In the wake of the 2008 financial credit crisis, investment firms have recognized the need for more robust liquidity risk management tools and procedures. However, due to shifting regulations and detailed fund and investment structures, fund of funds, private equity firms, hedge funds, and institutional investors continue to grapple with liquidity management and reporting within their investment portfolios. The following is a high level overview of both the liquidity risk challenges facing firms today, and the ways in which some fund managers are overcoming these challenges.
What is liquidity risk, and how does it affect funds?
Liquidity is the extent to which an asset or security can be bought or sold in the market, while not impacting the asset’s price. The concept of liquidity is comprised of illiquid assets, which are the result of liquidity risk and cannot be instantly sold due to value uncertainty and lack of a market. Liquidity risk refers to the concept that an asset or security cannot be traded at the rate necessary to achieve returns and bypass losses. In the last several years, worldwide economic challenges including rising liquidity costs, a more uncertain market and lower levels of market assurance have contributed to the liquidity management challenges facing funds. Liquidity risk’s ability to negatively impact and compound other types of risk, such as credit risk, also has far reaching consequences for the financial markets. These consequences make it even more imperative for firms to get a handle on their liquidity risk management practices.
This fall, Microsoft’s new Windows 8 operating system captured the attention of many customers. Windows 8, however, isn’t the only Microsoft change 2013 will bring. Microsoft is planning to provide stricter oversight of its auditing process by conducting up to 30,000 licensing audits on small to midsize companies by 2014. Here is an overview of why you should ensure that your software is up to date and what to expect when it comes to the Microsoft licensing audits.
What are the Microsoft Licensing Audits?
In 2013, Microsoft will conduct audits on customers’ software usage. The audits will be mainly focused on mid-size companies with 500 - 2,000 computers. Many large companies have already put strict companywide licensing policies in place, but smaller firms typically have less formalized processes for ensuring all devices are licensed appropriately. As a result, Microsoft’s auditing focus is shifting to smaller companies. These audits will ensure that clients’ software is correctly licensed and paid for.
Last week, we revealed the results of our 2012 Hedge Fund Operations & Technology Benchmark Study, which surveyed over 300 buy-side firms about their front, middle and back office technology and vendor preferences. This year’s findings underscore the need for investment firms to employ robust systems to support trading operations and meeting increasing regulatory and investor demands.
Below is a summary, but you can download the full report here.
Within the financial services industry, Eze Castle surveyed 320 firms including hedge funds (61%), investment managers or investment banks (12%), private equity firms (7%), fund of hedge funds (4%), broker/dealers (2%), and venture capital firms (1%). Additional firms included in an ‘Other’ category include family office, legal, real estate, endowment, quant, biotech and insurance brokerage.
Firms surveyed fell into three asset classes: 30 percent reported their AUM as $100 million and under; 32 percent fell between $101 and $500 million; and 38 percent reported over $500 million in assets under management.
Happy New Year! We hope your 2012 is off to a great start. Whether you’re launching a new fund this year or ramping up your existing firm, you should (and probably do) know how important your firm’s technology is and will be to your success. More so than ever, technology plays a critical role for hedge funds and investment firms, allowing them to streamline processes and communication, get a leg up on competitors in the marketplace and provide investors with the utmost confidence.
One of your first technology decisions of the year is your most important one: do you want your fund to operate on a traditional, on-premise technology infrastructure or utilize the cloud? This decision will affect many of your other technology choices, notably the type of office hardware and connectivity you will require, so we urge you to do your due diligence and select the option that best suits your firm’s needs.
Once you’ve made your infrastructure selection, there is a seemingly endless list of additional technology requirements for your firm. Luckily, I’ve whittled them down here to focus on some top technology priorities for you to focus on as you enter 2012.
As a general rule we don’t post articles on press releases, but for our friends at Ledgex Systems we are going to make an exception. They just released version 4.0 of their product.
