Institutional Investor's Alpha Magazine - October 2008 - (Page 70)

HEDGE FUND ADMINISTRATION ● Today, funds of all sizes are looking to expand their relationships with administrators, based on speciﬁc needs following day, the solution will allow errors that could cause settlement failures to be identiﬁed up to two days earlier than they are today, drastically reducing risk for prime brokers. The solution is based on SWIFT’s Accord central matching service and will use standard industry messaging. DARREN STAINROD UBS GLOBAL ASSET MANAGEMENT “It’s been difﬁcult to have a global solution with two providers, but Swift and DTCC have now partnered and are looking at a common platform.” bilities and “dashboard” technology to keep customers up to speed on the status of securities or corporate actions. In addition, DTCC and SWIFT recently announced a collaborative initiative on global message standards. Market participants around the world will be able to connect to DTCC’s Alternative Investment Products suite of services using ISO 20022-compliant XML messages and the SWIFT network, in addition to the proprietary message formats and direct link to DTCC that is currently available today. Noting the importance of that type of collaboration, Stainrod says, “It’s been difﬁcult to have a global solution with two providers, but SWIFT and DTCC have now partnered and are looking at a common platform.” PROVIDING ADDITIONAL VALUE Today, funds of all sizes are looking to expand their relationships with administrators, based on speciﬁc needs. “As infrastructure costs go up, more managers will want to outsource the administrative functions,” notes Wallace. “And it’s the added services that count as well – such as extending of credit and hedging facilities, and the application of technology.” In many cases, service providers are moving beyond the back ofﬁce to offer a “one-stop” approach that includes middle-ofﬁce trade services, such as attribution reporting, connectivity to multiple prime brokers, reconciliations, automated trade matching and derivatives processing. Demand for middle ofﬁce support is one example of a larger trend whereby hedge funds are more frequently asking for a broader and deeper set of services from hedge fund administrators, says Caporale. Services such as trade capture, daily P&L, cash management and collateral management are important capabilities used to differentiate hedge fund administrators. “In addition, we are seeing funds focus more on value-add services such as risk analytics,” he adds. Other valued services include in-depth support for pricing and reconciliations, according to Potter. Managers want to know the process a service provider uses when reconciling with a prime broker – and how often the reconciliations are done. Summing up the role of today’s service provider, Potter says, “Administrators need to have a close relationship with the client and understand their needs. What are the pieces of the business that are causing issues? Are there more services we could provide? Can we help you understand the market trends? What new instruments are coming and how do you stay ahead of the curve? In this way, administrators can implement new services to assist the fund manager, creating a true partnership.” ■ Meanwhile, DTCC is reengineering its core systems for securities underwriting and corporate actions processing for the US ﬁnancial services industry. The initiative will create a single new platform, replacing more than 60 separate legacy systems from the past three decades. DTCC’s goal is to build a robust, integrated platform that embeds straight-through processing (STP) procedures for US and international securities from origination through maturity, known as “cradle to grave.” The new platform will allow comprehensive information on corporate actions to be captured during the underwriting process, so the information can be used later to support automated corporate action announcements, helping to eliminate the need for manual input and processing. JEFF POTTER NORTHERN TRUST “Administrators need to have a close relationship with the client and understand their needs.” The goal is to cut costs, reduce risk and streamline current processing procedures, while providing ﬂexible and scalable systems to accommodate new types of instruments. That means building in international messaging standards, multicurrency payment capa- 10 • Alpha Sponsored Report • October 2008

Table of Contents Feed for the Digital Edition of Institutional Investor's Alpha Magazine - October 2008

Institutional Investor's Alpha Magazine - October 2008 Contents Letter from the Editor Longs & Shorts Pension Corner: Process of Evolution The Good Guys: Israel's Champion Interview: Fast Lessons for Hard Times Cover Story: Industry Under Siege The New Hedge Fund Economics Good-Bye, Easy Money Caging the Shorts Strategies: Bottom Fishing Profile: Cult of Personalities Research Center: Alpha Awards: Eye of the Storm Alpha Bytes: Funneling the Chatter Unhedged: Commentary: Attention, Hedge Fund Shoppers

Institutional Investor's Alpha Magazine - October 2008

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