Hedge Fund Technology
Flush With Data, Thomson Adds a Tool Set | Blogging for Alpha | Side Letters and Side Pockets: Back Office Time Bombs? | Hedge Fund Technology: What Drives Innovators? | Technology Meets Derivatives Trading |
Side Letters and Side Pockets: Back Office Time Bombs?
June 26, 2006
In the case of side pockets, an important concern is valuation, says Zebrowski, since they call for special accounting treatment for illiquid investments: "Technology can play a key role by installing a well-organized internal control structure around the valuation process."
However, according to Zebrowski, few technology firms have the requisite intellectual capital to build such enterprisewide compliance automation systems. He says that TurboCompliance works in concert with chief compliance officers, attorneys and accountants to automate internal control structures around the workflow of each business process, including side letters and side pockets.
As the use of these special arrangements continues to grow, more technology suppliers are likely to respond. As Nelson says, "There has been a good deal of innovation among vendors who have seen this opportunity."