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Comada’s Q1 2016 release of M.A.T.ware delivers the latest technology and features

It has been standard procedure for Comada to add features to its releases to meet the challenges of real-time changing business parameters.  However we also appreciate that the system’s architecture must also keep pace with modern demands.  Our latesrelease delivers significant improvement in functionality combined with modernisation in the system architecture which brings its own immediate benefits.

A new technology framework  

As business moves to operate on a wide variety of platforms and yet remain secure, we have introduced a framework which supports the browsers that people now want.  This means that M.A.T.ware operates on Chrome and Safari as easily as Internet Explorer or indeed any number of secure browsers.  This means consistency in the presentation and interaction aiding in the ease of use.

Our new framework also works for users operating on tablets as it supports touch screen systems.  With  modern work running on a variety of devices to support remote working as well as in-office work and given M.A.T.ware’s private cloud-based solution, it’s completely in line with operating securely anywhere.

Multiple approval process 

M.A.T.ware is used by both large institutions with a significant number of users and smaller firms that have only a handful of users.  It’s been critical to users that their way of working including internal controls, is suited to their business scale.  M.A.T.ware’s core strength is based on its configurability  that enables clients to actively manage every day complex processing and reporting with ease. This configurability not only ensures their system is sized best for their business today, but also provides the necessary scalable framework required for the business changes ahead.

One such area is multiple approvals (commonly referred to as “four-eyes”).  M.A.T.ware has well-established multiple approval controls over the trade process.  However this release extends a universal feature that allows businesses to configure multiple approvals as needed over functions.  An immediately useful implementation of this is in Price and Performance Management where firms that desire internal controls over price discovery can implement them.  Of course up front controls including data validation and tolerance checks have long been in place but multiple approvals extends this for best practice.

Increased speed 

M.A.T.ware has always been characterized by its precise, dynamic valuation process.  Supporting onshore and offshore hedge funds, private equity partnerships and equities through a pricing evaluation model allows for no compromises.  In order to enhance speed, Comada has targeted this critical area with a highly optimized process that means getting this information instantaneously is managed and delivered consistently.  Ultimately we know users want to get the results rather than spend time on a system.

Out with the old

As technologies evolve we constantly upgrade M.A.T.ware – for this release we have moved to Microsoft’s newest .NET architecture version.  We have also removed and replaced older (which today may only be a few years old) technology.  It makes us able to build new features more efficiently and therefore respond to the business requirements of our clients.

Comada enhances security offering for hedge fund investors

Migration of servers to new high security platform will offer clients more flexibility in their operational choices.

Hamilton, BERMUDA, July 2012: Comada, the provider of transaction-driven software solutions for investors in hedge funds, has migrated its servers to a new next-generation data centre hosted by QuoVadis Services Limited. The new Infrastructure-As-A-Service (IaaS) platform will bring considerable advantages to Comada’s customer base, including users of Comada’s award-winning M.A.T.ware software.

The new platform has been built using the latest generation networking equipment, high speed SAN for data storage, and servers designed for high density CPU and memory. It enhances the levels of security Comada can now offer its clients, with options for either multi-tenant or dedicated infrastructure. The platform also supports Comada’s programme to offer clients more flexibility in the way they use Comada technology.

Said Rupert Vaughan Williams, co-founder of Comada: “Security is a key requirement for today’s fund managers and their investors. With QuoVadis we are still able to offer clients robust solutions when compliance requirements mean they are unable to host software or data in a multi-tenant environment.”

Comada’s M.A.T.ware software is designed to be highly scalable, allowing it to be seamlessly deployed across a multi-tenant environment, along with highly configurable reporting features for fund managers and investors. Its scalability for both small and large firms in the alternative investments space requires a hosting environment that can meet the most stringent technological due diligence criteria.

Said Gavin Dent, CEO of QuoVadis Services (QVS): “QuoVadis has provided IaaS hosting to Comada for eight years, working with the company to support their fast growth and technology evolutions. By focusing on the performance, availability and security of the underlying platforms, QVS allows Comada’s team to focus on evolving the software at the heart of their services.”

About Comada
Comada is a global technology company specialising in building and implementing software solutions for the alternative investment industry. In particular, Comada’s flagship M.A.T.ware product delivers an unprecedented level of interconnectivity and transparency to the portfolio management and STP process in the alternative investments space. Praised for its flexibility, M.A.T.ware can be scaled to suit the needs of family offices as easily as large custodian banks. M.A.T.ware is already being used by custodians, fund administrators and funds of hedge funds. For more information, please go to www.comada.com.
About QuoVadis

Founded in 1999, QuoVadis Limited is an Internet security provider with operations in Switzerland, Netherlands, the United Kingdom, and Bermuda. The company is a global provider of digital certificate and digital signature services used to enhance privacy and confidentiality, data integrity, and strong authentication over the Internet. Drawing upon the company’s experience and investment in high performance datacenters, QuoVadis Services Limited (QVS) provides secure collocation, virtual hosting, and disaster recovery services to international organisations. For more information, please go to www.quovadis.bm.

Creating effective liquidity reporting

A detailed liquidity report of an underlying portfolio of hedge funds, one that could be dynamically updated, was the Holy Grail for many funds of funds in the dark days of 2008. Proper liquidity reporting is underpinned by effective data and tools. It requires a degree of investment in technology that can be proactive, agile and responsive.

One of the real tests of any portfolio management system occurs when things go wrong: in the world of money management, operational failures, for instance on the part of a business further down the service provider chain, can force the portfolio manager to re-evaluate retrospectively. Can he be sure that such revaluations are being consistently applied, especially if multiple individuals within the same firm are juggling dozens of spread sheets? Once mistakes creep into the historical portfolio picture, they can be difficult to track down and correct, and they can continue to have an unforeseen impact on reporting further down the line.

Beyond the problems of effective performance tracking, investors in hedge fund portfolios today want to feel they have a better grip on what is happening in underlying hedge funds. This means being able to view a more complete operational picture. Their questions cover key issues relating to fund liquidity, including whether funds have the ability to gate withdrawals, whether gates have been initiated, the expiry of each tranche lock up, and what the options are to reduce lock ups and when. Better information on the liquidity scenario can deliver important additional advantages to the portfolio manager.

It all comes down to a question of confidence: can an investor feel confident that a trade has been properly executed? Has it been confirmed by the relevant custodian and underlying transfer agent? How long does it take to receive the estimated and real NAVs? Do they always come in on time? Are communications with relevant parties secure and dynamic enough to process real-time information flows?

With a more detailed picture comes a higher degree of confidence in the underlying investment and a superior level of reporting to end investors when required. This also helps the portfolio manager to allocate further funds more efficiently.

Dealing blind: are you 100% confident about your trade location?

The parties to any single trade, be it the fund manager, the custodian, the investor or the administrator, are incorporating a degree of estimation in the course of the transaction process. It is still difficult to operate otherwise. Each participant is using different parameters to view mission critical data and communications. Each still relies on paper-based processes and spread sheets to manage billions of dollars of alternative investments. But can any of them express with 100% confidence that a specific trade is at a specific location in the transaction trade at any given time of the day? And can they put a value to it when they do find it?

At this juncture in time we stand in an industry that is becoming increasingly institutional, with over 60% of the assets being managed by hedge funds now originating from institutional clients. The client complexion of the industry has changed while the legacy technology in use within many firms harks back to an earlier and simpler era.

Technology issues are becoming a bottle neck for institutional investors, particularly with regard to managing and reviewing hedge fund portfolios. This is creating a demand for a more proactive and integrated approach to client reporting using technology that has the ability to break down the different components of the hedge fund trade. By bridging these operational processes, institutional investors can manage and review accurate data with a higher degree of confidence.

The scale of the problem facing the industry has been highlighted by Swift’s SHARP (Swift Hedge Funds Harmonisation Project) initiative. Swift identified a number of key operational issues within the hedge fund transaction process. While custodians and administrators can handle the paper trail when transaction volumes are low, the largest service providers to hedge funds now process well over 1000 transactions every month. Each order may come with up to 50 pages of documentation attached. A typical team within a hedge fund administrator might be handling 600-700 orders with a dedicated staff of a dozen or so. Apart from reconciling data with their own records, they must also ensure investors are complying with KYC and other regulations.

Because subscriptions processing is time consuming and error prone, the entire cycle from the time when the order is taken to taken until confirmation is received and accounts are reconciled can be as much as a month. Faxes of subscription agreements must be sent to transfer agents, which in turn must be confirmed by phone, with final documents being sent over by courier.

For a fund with monthly liquidity, these transactions can prove costly, particularly if the market has moved. Missing a deadline for an order could lead to a fund holding unnecessary cash, while a missed redemption deadline would leave a fund exposed to an unwanted position for another month, quarter of a year or more.

If funds restrict liquidity, or extend their lock-in periods, or raise gates, the risks of moving transactions in and out of funds grows. It is still very hard for custodians to provide funds of funds with accurate status reports, particularly when they are bombarded by faxes from administrators and transfer agents at the end of the month. For larger custodians, with dozens of service providers to deal with, the problem is only magnified.

Comada nominated for technology innovation at European Custody Risk Awards 2012

LONDON: Comada has been nominated for Technology Innovation of the Year in the European Custody Risk Awards 2012. The nomination is a joint one alongside fund administrator Custom House, for the CHARIOT 2 project, which went live in March 2012. Chariot allows investors to deal online in funds administered by Custom House.

The awards, hosted by Custody Risk magazine in London this month, recognise excellence in the provision of custody, fund administration and associated services in the European asset management and securities industries.

“Chariot Phase 2 was a ground breaking project for the European hedge funds industry, and it is great to see this being independently recognised,” said Rupert Vaughan Williams, co-founder of Comada. “Significantly, its implementation allows seamless dealing in equalised funds administered by Custom House, bringing with it greater transparency for hedge fund investors.”

Said Mark Hedderman, CEO of Custom House: “Here at Custom House we are committed to a culture of innovation for our hedge fund clients. We chose to work with Comada because of the group’s ability to deliver solid, institutional grade technology which would meet our own high standards of security and investor confidence.”

For further information please contact:

Stuart Fieldhouse
Media Relations
Email – sf@comada.com
Tel: +44 (0) 7793 882230

About Comada

Comada was founded in 2004 to provide the alternative funds industry with technology solutions that would revolutionise operational processes and the way the industry communicates. Our vision has always been to deliver system solutions that make a real difference to our clients, which facilitate the way they do business, and help them to radically reduce operational risks. At the core of this delivery is our M.A.T.ware transaction-driven technology.

Meeting the hybrid portfolio challenge

Today’s liquidity-aware fund investor is still seeking the appropriate solutions for cash flow monitoring within alternative portfolios.

Investors in alternative funds are managing far more diverse portfolios than they used to. And even within the hedge funds universe, they are grappling with wildly different structures and liquidity terms. Investors are set to increase their overall allocation to alternative investments, a trend that was already becoming established prior to the financial crisis, but by doing so they are creating some immediate operational challenges when it comes to monitoring their critical cash picture.

Fund allocators embrace new conditions of risk when they invest in alternatives. From an operations perspective, one of the key obstacles is the implementation of appropriate technology within the business that will allow for the effective management of alternative portfolios alongside other investments like long only funds and ETFs, where liquidity timelines and redemption conditions are very different. It is not unusual to have a UCITS fund with daily dealing sitting in the same bucket as a conventional hedge fund with monthly liquidity or a private equity or real estate fund with even longer liquidity time frames.

We are now living in an environment where more emphasis is being placed on internal risk controls and the quality of real time reporting is an important part of the overall risk management package. Portfolio managers and risk officers within investor organisations need to make sense of and fully understand the divergent cash flow and liquidity picture. Failure to do so will only create further pain for the organisation when another disruptive market event occurs.

