Simplifying Data Management for a Multi-Strategy, Multi-Fund Hedge Fund
A $7 billion multi-strategy and multi Special Investment Vehicle (SIV) hedge-fund client struggled for years to e ectively manage the day to day complexities of their reference data needs. They were constantly faced with limited availability to real time data and inconsistent data quality. Additionlly, the burden of maintaining an ever expanding security master was putting a strain on IT support while security redundancies were leading to increased costs from their market data vendors.
Background
The hedge fund client manages a group of hedge funds across different strategies and Special Investment Vehicles (SIV’s) that were customized for each client in order to provide diversification across multiple fund strategies and minimize exposure to one specific investment dimension such as currency, region, industry, or security type.
Problem
On a daily basis, the hedge fund client must maintain an in-house security master of over fifty thousand financial instruments across many security types: equities, warrants, corporate bonds, MBS, ABS, options, futures, IRS, CDS, CDOs and a variety of exotic options. Because of the weak data model of the in-house security master, the hedge fund client struggled with two major issues:
- Valuation of the complex structure of exotic derivatives such CDO’s and IRS’s.
- Valuation of the underlying securities and/or options of the reference derivatives.
Solution
Data Agent deployed HF-Suite combining the clients reference data needs into a new security master allowing the client to utilize the many capabilities inherent in the Data Mart. Additionally, the using Data Analytics the client was able to calculate complex valuations on its derivative products using their existing proprietary models. HF-Suite provided specific functionality “out of the box” that allowed the client to solve their nagging data problem and to lower their cost of managing their data. The client took advantage of the following capabilities of HF-Suite:
- A recursive underlying instrument structure up to a depth of 10 or more levels.
- With the recursive capabilities of the Data Cube, the client can now run valuation automatically without additional development for new instrument and security types.
- Flexible classification of general ledger entries for partnership accounting across the ownership structure of Special Investment Vehicles.
- Dynamic IRR calculation for any investment and SIV accounting entity.
Problem
As the client acquired more customers, it became very difficult to keep track of securities across different hedge funds. Duplicate securities were becoming a problem. The cost of pricing the duplicate securities across multiple vendors had quickly reached into a six-figure monthly cost.
Solution
Data Mart provided the client with a hierarchical business rule based set of security master reference checks that span across multiple levels of underlying instruments, reference data, and referenced securities to prevent the insertion of duplicate securities. Data Mart also included built-in automated business rules to determine whether a duplicate security exists and combine the duplicate security across all different investment data tables.
Problem
Replacing a security master is a lengthy process requiring the replacement of existing data loads. The security analytics and pricing data for each security must be sent to external vendors and the results generated must be downloaded back into the security master database.
Solution
HF-Suite’s Data Integration component provided the client with data adapters for many market data and reference data vendors including Bloomberg, Reuters, Factset, RiskMetrics, S&P, MSCI etc. HF-Suite allowed the client to take advantage of the Microsoft Business Intelligence platform and Integration Services, which made it simple to build additional data adapters.
Problem
One of the problems of replacing an existing security master is that over 100 reports have been built on top the in-house security master database.
Solution
Data Agent HF-Suite provides 20+ built-in reports to address operational and investment analysis requirements. In addition, the solution also provides virtual data views, which mimic the existing in-house security master data structure making it possible to use the client’s existing reports with the Data Agent Security Master without any modification.
