Post-Trade Analytics Consolidate for HFs

Terry Flanagan

The hedge fund community demands for consolidated post-trade analytics, meanwhile, keeps compliance a separate matter.

Today’s hedge fund markets are seemingly limitless when it comes to strategy, but also when it comes to vehicle of choice. An increase in alternative mutual funds, hedge fund replicating index strategies, and the Undertakings for Collective Investment in Transferable Securities (UCITS) have transformed the traditional hedge fund world and made it more accessible for an array of players, from institutions, to fund of hedge funds, to smaller, emerging shops that cater to retail investors.

As the hedge fund vehicles expand, so do those that support them. Last month, Paris-based BNP Paribas announced an expansion of its hedge fund administration services, specifically to cater towards UCITS and offshore hedge funds. According to a BNP source, hedge funds are requesting a front-to-back office, integrated, enterprise suite of solutions.

“We offer post-trade solutions that largely include fund administration, risk and reporting, and financing solutions for fund of funds,” said the source, who cited the biggest differences in functionality requests for smaller hedge funds versus fund of funds is custodial duties. “We handle the custody of assets for fund of funds, but our prime brokers will do that for the hedge funds directly.”

In keeping with the times, enhancing transparency, market exposure, liquidity and controls are top priorities for the bank. Keeping clients in check with compliance is also a timely issue, and is kept as a separate product on BNP’s hedge fund services platform.

Building on existing risk and reporting capabilities, BNP’s product suite will allow hedge fund managers to use all current alternative strategies, including those that deploy high volume trading.

“The bank is in a position at the forefront of buy-side regulatory change to keep its clients updated, and ready to take advantage of market evolution,” said the source. Since the financial crisis of 2008, buy-side vendors have exploded on the scene, especially because of regulatory changes warranting the need for systems to keep hedge funds in check.

“I go to many vendor conferences because I’m shopping for a consolidated platform that can wear many hats and save me costs,” said a hedge fund manager.

The firm’s current rolodex of buy-side clientele includes a mix of established and start-up long/short equity, OTC (over-the-counter) derivatives, and credit hedge funds.

“It’s critical right now for funds to have a good view of the exposures within their portfolios. We can provide simple metrics such as basic performance, all the way to different scenario analysis with calculations that highlight the different risk components,” the BNP source told Markets Media, who spoke on conditions of anonymity because he did not have press clearance.

BNP Securities Services has nearly $6 billion assets under administration.

Related articles