Today’s institutional allocator will have a number of alternative funds within their portfolio:

  • Onshore hedge funds, including Limited Partnerships
  • Offshore hedge funds, usually employing a unitised holdings model including series of shares or equalisation allocations
  • Private equity investments, again with a Limited Partnership structure with a commitment and funded periodically on a capital call basis
  • Real estate funds
  • Alternative UCITS with daily or weekly dealing
  • ETFs used as indexed hedges of based on alternative markets (e.g. based on commodities futures)

There is a need for a diverse range of alternative investment funds to be managed and analysed via a single platform, particularly when a portfolio manager requires accurate reporting on cash flow and liquidity terms. Managers of alternative fund portfolios now need to see all the way out the liquidity curve, to a year or more if needed. Private equity cash flows, for example, are much less frequent than conventional funds and need to be accounted for efficiently if the investor is going to ensure sufficient cash is on hand to meet PE commitments.

How can daily cash flow commitments to alternative investment funds be monitored on a forwards basis out to 12 months?

Proper cash flow management within the alternative portfolio in this challenging environment goes beyond normal accounting requirements. There is a need to budget and estimate both future commitments and withdrawals, taking into account actual and anticipated liquidity terms. Accurate risk management and forecasting can be managed on a dynamic basis from a single point, but not with an Excel spreadsheet. The sophisticated cash flow requirements of today’s industry go beyond what is economically achievable with Excel.

Today’s portfolio management solution needs to take account of a range of varying factors – liquidity terms of a hedge fund, or a particular side letter for example.  It has to be sufficiently customisable to dynamically track commitments over time, and provide an accurate picture of cash and asset positions, on a daily basis if necessary. To do this manually seems a reckless waste of man hours at a time when many investors are very conscious of both the lack of effective reporting on their portfolios and the costs they already incur in their operations.

The typical institutional fund portfolio will hold a range of assets with varying liquidity terms that will behave very differently under liquidity stress test scenarios:

Managing the balance between longer and shorter dated assets

It is important that, as the investment manager maintains his own diversification between different asset classes, he also keeps a clear picture of the pricing and liquidity terms of the portfolio of funds. This can even change several times a day. Juggling the short and long term liquidity picture simultaneously without appropriate monitoring can be like driving a car at midnight with no headlights. An Excel basic road map may help you, but you are still placing yourself at risk.

In addition, today’s portfolio manager will also need to model liquidity scenarios on an allocation-by-allocation basis, including hypotheticals. This can have an increasingly important bearing on decisions to allocate in the first place. The biggest variable, however, is the cash flow picture.  Is the manager overweight on monthly dealing funds? Can liabilities be met without altering exposures? Can they monitor and transact on both manager and client portfolio liquidity dynamically?

During the credit crunch of 2008, managers of alternative investment portfolios were forced to turn to their most liquid investments to access cash in the shortest possible time. Sometimes this meant liquidating holdings with some of the better performing fund managers. It is an experience that has created more emphasis on controlling and diversifying the underlying portfolio liquidity picture across sophisticated hybrid portfolios. Doing this effectively without resorting to manual and error-prone Excel-based processes is another matter.

Custody Risk #2: Producing statements with no Central Securities Depository

This is the second in a series of articles from Comada on the subject of custody risk.

The challenge for custodians in safekeeping alternative assets like hedge funds is that there is no Central Securities Depository they can rely on. For conventional securities, CSDs exist to help investors and custodians by providing an easily accessible record of securities owned. Historically, the CSD would take delivery of physical share certificates – today an electronic registry is maintained which allows investors and company registrars to keep track of who owns what.

For the vast bulk of hedge funds, which are not actively traded on stock exchanges, there is no CSD. Nor is there a broker to broker network like the Depository Trust Company’s National Securities Clearing Corporation. Custodians are therefore forced on a monthly basis to request statements of hedge fund holdings from the transfer agents who maintain funds’ registers of shareholders. The problem with this is that there is a large universe of TAs in the market, each acting for only a small portion of the total universe of hedge funds.

[…]

Tailoring your data to investor requirements

Making life easier for investors can help funds to keep mandates

In the increasingly competitive world of investment management, it is still possible to achieve a critical edge by simply presenting information to clients in an efficient and secure manner. Many money managers subconsciously see a client as being invested solely in their fund, and yet investing clients have their own difficulties keeping track of the numerous different funds and other investment types they have exposure to.

For investors, one of the big battles continues to be around procuring information about alternative fund investments in a format that meshes effectively with their own internal mechanisms. This conundrum offers the fund of funds manager an opportunity to seize a distinct competitive advantage and win investor goodwill at the same time.

Investors face the weekly struggle of collating performance information, much of which can get lost or arrives in a format which can only be transcribed with much manual effort and with the data errors which are an inherent risk with such a process.

A typical medium sized investor will be receiving data from alternative investments as emails, sometimes as PDFs. This contrasts with data on listed securities, which is cheaply and readily available in a convenient format. It is an enormous irony of the hedge funds industry that while the fund strategies themselves are highly sophisticated, the way in which their performance is reported is not.

Know your client

Today’s hedge fund investor is looking increasingly institutional in character; moving up the sophistication curve from the individual investor towards the requirements of pension funds or insurance companies, reveals a demand that information be delivered in an easily digestible format.

For the fund of funds manager, it becomes increasingly important that you identify the manner in which your investing clients would like to receive information. It becomes critical that you become aware of how your clients view that information and particularly how that data relates to the way your investors make use of their assets – for example their risk analysis protocols.

A fund of funds manager needs to understand that his fund still comprises only a small percentage of an institutional investor’s overall portfolio. Yet, all other things being equal, the investor is likely to favour the fund which will offer him better reporting, that can allow clients to readily process the information it generates.

Tailoring your data

To secure your competitive edge, you will need to consider the process you are using to report to investors, including the data points your clients want to see, and automate this process as much as possible. In today’s back office environment the technology now exists to provide high quality transaction-driven data in a format that is easily configured to the requirements of different stakeholders.

Funds of funds must recognise that for most investors, alternatives will comprise less than 50% of their portfolios, and frequently less than 25%. Therefore, managers of alternative investment fund portfolios need to be able to report into a framework that has probably been designed to harvest information from listed security investments. It will require involving service providers like fund administrators in the reporting conversation, and being consistent about how data is marshalled and presented. It will also require investment in tools which can be shared by service providers, helping to drive down the cost of delivery.

Overall operational compliance within the hedge funds industry needs to be a lot less problematic if funds are to meet the established reporting frameworks of institutional clients. As the character of the hedge fund investor base becomes increasingly institutional in nature, fund managers will need to make more use of technology – like the secure reporting opportunity offered by the Cloud – to ensure they make the most of the competitive edge efficient data delivery can become.

Custody Risk #3: Lack of accurate and timely fund pricing

Pricing remains a key consideration for custodians of alternative assets. By this we don’t mean the price that custodians charge for a transaction, although the cost to process a trade into or out of an alternative fund is higher than for an equity or a bond. The main issue here is procuring the actual fund’s NAV in a timely and accurate format. This valuation is particularly important, because it is used for calculating fees.

The calculation of custody fees needs to be transparent and consistent with the other services offered by the custodian. The cost involved in procuring a price for a traditional security is negligible – many prices are free, and vanilla securities also have the benefit of a reliable security ID code. The pricing of traditional securities can be carried out quickly, with clearly defined data sources and consistent prices. For hedge funds, the picture is much more opaque.

Where to find the data?

For alternative assets, procuring a price represents a much larger challenge, as there is no single data provider that can be consistently accessed.

  • Traditional securities data vendors publish the prices of those alternative funds that report directly to them, but pricing is frequently delayed and the funds covered do not represent a sufficient segment of the universe custodians need.
  • Specialist hedge fund databases cover a much larger slice of the universe, but rely on funds to report data to them. If a fund chooses not to report, or stops reporting (for example if it closes to new investment), the data series becomes incomplete.
  • Custodians can hire a third party agent to procure prices from fund managers on their behalf, but this can be an expensive and time consuming process.
  • Alternatively, custodians can go direct to the funds themselves, but this requires considerable investment in terms of time, money and manpower internally.

On top of the above data-related challenges is the fact that accurate pricing is required for a range of tasks, including for loans, bridging finance and leverage. Pricing hedge funds effectively for such functions is still a much greater problem for custodians than it should be.

For example, no electronic feed exists that can readily integrate with other data systems, causing custodians to rely on manual processes, which are slow and prone to errors. Audit trails to prove a price is accurate are both time consuming and expensive. In addition there is a huge burden of associated documentation to be managed.

Financing can be a much more lucrative business for custodians than plain vanilla custody, but even here, lending against alternative assets can be fraught with risks because of pricing issues. Because of the illiquid nature of alternative investments, investors sometimes need to borrow against holdings that are in the process of being redeemed in order to be able to re-invest assets. Such interim funding is frequently provided by custodians because they hold the assets, but this also puts pressure on the custodian to ensure accurate pricing and a detailed picture of the redemption time horizon. Ultimately, the lack of a consistent pricing picture represents a significant risk to the lending side of the custodian’s business.

For more information on how Comada can help you with your custody related risks, please contact Stuart Fieldhouse at sf@comada.com

Custody Risk #4: Liquidity

Why custodians may not be aware of the risks they are running when acting as brokers for investors in hedge funds.

Liquidity emerged as a major risk for hedge fund investors during the 2008 credit crisis, but it remains a major source of risk for custodians of alternative assets. Again, it is worth comparing the risks posed by alternative assets against those of more traditional securities.

In the world of normal trading, a broker who makes an error can usually rectify it quite speedily. This is because he is trading in a continuous market – the period during which the broker is exposed to his mistake is limited. He might only be at the mercy of price movements for an hour or less. And because systems between counterparties in conventional securities markets are automated, brokers can limit financial losses caused by errors with relative confidence.

Within the alternative investment market, where custodians are acting as brokers for investors in funds, potential errors are magnified because of the time it takes to confirm a trade. Mistakes in orders are uncovered in the reconciliation process, but it can take days before a counterparty will issue a trade confirmation.

Consider then the situation a custodian faces once an error in an order is discovered, for example when a sell order is confused as a buy order. Because shares in hedge funds are so illiquid, it can prove very difficult to have a mistake resolved, particularly as the custodian bank is dealing in a principal market – i.e. the fund is creating the security for the investor.

Funds have very little leeway to address errors, particularly since corporate governance might prohibit them from favouring a specific investor. Redemption terms can mean a trade will not be resolved for six or even 12 months, during which time the price of a fund will change with little or no scope to hedge it.

Custodians participating in the market for alternative funds are not being rewarded for the liquidity risks they are taking on a daily basis. Once such risks are fully understood, many banks may decide that it is not worth the slim rewards they earn. Custodians have improved the language used in agreements with clients as they have started to wake up to the liabilities they face, but another solution would be the introduction of electronic execution, speeding up the trade confirmation process and radically reducing manual errors.

On the other side of the coin, investors may want to use their alternative investments as collateral when raising cash. However, due to the lack of hedge funds’ liquidity, it can often be difficult to discover an accurate price. There is no readily available market data source, requiring significant proprietary effort to procure a recent net asset value (NAV).

Investors will often want to raise cash more quickly than shares in a hedge fund can be redeemed, and the lack of daily or weekly market prices means the lending bank can create significant risk for itself by lending against hard to value assets or assets than themselves can take some time to liquidate (frequently three months or more in the case of many hedge funds). Again, investment in electronic pricing interfaces can ensure more accurate and speedy pricing and support faster decision making.

Custody Risk: the Custodian as Broker

Welcome to the first of a series of briefings on custody risk from Comada, the alternative investment transaction technology specialists. In this series, we will aim to highlight some of the key risks confronting custodians of alternative assets. Over the next few months you will be able to learn about some of the challenges and solutions that present themselves to banks and other service providers dealing with alternative investment funds on a regular basis.

#1: Custodian as broker

The key function of a custodian is to be able to hold an asset securely. This requires that a custodian be able to keep track of and reconcile the asset concerned. However, as institutional allocators like pension funds and insurance companies increase their investments in alternative assets, their custodians are being asked to perform this role for shares in funds like hedge funds and private equity partnerships.

