IBOR or Investment Book of Record. The benefit of an IBOR is in providing complete and accurate investment and cash positions when required to power key functions such as performance reporting, shareholder accounting, risk data, and regulatory reporting. Aggregating portfolio data throughout the day to maintain a single, accurate view of all investment activity is not a novel concept, but with the wrong infrastructure, it can be manually intense, time-consuming and distracting to the investment team—the same team that relies on quality, real-time data to make informed decisions. Failing to provide the business with accurate, real-time data can erode performance, expose the business to potential compliance issues, and damage client relationships.
IBOR is put into practice when a CIO receives a call from its largest investor and needs to communicate how the portfolio is reacting to today’s market events, which holdings are contributing to or detracting from performance, and the market impact of liquidating the portfolio over a seven-day versus ten-day time horizon. Liquid was built on this premise—synchronizing a single source of accurate, real-time portfolio data with cohesive workflows across trading, portfolio and risk management, and investor reporting, all through a unified database.
Equally crucial, we ensure the quality and integrity of the data with a complete range of daily middle-office services that include the reconciliation of trading activity with counterparties and prime broker(s) of choice. What’s more, the data along with the hardware and workflows required to power the front- and middle-office are maintained on behalf of our clients in highly secure data centers that provide 24/7 business continuity and disaster recovery planning.
By eliminating multiple points of failure and milliseconds of latency, we are arming fund managers with the single version of real-time positional data to de-risk their business, enhance decision making, improve transparency, and ultimately put more money into their investors’ pockets.
Our next white paper– Tying the Front-Office Together with Modern Data Management – will dive deeper into this conversation. To continue this discussion email us at marketing@liquidholdings.com.
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