Ledgex Systems is a software provider targeting the alternative asset management industry – primarily multi-fund managers and private equity firms. Since officially launching in 2010, Ledgex Systems has signed many new clients and invested greatly in expanding the functionality of its flagship product, Ledgex. Today they released Ledgex 4.0.
The Ledgex platform gives alternative asset managers the ability to systematically manage their portfolios, perform complex liquidity scenarios, and provide robust reporting, both internal and external to the firm.
Earlier this week, our friends at Ledgex hosted a webinar outlining some of the common operational and technical challenges that are faced by multi-manager funds. The goal of this event was to provide attendees with insight into the following broad areas:
- Transparency and Risk: Changing expectations and how firms can adapt
- Operational Risk Assessment: Why it is important for multi-manager funds
- Portfolio Management: The technical hurdles of managing a fund
- Managing Liquidity: The keys to managing both investor and investment liquidity
Throughout the webinar, experts from Ledgex Systems and Rothstein Kass Business Advisory Services provided great information about the fund of hedge funds industry. The speakers for the event were Brian Macallister, Managing Director at Ledgex, and Andrew de Montille, Senior Manager at Rothstein Kass.
Following is a summary of the key topics discussed during the “Operational and Technical Challenges of Multi-Manager Funds” event.
If you missed it yesterday, we presented the results of our 2011 Hedge Fund Operations & Technology Benchmark Study. The purpose of this study was to examine the key front, middle and back office systems and technologies being used by alternative investment managers today.
As a means to gather this information, Eze Castle Integration surveyed over 200 hedge funds and alternative investment firms in 2010 regarding their hardware and software, applications, communications devices, and more. Below is a short summary of our findings*:
Of 223 total firms who responded, 56% reported their assets under management to be less than $250mm. 17% of our respondents had an AUM of between $250-750mm at the time of the survey, and 27% had more than $750mm in assets.
The majority of firms indicated that they had just 1 office location, which was in the United States. Only about ¼ of respondents had an international office and/or multiple office locations.
An Infovest 21 survey on the fund of hedge funds industry “found that over the past year, funds of funds’ most frequent change, as cited by 41% of those surveyed, was adding more nimble managers to their underlying portfolios. Another 38% said they became more liquid/provided more liquidity.”
Times they are a-changin’ (channeling Bob Dylan) for fund of hedge funds as they look to add value to investors and differentiate their funds from the competition. This evolution also adds new levels of complexity, particularly as fund of funds move towards investments in small to medium sized hedge fund managers. Investments in smaller hedge fund managers offer the prospect of higher returns and portfolio differentiation, but in some cases also require more due diligence and monitoring.
New fund of fund portfolio management software tools are emerging to provide a unified view of portfolio holdings and allow for smarter decision making. One such product is from Ledgex Systems.
If you’re a business of any kind, chances are you’re using email on a daily basis. A significant portion of email users across the world use Microsoft Exchange Server to support their daily business operations with email, voicemail, calendaring, contacts and more. If you’re one of them, you may be wondering about upgrading to MS Exchange 2010, which was released at the end of last year.
We’ve outlined some of the new features and key benefits to Exchange 2010 for businesses looking to upgrade or migrate to this platform.
Eze Castle Integration has launched a new subsidiary software company, Ledgex Systems. Ledgex was designed to meet the needs of fund of hedge fund firms, private equity firms and pension funds. Ledgex delivers a comprehensive technology platform that streamlines the investment management process with features such as portfolio management, investor relationship management, monitoring and alerting modules, and more.
- New Considerations for Launching a Hedge Fund: Insights from the experts
- Corporate Essentials for Successful Hedge Fund Startups
- Recapping a Busy Week in Cyber Security Across the Globe
- What Do Hedge Fund Investors Ask About IT? A Technology DDQ cheat sheet
- Webinar Recap: What Investment Firms Need to Know about Social Media Compliance
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