Because of the illiquid nature of many alternative funds and the fact that custodians are being called upon to actually place orders and redeem holdings by their clients, significant operational risks are being created. The quality of the connections between the various parties involved in a trade in an alternative investment fund need to be-re-examined in order to avoid a higher level of risk and commensurate expense when trades fail.

Custodians habitually only become involved in a trade once it has been executed: however, with alternative investments they are also being asked to take the place of a broker and place a trade. This is because hedge funds – and other alternative investments – are private placements. There is no broker acting as an intermediary, hence the custodian most often takes on the role of the broker, bringing with it significant execution risks.

In other markets – shares, for example – efficient systems exist to manage execution, but not so with private placements in funds. Manual procedures continue to dominate trades into and out of funds and it is often impossible for custodians to pass this role onto a specialist service provider, as might have been the case with other emerging asset classes in the past. Habitually devolving trades onto third parties will involve a custodian in transactions with dozens of service providers, including transfer agents and administrators, again considerably raising the risk that an order is inaccurately transmitted, or a deadline is missed.

Because systems are manual and paper-based, multiple checks and balances are needed to ensure there are no errors. Every fax requires several levels of completeness and accuracy checks.

Every control measure added to the process, while it cuts down on risk, also adds time and cost to the process of investing in funds. It requires that custodians be aware of closing dates for new investment in alternative funds, and submit orders well in advance. However, custodians’ clients will often push back on deadlines established by for submission of orders. Several days’ lead time will frequently be required, but investors, the end clients, will sometimes consider such deadlines as artificial.

Compressing manual processes in order to cope with client demands adds a considerably higher level of risk for custodians already under pressure as they process higher volumes of transactions in alternative funds. This will, without doubt, create more scope for costly errors. Having compressed the time frame for executing orders into funds, investing clients will be less than happy if errors occur and the custodian will often be asked to compensate them.

If you would like to receive further bulletins from Comada on custody risk, please email Stuart Fieldhouse at sf@comada.com.

How can alternative fund operations meet the new regulatory challenge?

Technology can help to address the risks of reporting failures

The alternative investments industry has now woken up to the new world order of increased regulation and reporting requirements. These new and stringent demands have become a major driver for firms of all types and sizes involved in hedge fund operations, and those who ignore the implications of this do so at their peril.

Regulators have become far more stringent about the regularity and detail of the reporting they expect to see, and errors in this process can be met with more robust fines. Combined with the challenge of dealing with multiple regulatory regimes, the risks are very real.

Professionals working in fund servicing, including custody and administration, transfer agents, and COOs at investment management firms, now face a situation where their careers and professional credibility lie in the hands of regulators. To keep costs contained as much as possible, financial services firms have to address their operational environments, including the way data and reporting are managed.

This mission can be a complex and costly exercise, but convenient out of the box solutions, such as those launched by Comada this year, can help investors and hedge fund managers to meet regulatory reporting requirements, including under FATCA and AIFMD, without the cost and disruption of a major revision of compliance programmes.

Better integration, cost-effectively

Comada has long been a strong advocate of better integration of reporting processes with pricing data and transactional information. Importantly this needs to create an environment in which live data can support more comprehensive and automated reporting activity.

Comada’s M.A.T.ware technology replaces legacy services, bringing to our clients a secure Cloud-based integration platform with more flexible connectivity.

Using the technical road map we have developed, transaction and pricing data and account information can be easily harvested from disparate reporting lines and systems to build a more comprehensive picture of such critical information as dynamic cash and liquidity in alternative portfolios.

M.A.T.ware is designed to meet the complex requirements of the alternative investment industry, and supports the reporting needs of even the largest organisations, integrating and then delivering the requisite data where it is needed. This includes information that it would be difficult and costly to incorporate otherwise, but which regulators are now asking for.

As the regulatory environment becomes stricter, solutions like this will be essential for firms that wish to continue to operate cost-effectively while meeting their reporting obligations.

For further information on how Comada can support your regulatory reporting, please contact Dave Shastri (North America) – ds@comada.com / +1 212 880 4245 or Stuart Fieldhouse (Europe) – sf@comada.com / +44 (0) 20 7043 1480.

Latest Comada technology release addresses AIFMD liquidity reporting requirements

Comada’s M.A.T.ware software now upgraded to meet integrated cash management and liquidity reporting demands for hedge fund investors and custodians.

Hedge fund software developer Comada has released a new update for its award-winning M.A.T.ware technology for investors in alternative funds. Available immediately to Comada clients, the update meets the new reporting requirements of regulators, allowing investors and service providers to manage fund transactions without disruption.

The new release fully integrates cash management by combining cash from FX dealing, credit and position exposures into comprehensive view and projection features. It also includes enhanced liquidity features which recognise that hedge fund investors increasingly invest in a wide variety of illiquid assets like private equity and less-liquid securities.  Recognizing the impact on both sides of the balance sheet, the release also delivers asset / liability management reporting to assist organisations in managing those risks that may arise from mismatches in liquidity.

The release also recognises the new reporting requirements around liquidity of portfolios as introduced by the Alternative Investment Fund Managers Directive (AIFMD). M.A.T.ware now delivers enhanced and standardised reporting around the delivery of liquidity information and also includes a UK Financial Conduct Authority reporting module to meet FCA Client Assets (CASS) requirements.

Said Dave Shastri, co-founder of Comada: “The global regulatory environment for both investors in hedge funds and their custodians has changed enormously in the last few years. Comada has been reacting to this by enhancing both the suite of regulatory reporting tools we make available to our clients, and the detailed cash management and liquidity data they require to support that reporting.”

Rupert Vaughan Williams, co-founder of Comada, added: “While prized for its straight-through-processing capabilities, Comada’s M.A.T.ware software is also highly regarded because of the additional live portfolio data it delivers to hedge fund investors. Our latest release allows this data to be used to meet new regulatory demands in an efficient and timely manner.”

Launched in 2006, Comada’s M.A.T.ware software is in use by hedge fund investors and custodians as both a hosted or internal solution for the management of portfolios of hedge funds and other alternative assets. It has won industry plaudits for the level of detail it delivers on actual and hypothetical portfolio liquidity and for secure electronic trade processing.

For more information, please contact Stuart Fieldhouse (Europe/Asia) or Dave Shastri (North America) or call +1 441 234 4400.

Cyber crime and hedge funds – cyber security policies

Hedge fund data: a business that is torn between two radically different forces. On the one hand, there is the instinct to share data in order to improve transaction processes: fund managers and investors demand open networks from service providers like administrators, while the service providers themselves are working more closely together, communicating information between the critical parties to a transaction into a hedge fund.

On the other hand, the exposure of networks creates opportunities for cyber crime with the attendant reputational risk this entails.

How then, can fund managers, investors and service providers reconcile the conflicting demands of cyber security with the obvious cost savings offered by outsourcing and the use of the internet to deliver mission critical data? How can we be confident that orders are being securely managed between counterparties when we are being asked to interact with different firms with varying levels of cyber security protocols?

In Comada’s three part series on cyber security, we’ll be looking at some of the critical issues that the alternative funds industry needs to address as a matter of priority. In this, the first instalment, we look at what need to be included in a cyber security policy.

Your cyber security policy – are you ready?

Being aware of the risks is a continuous exercise: Comada, as a provider of secure solutions, communicates regularly with experts who can provide up to date guidance and planning. Strategies are also developing within the hedge funds industry to limit bilateral connectivity, thereby reducing cyber crime risks.

We understand that investors and managers face a rapidly changing security situation. On top of that, regulators and operational due diligence professionals are adding cyber security to the list of business items they wish to inspect. Lack of an informed and enforced policy will create problems for firms in the very near future.

Here are some guidelines to good cyber security policy practice:

  • Ensure your policy is prepared in consultation with external professionals, and that it is detailed, including organisation and staffing issues, and how it applies to your clients and across your organisation. Make sure it includes who is responsible for ensuring security, how staff are expected to comply, how you vet personnel, what your password protocols should be, and how you ensure secure access to email, VPNs and your servers.
  • Make sure your staff are properly trained: human error is frequently the source of problems, regardless of how tight your policies are. How is desktop software updated? How is anti-virus software installed and updated? How is this process managed, and how much is the individual employee expected to do?
  • It is important that external vendors are made aware of security policies, and that they can adhere to these. They should be aware of their responsibilities under the policy.
  • As Software As A Service (SaaS) has become an increasingly relevant solution for participants in the industry, your policy should make sure that it incorporates your SaaS vendors, and that they can respond effectively to your regular security audits and are able to implement their services securely.
  • Cyber security threats are not simply external – internal data management is also critical. Drafting a policy may also be an opportunity to re-visit internal access protocols. Firms should be aware of who among their employees has access to different pieces of data. Should all your employees have universal access to all your data? Why? Your security policy should govern who has access to software and data and that this cannot be acquired by mistake. This may be harder to achieve in smaller firms like individual hedge funds or family offices, but it can be useful to leverage SaaS applications that have been developed for larger firms, but are now within the price range of the smaller market participant to use.
  • Like driving a car, where you partly rely on the competence of other road users, you must still be vigilant. Make sure your policy covers the standards you expect of the firms you deal with, that they are reputable and that they vet their own staff.

In our next bulletin we will look at some of the practical applications available for firms in the alternative investment industry that want to make themselves more secure. How does this all work in practice?

If you would like to receive regular updates from Comada or are interested in speaking to use about our SaaS applications for hedge fund investors, administrators, custodians and TAs, please contact Stuart Fieldhouse (Europe) – sf@comada.com, or Dave Shastri (North America) – ds@comada.com or call +1 441 234 4300.

Comada M.A.T. Share receives commendation in recent Banker Technology Awards

M.A.T. Share singled out for special mention due to its ability to help fund of hedge funds to integrate portfolio data efficiently.

Hedge fund technology provider Comada has recently been commended for its M.A.T. Share solution in the Back Office Innovation category of The Banker magazine’s 2007 Technology Awards. M.A.T. Share was the only hedge fund-specific technology solution to be singled out in the awards.

According to The Banker, “The M.A.T. Share solution brings order to chaos by sorting out the fragmented, non-standardised portfolio management issues in funds of hedge funds. It also offers an ASP approach in a market that does not have hi-tech departments.” The magazine added that “by gradually extending the approach to full STP, Comada is generating an innovative approach to an unstructured marketplace with M.A.T. Share.”

M.A.T. Share is designed to support portfolio managers responsible for funds where the main underlying security is hedge funds. It is available as a fully-supported software package that can be internally or externally hosted. Amongst the functions it covers are: portfolio monitoring, liquidity management, cash flow, performance measurement, data integration, and trade confirmation.

“We are delighted to have received this commendation from a magazine which enjoys such a high level of respect within the financial services industry,” commented Rupert Vaughan Williams, co-founder of Comada. “To.also receive such praise from an independent panel of judges within such a short time of M.A.T. Share’s launch is a welcome endorsement of our vision for our innovative operational solution for the funds of hedge funds industry which stems from treating funds as securities in their own right, allowing us to deliver a truly scalable platform to managers and their service providers.”

The Banker’s panel of judges included Chris Skinner (Chairman of the Financial Services Club); Parveen Bansal (Senior Researcher with Financial Insights); PJ Di Giammarino (Chief Executive of JWG IT Ltd); Clive Hawkins  (European Head of Equities, UBS); Tim Jones (Non-Executive Director,  Capital One Bank); Jamie Martin (Head of Payments, National Australia Group); Pekka Jarvinen (Head of Research, Nordea); Sherrie Rad (Strategy Project Manager, Business Operations, HSBC); Eric Sepkes (Vice President,  Global Transaction Services, Citibank); and Clive Winchup, Divisional CIO,  UKRB, Lloyds TSB).

