OPERA Hits Right Notes

Terry Flanagan

Reporting standard for hedge funds aims for increased transparency.

Faced with mounting regulatory and investor pressures, the hedge fund industry is developing standards for how funds collect, collate, and convey risk information.

A new protocol, Open Protocol Enabling Risk Aggregation (OPERA), will help hedge fund investors to aggregate exposures, and reduce proliferation of investor-specific risk formats that hedge funds have to manage.

Developed by an independent working group of 16 firms, including investors, prime brokers, fund administrators and hedge funds, OPERA is designed to increase the level of transparency available to investors, which varies from fund to fund and from strategy to strategy.

“OPERA provides a standard for the industry to follow for the capture and reporting of information that has historically been non-standardized, in the process making risk information difficult for investors to aggregate,” Will Livingston, chief operating officer of ConceptONE, told Markets Media.

“The OPERA standards are well thought out, well documented, and were created by a group of industry experts,” Livingston said. “ We believe that these standards are going to be more broadly incorporated into industry over time and also be a standalone report that funds will need to produce.”

ConceptONE, a provider of customized data and risk management business solutions for investment platforms, has expanded its services to support the OPERA standards.

The biggest issues that funds will face in producing OPERA reporting are related to aggregation, data management, and consistency with exiting reporting.

If a fund chooses to adopt OPERA or incorporate the standards, they will need both a data aggregation plan, as well as a set of analytics to be driven from the aggregated data set, and must ensure that the information reported therein is by and large consistent with the regulatory reporting structures.

“The aggregations required are not inherently difficult, however the requisite data will likely need to come from multiple sources,” Livingston said.

ConceptONE offers neutral and complete aggregation, analytics, reconciliation, and reporting through its RiskONE product. Reports cover many facets of portfolio management such as risk, exposure, performance, limits, Value at Risk, stress tests, and other predictive measures.

Offerings in middle and back office services allow for data acquisition from virtually any source and reconciliation to provide accurate data aggregation and reporting.

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