Automated FoHF reporting system aids operational risk analysis

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LONDON - youDevise has introduced a series of front-office analytic reports that can be generated on demand by its hedge fund information provider (HIP) offering fund of hedge fund (FoHF) portfolio management a new level of automation. The reports enable FoHF portfolio managers quickly to understand their exposure to specific hedge funds, strategies or regions, and to plan trades that respond to market conditions.

HIP claims to be the first online portfolio management system used by FoHFs and their administrators, such as Northern Trust, to track daily position information.

The front-office reports feature technology to deal with issues raised by the recent Madoff scandal. Users can create their own breakdown categories to analyse allocations based on relevant parameter such as manager, fee structure, administrator or redemption terms, according to Richard Koppel, managing director of youDevise

"The HIP can provide a company wide view, allowing fund managers to identify concentrations or pockets of risk they must address," he said.

The HIP first offered automation for FoHF portfolio management in 2006 by providing a stable platform, using industry accepted and tested calculations to eliminate the need for spreadsheets that many FoHFs used to track their positions in underlying hedge fund investments.

Integrating the HIP with Northern Trust's accounting platform in 2008 provided FoHFs with daily online information, maintained by their administrator, detailing underlying hedge fund holdings, current value, performance, liquidity, and hedging.

The new front-office analyse all data in the HIP so that portfolio managers can review historical performance of underlying hedge fund investments, understand their investment allocations in depth, and determine present and future access to liquidity.

Designed with the help of leading FoHF managers, the reports can be exported to Excel and can be printed and used in presentations. They are available to standalone HIP subscribers, in addition to Northern Trust administrative and custodian clients.

While the can be used at a moment's notice, youDevise clients said the front-office reports are especially useful in the monthly investment meetings held by most FoHFs to review strategies and make trading decisions.

The HIP front-office reports summary can calculates a company's exposure to each hedge fund in which it invests and the exposure as a percentage of the total exposure to all the hedge funds in which it invests.

Cash projection displays committed cash transactions for a specific FoHF for any future period where such transactions have been entered into the HIP. Tracking known future cash transactions, such as redemptions already committed to investors or trades already committed to underlying hedge funds, is critical when monitoring liquidity and planning future cash requirements.

Portfolio performance analyses historical monthly, quarterly or annual portfolio performance for a FoHF's hedge fund investments.

Portfolio allocations analyses a FoHF's exposure to each hedge fund in which it invests and to categories such as strategies or regions. It also displays the hedge fund positions that comprise exposure in each category and the recent performance of each position.

Portfolio liquidity analyses a FoHF's liquidity profile. It shows redemption terms applicable to each hedge fund, including gating status, initial lock up period, redemption frequency and notice period. It can also calculate the number of days required to redeem each hedge fund position.