Dave Shastri, another co-founder of Comada, said: “From the beginning,  we wanted M.A.T. Share to be recognised for its innovative approach to solving some of the very real operational problems the funds of hedge funds industry is facing today. There is a need within this industry for a solution that will provide portfolio managers with the means to share information easily within their organisation and with their service providers. We also realise that funds of funds need a flexible product that will not require a massive investment in time to implement properly.”

Comada wins recognition for Funds of Funds technology

Technology firm walks away with Best Fund of Funds Technology Provider Award at The Hedge Fund Journal Service Provider awards

Fund of funds technology specialist Comada has been recognised for the excellence of its M.A.T. Share software, picking up the award for Best Fund of Funds Technology Provider at the annual Hedge Fund Journal Awards this month.

Receiving the award for Comada were co-founders Rupert Vaughan Williams and Dave Shastri.

“We greatly appreciate this recognition for what we set out to accomplish at this relatively early stage in the development of our company,” said Vaughan Williams. “We are clearly delighted with the way the fund of funds industry has received our platform, and it’s great to have this recognised with an industry award.”

Comada won the award on the strength of its M.A.T. Share ASP model, including the speed and ease of the software’s delivery via browser-based desktop technology. M.A.T. Share’s value for funds of funds wanting more efficient and transparent liquidity management features was singled out for praise by the magazine, as was the way in which it allowed funds and their service providers to manage their data.

“M.A.T. Share is a fully-supported transaction based portfolio management product that can be internally or externally hosted,” said Comada co-founder Shastri. “It has been designed for use for managers of funds of funds, and its ability to get them using data beyond the confines of spreadsheets, and communicating that data with their service providers, is one of its great appeals for this sector.”

Hosted annually by The Hedge Fund Journal in London, the awards are designed to recognise the top hedge fund service providers across a range of categories. Held at the Natural History Museum in London, the ceremony was attended by representatives from a range of major firms, including banks, fund managers, and legal practices.

The Hedge Fund Journal is the leading trade journal for the European hedge funds industry. Originally launched in 2004, it is now widely read, not just in Europe, but further afield. This is the second year the magazine has hosted the awards.

Comada was also recently commended by The Banker magazine in that journal’s annual technology awards, again for M.A.T. Share’s ability to help funds of funds integrate portfolio management data effectively.

Comada M.A.T. Share receives special commendation at Funds Europe Awards

M.A.T. Share singled out for special commendation for its ability to deliver scalability and enhance operational infrastructure.

Hedge fund technology specialist Comada has been recognised for the excellence of its M.A.T. Share platform at the Funds Europe Awards in December 2008. This special commendation was given for the category of European Middle Office technology.

According to leading asset management trade journal Funds Europe “This hedge fund middle-office provider has bridged the gap between poor operational infrastructure in the hedge fund world and the stringent requirements of institutions such as pension schemes. Counting Gottex Fund Managers among its clients, Comada is using its M.A.T. Share product to replace the use of spreadsheets as a risk control tool at fund of hedge fund firms with better technology architecture. This in turn allows the fund houses to scale their business. Judges recognised this as a major necessity within the institutional hedge fund world, and so Comada was given a special commendation.”

Mark Porter Chief Operating Officer, Fund Services, UBS Global Asset Management presented the award to Susanne Petrie, Comada’s business development manager. M.A.T. Share is a hosted transaction level portfolio and liquidity management solution. Its enterprise class technology seamlessly integrates hedge fund data, delivering powerful operational risk management tools delivered through web accessed reporting to and between clients and service providers.

Co-founder Rupert Vaughan Williams remarked that “Comada was particularly pleased to accept this commendation from an industry leading publication like Funds Europe, signifying a strong endorsement of the specific type of operational architecture required for managing and executing hedge fund trades. Solutions like ours are likely to be in even more demand from institutional-scale managers as they seek to grow their businesses in a significantly altered and challenging environment this year.”

Funds Europe is the dedicated journal for cross-border fund professionals in Europe. It covers all areas of the asset management business with a circulation of over 10,600 copies each month. Established in 2002, funds europe is an influential and recognised market leading publication within the asset management and pension communities.

Comada earns award for Leading Fund of Fund Technology Provider from The Hedge Fund Journal

LONDON: Hedge fund technology specialist Comada is pleased to announce that it has won the award for Leading Fund of Fund Technology Provider from prestigious hedge fund trade magazine The Hedge Fund Journal. The award was given in recognition of Comada’s ongoing success with the deployment of its M.A.T. Share product for funds of funds.

Said Rupert Vaughan Williams, co-founder of Comada: “We are very pleased to receive recognition for M.A.T. Share, which continues to build on its transaction level architecture to address specific challenges regarding scalability and transparency in the fund of hedge funds industry. The past few years have highlighted our ability to address the liquidity management and operational challenges faced by this industry, providing a clear picture for those who manage hedge fund portfolios, and allowing them to deliver meaningful reporting to their clients.”

M.A.T. Share is a dynamic, web-based application for funds of hedge funds, distinguished by its ability to connect funds of funds with hedge fund administrators and custodians. Its robust technology platform allows portfolio managers to make trades and receive confirmations electronically, and assess liquidity within portfolios on a real-time or hypothetical basis.

Said Dave Shastri, co-founder of Comada: “M.A.T. Share makes use of Comada proprietary M.A.T.ware technology to address many of the operational challenges that the market turbulence of the recent past brought to the fore. The success of this product partly stems from its ability to do this while meshing seamlessly with existing legacy systems within a fund of funds operation.”

This is the second time Comada has been recognised for its ongoing programme of technology development in the hedge funds space by The Hedge Fund Journal. Founded in 2004 by a seasoned team of technology professionals with a background in asset management operations, Comada is at the cutting edge of transactional systems development for the hedge funds industry.

Editor’s notes:

About Comada
Comada was founded in 2004 by experts in the hedge fund front, middle and back office areas to develop specialist transaction level software applications. Its M.A.T.ware technology is specifically designed to enable fund of fund managers, their clients and counterparties to significantly enhance their operational risk management capabilities. Greater transparency and accurate liquidity profiling from underlying portfolios are key to the benefits this technology has to offer. Comada’s flagship product, M.A.T. Share, is already enjoying considerable recognition as a ground-breaking tool for industry participants seeking to reduce operational risk by delivering highly scalable functionality through smoother Straight Through Processing capabilities.

Funds of hedge funds industry faces operational challenges

Industry growth has raised a need for more sophisticated and robust solutions to avoid costly mistakes

Increasing operational risk and the urgent requirement for investment in efficient fund trade-processing infrastructure is arguably the biggest challenge facing the funds of hedge funds industry going forwards, according to Rupert Vaughan Williams, one of the founding principals of financial technology group Comada.

Comada is a specialist developer of technology products designed to substantially reduce operational risk in the fund of funds industry. According to Vaughan Williams: “Fund managers need software solutions that will not only integrate with their existing infrastructure, but also provide core technology from front to back. Whether the perceived challenge is specific or broad, no solution is likely to meet it properly unless it integrates all the processes from distribution to portfolio management through to settlement.”

No mean feat in a notoriously disparate and outsourced industry where data management is tricky to perform smoothly and accurately. “Hedge fund technology must treat funds as securities in their own right if it is to deliver a formula that will continue to meet the end-to-end challenges fund managers are facing,” says Vaughan Williams. “Right now there is still an overwhelming reliance on spread-sheets, and inaccurate data, and it is costing managers, and by extension their investors.”

According to a recent study, 61% of funds of hedge funds believe that better internal technology could help them to deal with the perennial problem of liquidity mismatches. Research by Omgeo last year has shown that an automated post-trade environment could reduce operational costs by up to 75%.

Comada has recently launched a software product for funds of hedge funds designed to help them counter the imminent threat of operational meltdown in their front, middle and back offices. M.A.T. Share has been created to help managers run portfolios where the principal investment securities are hedge funds, by helping managers to track trades into and out of underlying funds, and maintain detailed records on the funds they are invested with, or are currently tracking.

“M.A.T. Share was designed to fulfil a need amongst funds of hedge funds operations for a robust tool that could be inserted into their business to provide managers with an accurate picture of their portfolios,” says Dave Shastri, co-founder of Comada. “It allows employees to keep track of trades, and share information between the various functions within the firm and with service providers.”

M.A.T. Share is available as a fully-supported software package, which can be internally or externally hosted. It can be used to facilitate a comprehensive range of functions within a typical fund of funds business, amongst them portfolio monitoring, trade confirmation and process flow, liquidity management, cash flow, document library, performance measurement and data integration. It is the first of a revolutionary series of applications Comada is planning to launch in order to help asset management businesses to cope with the increased pressures of institutionalisation within the hedge funds industry.

Olympia Capital (Ireland) Limited chooses M.A.T. Share to help fund of hedge funds clients meet new operational challenges

Tailored specifically for the fund of hedge funds industry,  Comada’s M.A.T. Share helps fund managers and administrators streamline internal trade processing.

Olympia Capital (Ireland) Limited has licensed Comada’s M.A.T. Share software for use within its fund of hedge funds administration business. The Dublin-based specialist administrator caters to almost $10 billion in fund assets, and decided to utilise M.A.T. Share to help it take its existing culture of high touch service provision to the next level.

M.A.T. Share is available as a fully-supported software package, which can be internally or externally hosted. It can be used to drive and manage a comprehensive range of functions within a typical fund of hedge fund manager or service provider, including portfolio monitoring, trade confirmation and process flow, liquidity management, cash flow,  performance measurement and a document library, all with full data integration. M.A.T. Share can also help with the effective communication of transaction data between administrators, custodians, and fund managers.  For example, it can procure an accurate cash-flow picture without reversion to spreadsheet mechanisms.

“In this high touch area of the fund services business, a generic product simply will not do,” said John Walley, CEO of Olympia Capital in Dublin.  “We chose M.A.T. Share because it is a specialist product, designed for a highly specialised area of the hedge fund investment business. It helps us to fully leverage our existing activities while avoiding the creation of operational silos that typically occur when more generic software modules are employed.”

The choice of M.A.T. Share was driven by its applicability to Olympia’s established culture of highly personalised administration for funds of hedge funds clients.

“Funds of hedge funds are the fastest growing area of the hedge funds business,” said Rupert Vaughan Williams, co-founder of M.A.T. Share developer Comada. “Service providers of these funds have found that as their clients grow considerably larger, they are seeking operational efficiencies that can only be scalable if they make use of robust and tailored technology solutions.”

Dave Shastri, co-founder of Comada, added: “We are delighted to add Olympia as a client which, as a fund administrator, demonstrates the breadth of application to funds of funds structures that M.A.T. Share can achieve. We look forward to supporting them.”

Comada names new Chief Operating Officer to help grow funds of funds business

Fund of hedge funds technology specialist Comada announced today that it has hired Chandra (“Chan”) Arandjelovic to occupy the newly-created position of Chief Operating Officer.

Prior to joining Comada, Chan was a Senior Vice President at HSBC Alternative Fund Services in Bermuda. She has been working within the sphere of alternative fund operations for 20 years, and in her role at HSBC was responsible for delivering fund administration services to hedge funds worth over $30 billion.

Chan brings to Comada her experience in applying investment technology using pioneering vendor systems that are now widely adopted within the hedge funds industry. This makes her ideally suited to helping to oversee the ongoing roll-out of Comada’s own suite of technology applications within the alternative investment industry.

Based in Comada’s Bermuda office, Chan will report to Comada co-founder Dave Shastri. The Bermuda office is already serving as the company’s global base for funds of funds customers, and Shastri said it was important that Comada could demonstrate depth and experience within the COO’s role.

“Bermuda provides an excellent base for Comada as a significant number of groups that handle hedge fund investments are based here, including funds of funds, insurance companies, endowments and administrators,”  Shastri explained.

A long-term resident of Bermuda, Chan worked in the insurance sector before joining the then Bank of Bermuda, subsequently acquired by HSBC.  Amongst the leading technology applications she helped to implement was Advent’s Geneva and she played a significant role in defining this application’s use in the HSBC environment as they were the pioneer administrator on the platform.

