YouDevise Limited announced today a new level of automation for fund of hedge fund (FoHF) portfolio management, introducing a series of front-office analytic reports that can be generated on demand by its Hedge Fund Information Provider (HIP).
The reports enable FoHF portfolio managers quickly to understand their exposure to specific hedge funds, strategies, or regions, and to plan trades that respond to market conditions.
"In today's volatile markets, immediate access to this data enables funds of hedge funds to take better advantage of market changes for their institutional investors," said Richard Koppel, Managing Director, youDevise. An expert in FoHF technology, Mr. Koppel co-developed the HIP, the first online portfolio management system used by FoHFs and their administrators, such as Northern Trust, to track daily position information.
The front-office reports also feature technology to deal with issues raised by the recent Madoff scandal. "Users can create their own breakdown categories to analyse allocations based upon any relevant parameter, such as manager, fee structure, administrator, or redemption terms," Mr. Koppel explained. "The HIP can provide a company wide view, allowing fund managers to identify concentrations or pockets of risk they must address."
Automating FoHF Portfolio Management
The HIP ushered in the first wave of automation for FoHF portfolio management in 2006 by providing a stable platform, using industry accepted and tested calculations, to eliminate the need for home grown, error prone linked spreadsheets that many FoHFs use to track their positions in underlying hedge fund investments.
Integrating the HIP with Northern Trust's accounting platform in 2008 created a second wave by providing FoHFs with daily online information, maintained by their administrator, detailing underlying hedge fund holdings, current value, performance, liquidity, and hedging.
The new front-office reports announced today create a third wave by analyzing all data in the HIP so that portfolio managers, at the push of a button, can review historical performance of underlying hedge fund investments, understand their investment allocations in dens in depth, and determine present and future access to liquidity.
Designed with assistance of leading FoHF managers, the reports can be exported to Excel, and are easy to print and suitable for presentation. They are available to standalone HIP subscribers, in addition to Northern Trust administrative and custodian clients.
While the new front-office reports can be used at a moment's notice, youDevise clients say they are especially useful in the monthly investment meetings held by most FoHFs to review strategies and make trading decisions.
FoHFs not using the HIP typically employ at least one or two full time employees to create and maintain linked spreadsheets to produce basic portfolio reports. These "spreadsheet jockeys" generally require several days to create anything like the new HIP reports.
HIP Front-Office Reports Summary
- All Funds Allocation. Calculates a firm's exposure to each hedge fund in which the firm invests, and the exposure as a percentage of the firm's total exposure to all the hedge funds in which it invests.
- Cash Projection. Displays committed cash transactions for a specific FoHF for any future period where such transactions have been entered into the HIP. Tracking known future cash transactions, such as redemptions already committed to investors or trades already committed to underlying hedge funds, is critical when monitoring liquidity and planning future cash requirements.
- Portfolio Performance. Analyses historical monthly, quarterly or annual portfolio performance for a FoHF's hedge fund investments.
- Portfolio Allocations. Analyses a FoHF's exposure to each hedge fund in which it invests and to categories such as strategies or regions. Displays the hedge fund positions that comprise exposure in each category and the recent performance of each position.
- Portfolio Liquidity. Analyzes a FoHF's liquidity profile. Shows redemption terms applicable to each hedge fund, including gating status, initial lock up period, redemption frequency and notice period. Calculates the number of days required to redeem each hedge fund position.