After Registration: Hedge Fund Advisers Find Help
June 30, 2011
The Securities and Exchange Commission’s recent decision to delay the deadline for many hedge fund and private equity fund advisers to register until March 2012 from July gives them a tad more breathing room to prepare for the new requirements.
And find the necessary help. Enter a legion of third-party IT, compliance specialists, prime brokerage and fund administrators to the rescue. They are only too willing to prove they have the best infrastructure, operations and data available in a competitive market.
“Fund advisers will quickly turn to software vendors and middle and back office service providers for answers,” said Noreen Crowe, vice president and product manager for Linedata for Mshare, the shareholder accounting platform operated by Linedata. “Regulators may not have final rules in place but that isn’t stopping fund managers from coming up with their own requirements to prepare.”
The SEC wants to keep track of just how much systemic risk a hedge fund or private equity fund could cause if it were to go bust. So the regulator wants information and lots of it in about fourteen different categories ranging from the value of its assets under management to as complicated as value at risk, leverage and counterparty exposure. It can easily come to over 400 data elements.
“One change we’ve seen is an increase in the number of our transfer agent clients using Linedata Mshare to track U.S. investors in offshore funds - not just to count numbers for SEC registration but also for an increasingly wide set of regulatory requirements, “said Crowe, whose Paris-headquartered firm provides technology to investment managers . “These clients plus the 30 fund administrators and hedge funds using Linedata Mfact, Linedata’s portfolio accounting platform, are anticipating using the products to slice and dice data on the fly any way the SEC might want – by customer, time period, asset class, individual security and geography.”
Among the key new regulatory responsibilities: disaster recovery and archiving are in vogue. Too often hedge funds have relied on either their fund administrator or prime broker to provide them with the necessary data in the event of a power or other outage but they still cannot access their trading, risk management and back-office applications. Nor can they afford to lose client records and electronic c ommunications stored on desktops, smart phones, Bloomberg messages and other forms of online media.
In May, Abacus, a San Francisco-based hedge fund technology firm rolled out its private cloud offering “AbacusFlex“ to allow hedge fund managers to host all of their technology and back-up sites in secure and redundant data centers. This includes core systems such as order management, risk management and accounting systems, as well as email, mobile devices, and voice solutions. “Hedge funds don’t want the expensive and onerous process of managing IT internally, now have a choice to host their technology off site,” said Chris Grandi, co-founder of Abacus.
The decision on whether to rely on licensed or hosted disaster recovery platforms in large part depends on the size of the fund, according to Arup Das, chief executive and technology officer for Alphaserve Technology, a New York-based technology provider to hedge funds. The smaller the fund the more likely it will choose a hosted system.