Arandjelovic noted, “Having supported the fund of hedge fund business for several years, I am keen to join a firm which can truly provide the solutions this industry so desperately needs; from controlling the transaction life cycle to evaluating exposure and risks and everything in between. The M.A.T. Share product is built with these unique requirements in mind.”

“Chan’s ability in this area is an important factor to us, as funds of hedge funds are increasingly seeking to integrate relevant technology to allow them to scale their businesses,” Shastri added. “Chan has the right level of experience with these groups, scaling operations and technology from boutique to institutional platforms, and this will be invaluable to our clients as we roll out our core M.A.T. Share software.”

M.A.T. Share is Comada’s trade and portfolio management application, designed specifically for funds of hedge funds. It helps managers to track trades into and out of underlying funds, as well as maintaining detailed records on the funds they are invested with, or are currently tracking. It can also be more widely used by other habitual investors in hedge funds,  for example private banks or family offices.

Comada makes new business development appointment in UK

Susanne Petrie will support software firm’s business development activities

Comada, the developer of the award-winning fund of hedge funds software package M.A.T. Share, has appointed Susanne Petrie to spearhead its marketing and business development activities in the UK. Based in London, Petrie will be working closely with Comada co-founder and Head of Business Development Dave Shastri.

“London is an important hub for the European hedge fund industry, and we felt it was vital that we had someone with Susanne’s experience to help us to raise our profile with the fund of hedge funds community here,” Shastri said. “Susanne comes to us with an extensive network of contacts in the alternative investments sector, and we look forward to her putting her experience to good use on Comada’s behalf.”

Petrie began her career in hedge funds by launching Hedge Funds Review in 2000, establishing it as a leading publication for hedge fund information. Her industry focus subsequently included the development of hedge fund and fund of fund events around the globe. In 2005 she moved to IMS Consulting, the dominant independent UK compliance consultancy focusing on the asset management industry, as Head of Business Development.

Said Petrie: “Technology is becoming an increasingly vital ingredient for the successful functioning of funds of hedge funds businesses, and it is great to be working with a business like Comada, which is developing software of practical and strategic significance for these firms. I am looking forward to meeting both old and new friends in the hedge funds industry in my new role.”

Comada is continuing to deploy and support its M.A.T. Share software, an ASP-hosted solution specifically designed for funds of hedge funds, in both Asia and North America. Petrie’s appointment will allow the firm to deal more efficiently with potential customers in Europe as well. M·A·T·share allows fund managers to integrate day-to-day operational and investment activities as well as linking firms with service providers to ensure vastly improved pricing and reporting capabilities.

Comada partners with Custom House to deliver online transaction tracking platform for hedge fund investors

New platform to strip out paper-based processes in hedge fund investment experience

Transaction technology developer Comada today announced that it has partnered with hedge fund administrator Custom House to launch a new platform for fund managers and their investors. Launched this week, the platform allows investors in hedge funds administered by Custom House to invest, track and receive investment and redemption confirmations electronically. Most importantly, it achieves this via browser-based architecture that precludes the need to download software to a desktop computer, seamlessly integrating with, and extending in-house legacy technology.

“The hedge fund industry has needed an application like this for some time now,” said Rupert Vaughan Williams, co-founder of Comada. ”We are delighted to be working with Custom House who are committed to best of breed technology. This platform significantly raises the bar for hedge fund investing. Users of this technology can now rely on robust infrastructure that electronically processes and reconciles transactions from a single reference point. It is specifically designed to minimise the operational risks of the day to day management of portfolios of alternative investments.”

Comada specialises in designing and delivering transaction-based solutions for the managed assets industry, particularly hedge funds. Its core management team has been working together in the industry for almost two decades. It provides both bespoke and off-the-shelf solutions for hedge fund managers and their clients. Comada partnered with Custom House to deliver an advanced platform that would further integrate investors into the investment cycle and help reduce operational risk.

Dermot Butler, Chairman of hedge fund administrator Custom House commented: “We wanted to deliver a service to our customers which they could rely on. It is now possible for both managers and investors to track the progress of investments and redemptions electronically, real time, 24 hours a day. Thanks to our partnership with Comada,  we believe we are the first hedge fund administrator to be able to offer this particular kind of service.”

Custom House is responsible for the administration of more than $40 billion in hedge fund assets globally, across a range of different investment strategies. It has established its credentials as being a first mover and innovator in the arena of hedge fund administration.

Editor’s notes:

About Comada
Comada was established by seasoned funds industry professionals in 2004 to create bespoke and off-the-shelf technology applications for fund services providers and managers. Its M.A.T.ware core engine has been used to power M.A.T. Share, the STP solution for fund services companies and funds of funds managers. Its solutions are focused on improving operational risk by delivering greater transparency and comprehensive liquidity analysis. Its browser-based products are easily delivered over Intranet, Extranet or Internet, to the desk tops of custody and fund administration operations linking them directly to their hedge fund clients.

About Custom House
Custom House Global Fund Services Ltd., the Maltese-based holding company for the Custom House Group, is a member of the Equity Trust group of companies. The company is a Category 4 Licensed Custodian of funds-of-funds and recognised as a full service hedge fund administrator by the Malta Financial Services Authority (“MFSA”).

The primary business of Custom House is the provision of full administrative services to alternative investment and hedge funds, including private equity and real estate funds, as well as managed accounts. Established in 1989, Custom House operates a network of global offices, and has approximately 290 staff worldwide. With around US$40 billion in assets under administration, the firm provides administration services to more than 200 managers, trading through more than 600 investment funds. Custom House provides daily dealing NAVs for over a third of these.

Comada partners with Prime Fund Solutions on next generation fund of funds technology

Comada’s M.A.T.ware technology to power new custody tool for PFS customers

(Somerset, BERMUDA): Transaction technology developer Comada has partnered with leading alternative investment funds service provider Prime Fund Solutions (PFS) in the development and delivery of PFS’ next generation middle office platform, PFS Horizon. The strategic partnership, announced this week by Comada co-founders Rupert Vaughan Williams and Dave Shastri, sees PFS Horizon used to deliver best-in-class middle office services and reporting technology to the fund clients of Prime Fund Solutions.

Comada is an established developer of technology solutions for the fund services market. Its core M.A.T.ware system already serves as the basis for a number of off-the-shelf products for funds of funds, as well as bespoke platforms like PFS Horizon. Comada’s flagship M.A.T. Share software is already being used within the alternative investments industry to help with the reduction of operational risk and to enhance liquidity profiling.

PFS Horizon brings funds of funds a full transaction-based custody portfolio and investment management system. With the objective of providing fund managers with efficient straight through processing,  PFS Horizon uses direct interfaces to harmonise a range of mission critical operations, including the handling of portfolio assets, due diligence, trading, pricing and reconciliation. It offers a single point of control to allow a manager to oversee the entire investment lifecycle,  actual and hypothetical, from start to finish.

“We are very excited to work together with the team at Prime Fund Solutions to deliver what we believe is a market leading straight through processing tool for the funds of funds industry,” said Comada co-founder Dave Shastri. “Our M.A.T.ware technology has been developed to combine PFS requirements with those of their clients into a single integrated operational environment.”

M.A.T.ware is designed to support the development of fund servicing solutions that help managers to significantly enhance their operational processes for much greater transparency of underlying portfolios,  more accurate liquidity management, and dynamic portfolio modelling.  Comada’s emphasis on web-enabled delivery means its technology can be configured to meet a range of operational challenges via a seamless and easy-to-deploy interface.

Said Rupert Vaughan Williams, co-founder of Comada: “PFS wanted us to work with them to build a fully integrated portfolio and liquidity management solution that could tackle a range of important tasks for their clients. We will continue to work with them going forwards to enhance their offering on the basis of client feedback and the changing regulatory and operational environment for funds of funds.”

Erik Jens, CEO of Prime Fund Solutions, said: “We believe this new technology represents a significant step forward in the fund of hedge funds middle office and reporting arena. The custodian’s ability to provide greater transparency, asset safety, and robust infrastructure are now important considerations for fund of hedge fund managers.  Comada and PFS are playing an active role with the technology solutions we have been developing to help custodians deliver both efficiency and continuity. We have already received extremely positive initial feedback from our institutional fund of funds clients and we now look forward to rolling out the new technology across our global client base over the coming months.”

About Comada
Comada is a leading alternative investment technology group established by seasoned funds industry professionals in 2004. It delivers fully integrated bespoke and off-the-shelf transaction-driven technology applications for fund services providers and managers.  Its M.A.T.ware core engine has been used to power M.A.T. Share,  the STP solution for fund services companies and funds of funds managers. Its solutions are focused on significantly improving operational risk by delivering greater transparency and liquidity profiling. Its fund portfolio management products are easily delivered via web interface to the desk tops of custody and fund administration operations, linking them directly to their hedge fund clients.

About Prime Fund Solutions
Since 1969 Prime Fund Solutions (PFS) has pioneered the provision of fund services to the alternative asset management industry. PFS has a global presence from eight key locations including Ireland,  Luxembourg, the Isle of Man, Amsterdam, the Cayman Islands,  New York, Hong Kong and Singapore. In addition, it has representative offices in Geneva, London and Tokyo. PFS is amongst the largest and most trusted counterparts in the areas in which it specialises, including:  administration, banking, custody and financing. PFS currently services clients ranging from boutique asset managers to large scale global institutions such as pension and sovereign wealth funds.

Hedge fund technology specialist Comada selected by leading global administrator SEI to leverage funds of hedge funds risk management infrastructure

SEI (NASDAQ:SEIC), one of the leading global providers of outsourced asset management, investment processing and investment operations solutions,  has selected financial software specialist Comada to enhance the risk management services that will be delivered to the company’s investment manager clients via SEI’s Total Liquidity Management™ tool.

The strategic partnership, announced this week by Comada co-founders Rupert Vaughan Williams and Dave Shastri, will see the implementation of Comada’s M.A.T.ware risk management capabilities into SEI’s operations platform to further enhance SEI’s outsourcing services for hedge funds and funds of hedge funds.

Said Rupert Vaughan Williams, “SEI was particularly interested in working with us to address increasingly important liquidity issues that continue to challenge the alternative investments industry in the wake of the credit crunch, and to provide their hedge fund managers with further insight and analytics into their portfolio construction process. We very much look forward to working with SEI to continue to deliver client integration tools in this area.”

Comada is an established fund of hedge fund technology solutions group and is responsible for the development of the award winning web based M.A.T. Share portfolio and liquidity management product. The core infrastructure for M.A.T.ware serves as a basis for both Comada’s own products and custom-designed industry solutions.

By seamlessly integrating the M.A.T.ware risk management application features to SEI’s existing platform, SEI will be able to deliver a web based liquidity management solution that addresses time to cash analysis plus ‘what if’ liquidity analysis over both the portfolio and investor sides of the balance sheet.

Dave Shastri added: “We are delighted that the level of granularity and presentation in our risk and liquidity analyses represented the quality of information that SEI was seeking to provide its clients with.”

Phil McCabe, Senior Vice President and Solution Head, SEI’s Investment Manager Services division, commented: “Liquidity management, particularly for funds of hedge fund managers, has been of critical importance over the past few years as managers and investors alike seek broader transparency and holistic views of their investments. Integrating Comada’s M.A.T.ware application into our best-in-class solution enhances our front-office offering and helps us deliver a way for managers to more accurately monitor their cash availability in both an efficient and automated manner.”

About Comada
Comada is a leading alternative investment technology group established by seasoned funds industry professionals in 2004. Its M.A.T.ware technology delivers fully integrated transaction-driven applications for hedge fund services providers and managers. Comada’s technology is focused on integrating critical work flow processes to significantly enhance portfolio and operational risk management capabilities through greater transparency and accurate portfolio liquidity profiling. This is achieved by linking administration and custody operations directly to hedge fund clients.  Comada’s flagship product, M.A.T. Share, is already enjoying considerable recognition as a scalable ground-breaking tool for industry participants seeking advanced Straight Through Processing (STP) and integrated dynamic client reporting capabilities.

