The hedge fund and investment management industry has seen many radical changes during the last year, including the consolidation (or elimination) of the large prime brokerage firms. Because of these events many funds have moved to a multi-prime broker model instead of the more traditional single prime broker model. There are obviously many advantages to going to a multi-prime broker model (including the reduction of prime broker bankruptcy risks), but there are also many logistical issues which need to be considered.
Start up hedge funds which wish to use a multi-prime broker approach should discuss this option with their hedge fund attorney as well as their hedge fund administrator which will be able to help with the back end aggregation of the prime brokerage fees. Additionally, managers may want to seek a software solution like the one from Advent described in the press release below.
Other hedge fund law articles related to this post and the press release below:
Advent Assembles Experts to Advise Hedge Funds on Multi-Prime Strategies
Panel Discussions Stress Internal Consolidation Infrastructure as Key to Success
SAN FRANCISCO – December 15, 2008 – Advent Software, Inc. (NASDAQ: ADVS), a leading provider of software and services to the investment management industry, announced today that it hosted a series of events to educate hedge fund managers on the effective implementation of multiple prime broker or “multi-prime” strategies. Over 200 alternative asset industry participants took part in the events, which included panel discussions in New York and London in late November, as well as an online webinar.
Advent presented these events in response to increasing industry interest in the multi-prime approach. Funds of $1 billion or more often diversify their prime brokerage relationships, both to mitigate risk as well as to take advantage of specialized services and capabilities. Due to recent market conditions, funds as small as $100 million are looking at ways to mitigate risk through a multi-prime approach. The Advent events were designed to explain why more funds are moving to the multi-prime model and what it requires in the way of infrastructure and technology.
According to event panelists with multi-prime experience, the critical component for success is the ability to aggregate data from multiple sources and different formats into a single reporting platform. Advent’s Geneva® global portfolio management and accounting platform is an example of a solution that can help firms make the transition to a multi-prime environment, with consolidated reporting across all asset classes and counterparties.
“The response to these events and our webinar shows that fund managers are eager to hear about the multi-prime model,” said Chris Momsen, Senior Vice President and Co-Head of Global Accounts at Advent, who moderated the live discussions. “We were fortunate to bring together some high-level industry experts to provide valuable insights and advice. And with Geneva®, Advent can also make it easier for firms to adopt a multi-prime approach, a model which ultimately enables firms to be more efficient.”
Momsen cited the example of a multi-billion dollar global hedge fund that recently implemented Geneva®. “Before, they had one employee dedicated full time to reconciling margin account balances across multiple prime brokers, and it took four employees to keep data in synch between the front-, middle-, and back-office systems,” he said. “Now, with Geneva®, they’ve eliminated the data latency issues that arise from having data scattered among different systems, and now those four employees are able to focus on more value added tasks.”
Geneva® is specifically designed for managing complex global fund strategies involving multiple asset classes and currencies. It is the core portfolio management solution for more than 175 firms worldwide, including global asset managers, hedge funds, fund administrators and prime brokers.
Geneva®, a global investment management and accounting platform, is a proven solution for asset managers, hedge funds, fund administrators, prime brokers, and mutual funds that require a high level of operational efficiency and easy access to real time data. Geneva® offers comprehensive instrument coverage, full financial general ledger, and industry-standard integration tools to enable firms to manage complex investment vehicles, multiple investment strategies, and tiered fund structures. For more information on Geneva®, click here.
Advent Software, Inc. (www.advent.com), a global firm, has provided trusted solutions to the world’s leading financial professionals since 1983. Firms in 60 countries use Advent technology. Advent’s quality software, data, services and tools enable financial professionals to improve service and communication to their clients, allowing them to grow their business while controlling costs. Advent is the only financial services software company to be awarded the Service Capability and Performance certification for being a world-class support organization.
The Advent logo, Advent Software and Geneva are registered trademarks of Advent Software, Inc. All other company names or marks mentioned herein are those of their respective owners.