About SEI’s Investment Manager Services Division
SEI’s Investment Manager Services division provides comprehensive operational outsourcing solutions to global investment managers focused on mutual funds, hedge and private equity funds, exchange traded funds, collective trusts, and separately managed, as well as institutional and private client, accounts. The division applies operating services, technologies, and business and regulatory knowledge to each client’s business objectives. Its resources enable clients to meet the demands of the marketplace and sharpen business strategies by focusing on their core competencies. The division has been recognized by Buy-Side Technology as “Best Fund Administrator” and by HFMWeek as “Best Funds of Hedge Funds Administrator.” For more information,  visit www.seic.com/enUS/im/303.htm.

About SEI
SEI (NASDAQ:SEIC) is a leading global provider of outsourced asset management, investment processing and investment operations solutions. The company’s innovative solutions help corporations,  financial institutions, financial advisors, and affluent families create and manage wealth. As of March 31, 2010, through its subsidiaries and partnerships in which the company has a significant interest, SEI administers $394 billion in mutual fund and pooled assets and manages $162 billion in assets. SEI serves clients, conducts or is registered to conduct business and/or operations, from numerous offices worldwide.  For more information, visit www.seic.com

Comada’s M.A.T.ware supports Custom House Phase Two CHARIOT launch

Second phase of web-based dealing platform offers more advanced features to hedge funds and their investors.

LONDON: Comada, the award-winning provider of transaction-based technology solutions to the alternative investments industry, is pleased to announce that its M.A.T.ware technology has successfully supported the roll-out of the second phase of the CHARIOT Web Dealing Platform by Custom House Global Fund Services this week.

Using its proprietary M.A.T.ware technology, Comada helped Custom House to launch CHARIOT in April 2010. CHARIOT is a robust web-based investment platform that enables investors to subscribe and redeem funds that Custom House administers. The launch of the second phase of CHARIOT brings new enhancements for Custom House clients, allowing investors to also deal in funds that are subject to an equalisation process.

Said Rupert Vaughan Williams, Co-Founder of Comada: “Using M.A.T.ware technology Custom House continues to set new standards for hedge fund investing. The ongoing success of CHARIOT is soundly based on the integration commitment of both groups  We have been very pleased with the way it was possible to mesh M.A.T.ware with Custom House’s existing systems, and we welcome the live deployment of CHARIOT’s second phase to Custom House customers.”

Said Mark Hedderman, Chief Operating Officer of Custom House: “Here at Custom House we are committed to a culture of innovation for our hedge fund clients. We chose to work with Comada because of the group’s ability to deliver solid, institutional grade technology which would meet our own high standards of security and investor confidence.”

Editor’s notes:

About Comada
Comada was founded in 2004 by experts in the hedge fund front, middle and back office areas to develop specialist transaction level software applications. Its M.A.T.ware technology is specifically designed to enable fund of fund managers, their clients and counterparties to significantly enhance their operational risk management capabilities. Greater transparency and accurate liquidity profiling from underlying portfolios are key to the benefits this technology has to offer. Comada’s flagship product, M.A.T. Share, is already enjoying considerable recognition as a ground-breaking tool for industry participants seeking to reduce operational risk by delivering highly scalable functionality through smoother Straight Through Processing capabilities.

About Custom House Global Fund Services
Custom House Global Fund Services Limited (“CHGFS”), which is a member of the Equity Trust group of companies, is the Maltese-based holding company for the Custom House Group of Companies. CHGFS is a Category 4 Licensed Custodian of funds of funds and recognised as a full service fund administrator by the Malta Financial Services Authority (“MFSA”). The primary business of Custom House is the provision of full administrative services to alternative investment and hedge funds, funds of funds, and managed accounts and managed account platforms. In addition to its Malta head office, Custom House, which was established in 1989, also operates through offices in Chicago, Dublin, Guernsey, Luxembourg, The Netherlands and Singapore, and has approximately 290 staff worldwide. With approximately US$48 billion in assets under administration, the firm provides administration services to more than 200 managers, trading through more than 500 investment funds, for approximately 25% of which Custom House provides daily dealing NAVs.

Why technology has become a bottle neck issue for hedge fund investors

The parties to any single trade, be it the fund manager, the custodian, the investor or the administrator, are incorporating a degree of estimation in the course of the transaction process. It is still difficult to operate otherwise. Each participant is using different parameters to view mission critical data and communications. Each still relies on paper-based processes and spread sheets to manage billions of dollars of alternative investments. But can any of them express with 100% confidence that a specific trade is at a specific location in the transaction trade at any given time of the day? And can they put a value to it when they do find it?

At this juncture in time we stand in an industry that is becoming increasingly institutional, with over 60% of the assets being managed by hedge funds now originating from institutional clients. The client complexion of the industry has changed while the legacy technology in use within many firms harks back to an earlier and simpler era.

Technology issues are becoming a bottle neck for institutional investors, particularly with regard to managing and reviewing hedge fund portfolios. This is creating a demand for a more proactive and integrated approach to client reporting using technology that has the ability to break down the different components of the hedge fund trade. By bridging these operational processes, institutional investors can manage and review accurate data with a higher degree of confidence.

The scale of the problem facing the industry has been highlighted by Swift’s SHARP (Swift Hedge Funds Harmonisation Project) initiative. Swift identified a number of key operational issues within the hedge fund transaction cycle. While custodians and administrators can handle the paper trail when transaction volumes are low, the largest service providers to hedge funds now process well over 1000 transactions every month. Each order may come with up to 50 pages of documentation attached. A typical team within a hedge fund administrator might be handling 600-700 orders with a dedicated staff of a dozen or so. Apart from reconciling data with their own records, they must also ensure investors are complying with KYC and other regulations.

Because subscriptions processing is time consuming and error prone, the entire cycle from the time when the order is taken to taken until confirmation is received and accounts are reconciled can be as much as a month. Faxes of subscription agreements must be sent to transfer agents, which in turn must be confirmed by phone, with final documents being sent over by courier.

For a fund with monthly liquidity, these transactions can prove costly, particularly if the market has moved. Missing a deadline for an order could lead to a fund holding unnecessary cash, while a missed redemption deadline would leave a fund exposed to an unwanted position for another month, quarter of a year or more.

If funds restrict liquidity, or extend their lock-in periods, or raise gates, the risks of moving transactions in and out of funds grows. It is still very hard for custodians to provide funds of funds with accurate status reports, particularly when they are bombarded by faxes from administrators and transfer agents at the end of the month. For larger custodians, with dozens of service providers to deal with, the problem is only magnified.

In pursuit of a confident measure of liquidity

Since the subprime crash of 2008 the alternative investment industry has been focusing in unprecedented detail on the issue of operational risk. This is being driven forwards from a number of quarters, including by regulators and investors concerned that assets might be placed in jeopardy as a consequence of future systemic failures. There is a general appreciation, however, that within the hedge funds industry there are systemic issues in the way business is being done that will need to be addressed if operational risk is to be reduced.

The investor community in particular is seeking solutions that will allow it to improve the efficiency of the hedge fund trade cycle, providing for enhanced interaction with fund managers and service providers like administrators and custodians.

Talk of ‘transparency’ is more prevalent than ever: we have statements to this effect from regulators and investors (e.g. in the recent survey of managers and investors published by Ernst & Young). But can we properly define what we mean by hedge fund transparency and produce a benchmark industry standard?  Commentators have discussed the transparency of the trade, for example in equities pricing, but how can you translate this into hedge fund investments? In the post-Madoff environment, transparency now means proper verification of every stage of the trade, from the initial investment in the fund to where the assets are held.

From the perspective of the investor, for example a typical pension fund or family office, an investment in a hedge fund is treated as a security, and with that come concerns about liquidity: where is the investment held, what it is worth? How is it treated from a legal perspective?

In short, investors would like to be able to see their alternative investments alongside their other assets, be they exchange-traded securities or long only mutual funds. The problem is that hedge funds – and their private equity equivalents – are more opaque and are still seeking solutions that will allow them to deliver this degree of enhanced reporting to the investor community. It is difficult to get away from the spread sheet when it comes to managing an alternative investment portfolio: finding out what something is worth is hard enough using Excel; what about providing a confident measure of liquidity?

How do you cope when things go wrong?

A detailed liquidity report of an underlying portfolio of hedge funds, one that could be dynamically updated, was the Holy Grail for many funds of funds in the dark days of 2008. Proper liquidity reporting is underpinned by effective data and tools. It requires a degree of investment in technology that can be proactive, agile and responsive.

One of the real tests of any portfolio management system occurs when things go wrong: in the world of money management, operational failures, for instance on the part of a business further down the service provider chain, can force the portfolio manager to re-evaluate retrospectively. Can he be sure that such revaluations are being consistently applied, especially if multiple individuals within the same firm are juggling dozens of spread sheets? Once mistakes creep into the historical portfolio picture, they can be difficult to track down and correct, and they can continue to have an unforeseen impact on reporting further down the line.

Beyond the problems of effective performance tracking, investors in hedge fund portfolios today want to feel they have a better grip on what is happening in underlying hedge funds. This means being able to view a more complete operational picture. Their questions cover key issues relating to fund liquidity, including whether funds have the ability to gate withdrawals, whether gates have been initiated, the expiry of each tranche lock up, and what the options are to reduce lock ups and when. Better information on the liquidity scenario can deliver important additional advantages to the portfolio manager.

It all comes down to a question of confidence: can an investor feel confident that a trade has been properly executed? Has it been confirmed by the relevant custodian and underlying transfer agent? How long does it take to receive the estimated and real NAVs? Do they always come in on time? Are communications with relevant parties secure and dynamic enough to process real-time information flows?

With a more detailed picture comes a higher degree of confidence in the underlying investment and a superior level of reporting to end investors when required. This also helps the portfolio manager to allocate further funds more efficiently.

Projecting light onto hedge fund transactions

Since the subprime crash of 2008 the alternative investment industry has been focusing in unprecedented detail on the issue of operational risk. This is being driven forwards from a number of quarters, including by regulators and investors concerned that assets might be placed in jeopardy as a consequence of future systemic failures. There is a general appreciation, however, that within the hedge funds industry there are systemic issues in the way business is being done that will need to be addressed if operational risk is to be reduced.

The investor community in particular is seeking solutions that will allow it to improve the efficiency of the hedge fund trade cycle, providing for enhanced interaction with fund managers and service providers like administrators and custodians.

Talk of ‘transparency’ is more prevalent than ever: we have statements to this effect from regulators and investors (e.g. in the recent survey of managers and investors published by Ernst & Young)[1]. But can we properly define what we mean by hedge fund transparency and produce a benchmark industry standard?  Commentators have discussed the transparency of the trade, for example in equities pricing, but how can you translate this into hedge fund investments? In the post-Madoff environment, transparency now means proper verification of every stage of the trade, from the initial investment in the fund to where the assets are held.

From the perspective of the investor, for example a typical pension fund or family office, an investment in a hedge fund is treated as a security, and with that come concerns about liquidity: where is the investment held, what it is worth? How is it treated from a legal perspective?

In short, investors would like to be able to see their alternative investments alongside their other assets, be they exchange-traded securities or long only mutual funds. The problem is that hedge funds – and their private equity equivalents – are more opaque and are still seeking solutions that will allow them to deliver this degree of enhanced reporting to the investor community. It is difficult to get away from the spread sheet when it comes to managing an alternative investment portfolio: finding out what something is worth is hard enough using Excel; what about providing a confident measure of liquidity?



[1] Coming of Age: Global Hedge Fund Survey 2011 (Ernst & Young)

Fund of fund technology can be cost effective

As a firm that specialises in providing technology solutions to hedge funds, we at Comada are more than aware that the fund investors we serve are seeking solutions today that will help them to run a leaner, meaner business going forward. What many funds of hedge funds still don’t realise is that Comada’s M.A.T.ware technology is eminently scalable, and can grow with their business.

Some managers won’t want our technology with all the features a bigger firm might require. Hence, we’ve now scaled our offering so that our clients can implement many of the core features of M.A.T.ware while paying an affordable monthly fee.

M.A.T.ware’s Foundation level package has been designed to suit the first-time user who wants to benefit from many of the advantages Comada’s technology offers, including its scope to make a fund of hedge funds business more efficient.

Straight out of the box

M.A.T.ware’s out-of-the-box, browser-based features allow you to access our technology wherever you go. You can also manage all your fund investments on a single screen, including hedge funds, LPs, private equity, managed accounts and ETFs, plus oversee multiple portfolios.

In addition, Foundation offers our award-winning fund of fund portfolio modelling, document management, valuation accounting and currency management facilities to help you improve your overall operational architecture.

In short, smaller investors in hedge funds, or those who would like to try out some of the basic features of our technology before making the decision to scale up, can now speedily implement M.A.T.ware in their home environment and at what we believe is a very competitive fee. If you decide you need the additional features of our Manager level package – like white labelling or referential data – it is very easy to upgrade.

To find out more about M.A.T.ware’s Foundation level package, and to arrange a demonstration of what it can do for you, please contact Comada today.

Setting a new standard for investor oversight and liquidity analysis

Comada is featured this week on RFP Connect. Rupert Vaughan Williams, co-founder, was in the hot seat fielding questions on our M.A.T.ware technology.

Rupert Vaughan Williams, co-founder of Comada

Uncertainty in global financial markets has never been greater, and for institutional investors with exposure to hedge funds, there is now a more pressing need to keep close tabs on what is happening in their alternative investment portfolios, be it transparency, liquidity or investment tracking.

For investors with hedge fund portfolios, including pension funds and family offices, the right portfolio management tools—with client and service provider connectivity—can be critical to successfully navigating the financial storm. In addition, investment organisations and their service providers need operational solutions that will help them to streamline their businesses, keeping them competitive.

With this in mind, most alternative funds, including offshore investment funds, are seeking dynamic highly scalable technologies that meet newly required standards for fund investing, provide better services and mitigate various operational risks.

M.A.T.ware is the only technology platform of its kind to provide detailed transaction-based analysis of portfolios comprised of offshore funds and limited partnerships, including managed accounts, ETFs, hedge funds, private equity and multi-tiered structures.

You can read the rest of the interview here.

The leading fund of hedge funds technology provider

Article published in The Hedge Fund Journal, April 2011, written by Stuart Fieldhouse.

As the dust has settled in the wake of the credit crisis, it has become increasingly obvious to funds of hedge funds managers that more needs to be done to address the issue of the inherent risks within their portfolios. The offshore hedge funds industry has lagged the onshore one in the straight-through-processing and settlement stakes, and as the credit crisis exploded onto the scene in 2008, this started to show.

Historically, the offshore investor base was happy with the levels of speed and efficiency at which things were being done. Back office functionality was allowed to proceed at a slower pace, and risk calculations for hedge fund investors had to take that into consideration.

That all changed in 2008. Memories are still bitter in some quarters at how long it has taken funds of funds to liquidate their holdings and pass on cash. Investors in alternative investments have learned their painful lessons, and are now much more demanding when it comes to reporting what a fund currently holds, and how much it has been valued at.

Deploying cost-effective monitoring and reporting solutions has crept to the top of many COO’s agendas in the last couple of years and is now likely to stay there.

M.A.T. Share
Comada’s M.A.T. Share product, a web-delivered solution for funds of hedge funds, earned it recognition from The Hedge Fund Journal thanks to the revolutionary approach it has taken to solving some of these challenges and problems.

First and foremost has been the use of Comada’s proprietary M.A.T.ware technology, which was used to build a product that can enhance the levels of communication between funds of hedge funds and their service providers. It has allowed firms to also be able to improve their reporting to end investor customers. This is vitally important in a climate where hedge fund investors are keeping much closer tabs on their investments, and where transparency and liquidity have replaced alpha-generation and capacity as key concerns.

In the words of Dave Shastri, co-founder of Comada: “M.A.T. Share represents a new operating model for the fund of hedge fund client. It represents the true ability to integrate the workflow process between the fund of hedge funds manager, the service provider, and ultimately the end investor.”

Shastri sees M.A.T. Share as a solution that can strip away much of the operational headache for both the fund manager and the service provider. It can smooth away many of the glitches and human error-inspired problems that can easily creep into day-to-day trade processing and settlement, and can do so using a package that is easy to deliver, install and update. Comada’s senior management team has always been wedded to the idea that its solutions should be easily deployable and should make a big difference in the way funds and service providers communicate.

Comada’s message is being taken on board by the industry and it has already been working with some leading names in fund administration and custody, amongst them SEI Investments, and PFS (Prime Fund Services), as well as fund of fund groups like Gottex. “We need our technology to be able to satisfy the appetite of the service provider as well as the fund manager,” explains Shastri.

Comada’s technology has been designed to be adaptable to the requirements of banks and other large service providers who need to meet the growing demands of funds of hedge funds. Funds are averse to the idea of costly re-builds, and anyway, why put them through it when compatible solutions are on hand?

Modern architecture
“Funds of funds and indeed their service providers recognise the need to move away from silo-trapped technology,” explains Rupert Vaughan Williams, co-founder of Comada. “We have therefore developed modern architecture that allows firms to integrate more successfully, both upstream to investors and downstream to service providers. This has required significant investment on our part in M.A.T. Share’s integration capabilities.”

Vaughan Williams is keen to emphasise that Comada’s proprietary core technology offering, M.A.T.ware, is not just a modular offering, for instance when encompassed in the M.A.T. Share fund of funds product, but can also be tailored to meet more specific requirements. It is highly adaptable, and can mesh easily with legacy internal systems without the need for prohibitively lengthy and costly new build-outs.

“In practice,” says Vaughan Williams, “we understand what it takes to make a technology application work in the real world. We have established a process that is effective and allows us to join up the dots for the fund of funds administration process. We recognise that funds of funds don’t operate on their own, and by connecting them seamlessly to their service providers, we can significantly enhance their own deliverables to their clients.”
M.A.T. Share also has significant advantages as a risk management application, but at the same time has been designed to be adaptable to the various risk management platforms that funds of hedge funds have been developing. In particular, it offers solid deliverables for funds seeking to provide more transparency to their clients, or wishing to track liquidity risk more accurately across their portfolios.

“We are talking here about providing a precise liquidity picture,” says Shastri. “Everyone is concerned about managing tail risk, but we can provide a much more efficient information set needed to understand liquidity elements.” This includes real and hypothetical scenarios, readily available at the touch of a button.

Accruing to this, of course, is the enhanced client reporting and communication advantages M.A.T. Share can offer the fund of funds.

“We’re living in an environment now where efficient and transparent client reporting can make the difference between keeping assets and facing a redemption notice,” explains Vaughan Williams. “Maintaining client confidence is essential, and having a tool which can generate customised reports with reassuring levels of detail, including liquidity profiling, will go a long way towards maintaining client confidence.”

Comada’s offering now extends to limited partnership structures and private equity funds. The technology firm’s management team, which has a long track record in the fund services business, intends to keep M.A.T.ware as scalable as possible. This makes it of value to the small fund of funds operation, as in the case of the award winning M.A.T. Share offering, as well as to the large fund administrator or custodian, where the adaptability and scalability of M.A.T.ware – the DNA of the M.A.T. Share – can add value.

“Scalability is key,” says Vaughan Williams. “You need to be able to operate with transaction capable architecture that will allow you to manage growth and deliver efficiencies in different areas of your business when needed. The business logic required to do this also needs to be able to digest and manage vast amounts of data, making it useful simultaneously and dynamically throughout your entire business. Getting a proper picture of this information is critical if you are going to stay on top of both operational and portfolio risk.”

The future of financial technology for the fund of hedge funds market requires systems that can deliver portfolio managers everything they require, be that ‘what if’ scenarios, liquidity-driven analysis, real-time cash flow, or electronic trade confirmation from a custodian. M.A.T. Share can deliver an unprecedented level of risk transparency: managers can see their liquidity risk clearly, they can assess risk using a variety of different parameters based on what is actually in their portfolio today, as well as running scenarios based on what they might want to add or change. Comada understands that some funds use very different approaches to risk analysis, but is confident that its tool box can be adapted to most of the analytical approaches currently being used.

“We have the ability to integrate into the standard analytical process; this allows the front end to run seamless and efficiently,” explains Vaughan Williams. “This is the way the industry is starting to specialise, using different types of liquidity and exposure risk analysis. We believe M.A.T. Share can add significantly to the analysis that funds of funds are already doing, providing them with more accurate and additional levels of data on a dynamic basis. We think they’ll be impressed with what they see.”

Building the dynamic funds environment
Comada’s development team cannot have reached the point where its technology is winning increasing acceptance in the hedge funds industry without a fundamental understanding of the hedge funds industry, and particularly what is required to deliver efficient straight through processing capabilities. Comada’s products serve as the link between various parties in the processing environment, and it can leverage these for the benefit of its customers. It has focused much of its development activities on building a dynamic environment that can keep pace with the increasing demands of the fund of hedge funds industry and its investor base.

Comada’s technology is based on the latest connectivity processes, its aim being to deliver web-based functionality to fund of funds users via Windows Environment. It employs ASP .NET technology to enhance integration, both within a business and with counterparties externally.

M.A.T.-based products can be managed either as a hosted solution, or run internally as part of a firm’s existing systems, as has been the case with some of the larger banks and fund managers that have made use of it. This also allows M.A.T.ware-based products to be deployed quickly and cost-effectively, and makes M.A.T. Share an offering that can be readily rolled out globally should an organisation desire to do so.

“We’ve been working around hedge funds and their service providers for decades,” says Vaughan Williams. “The challenges funds of funds face today, both operationally and from a portfolio risk perspective, are not new to us. We wanted to be able to deliver a solution to funds of hedge funds which they would find adds very real value to the way they run their businesses on a day-to-day level. This means a new, and dare I say it, exciting approach to data management that drills down into a highly granular level of detail that many hedge fund professionals will not have seen before. Ultimately, this is where the industry is going, and it needs solutions like M.A.T. Share to get there.”

About Comada
Comada was founded in 2004 to develop technology solutions for funds of funds, administrators and custodians, particularly in the alternative investments space. Its core team has an extensive track record in banking, fund management and administration. Its development and technology support teams work on a global basis with some of the largest firms in the fund of hedge funds services industry.

Comada’s raison d’etre has always been to reduce many of the inefficiencies that have existed historically in the back and middle office hedge funds environment by designing easily scalable and deliverable solutions that will help funds and their counterparties to manage risk and communicate more effectively with each other. It has done this by creating dynamic products that draw on the input of various users to create a larger and more effective end offering, one that cuts down on human error while delivering the highly scalable advantages that are conferred by increased automation.

The three ‘Ds’ of separation eluding technology integration

Article published in AIMA Journal, Autumn 2008, by Rupert Vaughan Williams, Comada.

The three ‘Ds’ currently playing a large role in the STP conundrum in today’s fund of funds businesses are:

  • Duplication
  • Data
  • Documentation

They have a lot to do with the specific technology risks some alternative investment firms are running; addressing the challenges these ‘Ds’ pose will help funds of funds immeasurably, both in terms of cost savings achieved and in overall operational efficiencies.

Let us start with Duplication (and its surly cousin Error): Both are an ongoing bane for funds of hedge funds that find they cannot synchronise pricing and trades as a result of both duplication and error. Fund managers are faced with a need to reconcile actual positions and performance, received from managers’ transfer agents, administrators and custodians – data which can then allow them to analyse performance/risk and report accurately to their investors. It is a goal that is hard to achieve without a serious re-think of IT strategy. Confirmed details of prices from managers, administrators, and even a sub-adviser, need to be improved to avoid creating reams of unnecessary work.

This brings us to our second ‘D’: Data.

Although the industry has changed over the last ten years, in terms of the size of the assets under management and the scale of investors participating in hedge fund type investments, much in the way of pricing and data management has not. Infrastructure which might have been considered adequate in 1998 does not really meet the grade today.

This is probably true of many areas of technology (who fancies the prospects of the Sony mini disk these days?). However, given the influence that institutions are having in shaping the way hedge funds manage their operations, funds of funds will need to seriously address the systems they have in place at the moment. The point here is, that in many cases the commitment to invest in infrastructure has been sadly lacking.

Firms must now consider the way they are managing transaction-level data within their businesses. This should take into consideration a wide variety of factors beyond simply pricing data i.e. due diligence, risk assessment and monitoring, lock-ups and gates and even tail risk, as well as charges and other fund parameters. Such information should be readily available and actionable but the unstructured tools still being employed by hedge funds, coupled with the increased complexity and illiquidity of underlying portfolios, means that it is hard to track down.

Funds of funds need to balance the benefits of operating solely with third party data, compared with managing their own transaction-based data internally. The latter solution would allow more effective modelling and risk management, as well as letting the portfolio managers make an informed comparison with third party data resources. As always, integrating these different data sources still means addressing the way data is managed in-house.

Funds of funds are also waking up to the fact that proprietary data and third party data are not the same thing. As many hedge funds start to adopt a liquidity profile that more accurately reflects private equity vehicles, funds of funds have to formalise liquidity management and risk procedures. This includes an ongoing analysis of redemption options and an awareness that these can change with the markets, as we saw last summer.

Hedge funds, by their very nature, are not liquid securities and essentially operate as private placements. One may be in for a disappointment if approaching hedge fund portfolios within the IT parameters of more conventional securities.

Managers need the peculiarities of the various funds they have exposure to at their fingertips, including the investment structure, the explanatory memoranda and the costs and terms that might be associated with accessing and redeeming units. They need a snapshot of those liquidity and cost variables but how does one get it in a scalable manner?

This brings us to the third of our ‘Ds’: Documentation. For a fund of funds, portfolio managers need to be able to retrieve due diligence and other associated documentation quickly and logically, in an electronic format. The correct management and availability of documentation on an ongoing basis, sometimes across multiple offices, is critical in helping funds to stay on top of liquidity risk. Various IT applications are available to help achieve this but some are more suitable than others. A tailored approach to document management that addresses the unique requirements of funds of funds managers, seems the most suitable.

ASP Delivery
It is obvious why the ASP delivery model has become so popular with IT providers for the investment management industry. Remotely-hosted technology is easier to mesh with a highly robust infrastructure profile, easier to maintain and it can interface smoothly with disaster-recovery protocols. The ASP approach has the added benefit of not requiring the installation of masses of new hardware in an otherwise lean investment management operations environment. It is also cheaper. Funds of funds are, after all, in the business of investment management, not technology development. The cost of developing and maintaining in-house solutions can be astronomical, affordable only if you are an investment bank or custodian with a large infrastructure but not otherwise.

For an industry that has traditionally outsourced virtually all its key components from accounting and custody to fundraising, the step to outsourcing its technology should, conceptually, be straightforward. What should make this kind of decision even easier is the ability to use an ASP solution, even better if it is web-based. If there was ever a single solution developed to help integrate a fragmented industry, the use of browser based applications is the one.

An ASP solution is also readily scalable and software can be easily updated remotely by the provider, as and when the fund manager’s requirements change. Firms that are using multiple offices can ensure that the technology is readily deployable across time zones and continents.

Integration: It is achievable
The morass of conflicting data that CIOs of funds of funds can face need not be a problem. A single, integrated ASP-hosted system can ensure that the data in use in-house is the right data, it is updated, it is accurate and it is readily accessible, whether sitting in your office in London or with a client in Jakarta. Real and accurate valuations, exposure and analyses are now more important than ever in the reporting process.

Apart from levering proprietary data out of the legacy silos it has probably been collecting in over the years, established firms will also be grappling with scalability issues as they get bigger, make more hires and open new offices. For example, we are seeing many major funds of funds opening new offices and expanding their operations in Asia. This relates partly to an appetite for increased allocations to managers in the region and partly to a need to service increasing numbers of cash-rich Asian customers. For increasingly global businesses, a single, harmonised data-management system is needed, so that fund of funds managers can make informed decisions, using real data, much of it proprietary.

This is not rocket science. It does require careful thought as to how growing businesses formalise their data management processes. It does not require building systems from scratch. However, it does need a revision of systems that might have grown organically and which might be fragmented or which might not have evolved as the fund management business has grown. As a consequence, operational risk is being created unwittingly through the failure to source appropriate data. Worse still, it is leading to the making of decisions that are based on inaccurate data. It also means that funds may end up reporting inaccurately to investors – a situation that opens up a whole new can of regulatory worms.

The ASP model is also more robust from a security perspective. Internally-hosted systems, as some major quant funds will attest, can require a huge investment in personnel and infrastructure, in order to ensure security requirements are addressed. It can take months, even years in some cases, for institutional-grade IT security measures to be properly implemented on a firm-wide basis. With ASP-delivered systems, managers can be up and running in a matter of weeks, safe in the knowledge that much of the mission-critical software is being hosted remotely in highly secure locations.

ASP-delivered software can be completely outsourced to an IT partner, or can be installed within the investment management entity to varying degrees. For funds of funds, the key is getting this balance right and finding the formula which matches one’s size and operational expectations. Luckily, many ASP solutions can be upgraded gradually over time. It is important that the solution chosen is one that the whole business can make use of, is easy to use and can run on multiple applications.

Painting a clearer picture: Funds of funds are in search of clarity in their cash flow

Article published in The Hedge Fund Journal, December 2007, written by Dave Shastri, Head of Business Development, Comada

This summer’s credit crunch was a wake-up call for many funds caught on the wrong end of the liquidity curve. Investors had been adapting to low volatility in the market and had sought wider alternative strategies and employed leverage to improve portfolio composition and returns. Much of this pain was caused by funds of hedge funds (FoHFs) suffering from an expanding duration gap: what they owned was longer-dated than what they owed. It was a classic problem.

The three major operational issues that were exposed for FoHF managers were lock-ups, hold backs, and caveats in the structures of underlying funds. All are in need of being addressed going forwards, if liquidity is to be more precisely managed in future bouts of market turbulence.

Lock ups are getting longer
Lock-ups have become more of an issue as market opportunities have evolved and funds have migrated towards more esoteric strategies. This has been the prime driver behind the duration gap issues FoHFs have had to grapple with going into the autumn. The market has changed under their feet. Underlying managers are now involved in longer-dated deals, including private equity style investments. This has led to longer lock-ups for their investors.

Hold Backs
A common practice amongst many hedge funds is to hold back 5-10% on withdrawal of the investor’s assets until completion of the annual audit. This can mean a wait of up to 18 months if the redemption request is submitted early in the financial year. For FoHFs, this can also create difficulties if they are in turn seeking to meet their own investor redemptions. The large, institutional investors that are now accessing the hedge funds marketplace via FoHFs tend to treat the FoHFs as just another asset class: they are less inclined to be patient with managers on the strength of a long-term relationship.

Negative performance will quickly raise questions and result in redemption requests driving redemptions to underlying hedge funds. While the Hold Back is technically no longer at risk in terms of the funds’ performance, the monies are also no longer performing and do not accrue interest.

Fund structures
The caveats that have been sewn into fund structures as a provision by managers to control liquidity and lock down assets, have come under increased scrutiny recently. This is being discussed at both the industry and regulatory level, so we may see changes in practice going forwards. However, some of these restrictions have been in place for a long time in the case of seasoned managers, and they are rarely invoked.

One of these caveats is the ‘side pocket’, a mechanism used by many funds increasingly to segregate certain investments in the portfolio and apply a different valuation mechanism from the rest of the holdings. Side pockets are helpful in expanding the investment horizon and allocating these to the right investors. So FoHFs and other investors can find themselves owning several different holdings from the single investment they made. Again, this is a fairly dormant feature that has been available to most hedge funds but one which has been used increasingly as new opportunities have been developed by managers. The side pocket creates a new liquidity profile to the initial investment, so tracking this separately is essential to fully managing the portfolio.

Another of these caveats is the ‘gate’. Gates essentially limit how open the door of the fund is to redemptions occurring at the same time. Of course the original purpose of this was to support an orderly sale of securities by the manager so that the remaining investors are not disadvantaged by selling these. The particular difficulty with gates is that the FoHF cannot be certain when the door will be closed because it can be relative to other investors.

A number of FoHFs have been receiving new investment through structured products, with the additional leverage this implies, but these structures have also exacerbated FoHFs’ sensitivity to lock-ups and hold backs and other caveats in the hedge fund itself such as side pockets and gates. As structuring institutions sought to reduce leverage in the summer, this caused some FoHFs into cascading redemptions which are difficult to implement.

All of the above has led to a need on the part of FoHFs to build a more accurate internal picture of their liquidity position in an effort to avoid any nasty surprises. A complete statement of time-to-cash requires painstaking analysis of every investment held, and when that investment can be redeemed. This has to take into consideration the lock-ups and their optionality and associated cost (generally referred to as ‘hard’ and ‘soft’ lock-ups terms). FoHFs also need to consider the redemption fees quoted by those underlying managers which maintain a redemption penalty regime and gates which may be imposed at fund and investor level.

With hold backs, FoHFs need clarity in order to be able to manage tail risk and the cash flows associated with the tailing off of the redemption payment from the manager. Tools that can accurately track every outstanding payment can be helpful here. It boils down to being able to build a daily picture of who owes the fund what, how quickly that cash will arrive and the supporting of pro-active management.

A changing culture?
The culture within the FoHFs’ business is changing, requiring CIOs to stay on top of the trading aspects of holdings and positions in a way they weren’t required to do five years ago. This includes being able to break down portfolios according to liquidity and strategy concentration terms, and treating underlying funds more like securities in a traditional investment portfolio. FoHFs need to keep track of their options, and communicate these more efficiently to investors when required. Up until recently, that great crutch of financial technology, the Excel spreadsheed, has been equal to most of the tasks imposed on it within the FoHFs environment, but it is starting to show the strain. It is not able to robustly capture the depth of information CIOs require consistently. Analysts can take days at the moment to compile an accurate calculation using Excel, yet if internal data is managed correctly, this could be done at the touch of a button.

When addressing structured products valuations FoHFs need to be aware of their gross and net exposure. What will be the effect of any losses on these structures? It may seem trite, but being able to manage such risk management data at the touch of a button challenges the capabilities of Excel. FoHFs that are being developed through structured products will need to be particularly aware of any losses they have suffered, as this will have to be reported in detail to the structuring institution. This could require the FoHF to sell some of its holdings, and therefore be ideally ready in advance with the details of which managers it can quickly redeem against. The key here is having the technology that can provide the CIO with a picture of where his portfolio is, and options on how he can liquidate sufficient capital to meet the investor demand, with in addition, control over the impact on the compositions of the overall portfolio. It requires aggregating accurate data along with all the terms and conditions surrounding that investment in order to be able to manage internal liquidity on a day by day basis if needed.

Conclusion
The summer’s market turbulence has been a useful lesson in liquidity management for the FoHF industry. As institutional capital continues to flow into hedge funds, and the demand for structured products linked to FoHFs carries on apace, we are expecting many leading FoHFs will be addressing the way they manage their internal portfolio management data to take account of the ease – or lack thereof – of redemptions within their underlying portfolios. This will be essential if they are to be prepared to meet any further bouts of turbulence with a solid liquidity management framework, a framework which will, at the same time, help them to build investor confidence.

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