Asset Management Blog Development

Complex Multi-Strategy Hedge Fund Case Study

Defining the Problem of Data Management

Market volatility, big data mining for new investment ideas, regulation and an endless list of middle and back-office responsibilities are forcing funds to take a long hard look at their data management strategy. 

First, there is a growing use of big data to source and mine new sources of alpha generating ideas and to measure investor sentiment that can direct asset prices. Data management is also being driven by the investor and regulator-driven demand for greater transparency and risk awareness. Robust data management – using data warehousing technology that takes data from multiple diverse sources and places them inside a central repository is clearly the proven answer.

Second, administrators are performing a variety of middle and back-office duties, including working closely with Hedge Fund managers during the launch and set-up of new funds; providing monthly or quarterly accounting of investor contributions and withdrawals and computing profit and losses for the accounting period; monitoring daily and weekly cash-flow reporting; preparing semi-annual and annual reports for fund investors

Third, cloud adoption is driving success in this new era of transparency to comply with increasing regulations and operational risk. It makes it possible for all dots to be joined for compliance purposes across diverse, disconnected, and siloed internal regulatory systems. The cloud provides the flexibility and scalability funds require, while satisfying their security and regulatory concerns. 

 

The Evolution of Data Management as a Competitive Advantage for Funds

The new and evolving data warehouse system is equivalent to a hub and spoke system where the data warehouse is the hub and the various data inputs (information or fees) are the spokes. The advantage of this hub and spoke system is the ability for managers to collect data from disparate sources, centralize the data and then analyze it to find new investment opportunities.

Data management is an integral part of hedge funds, especially ones using quantitative and big data analytics as part of their investment strategies. According to a recent Ernst & Young survey, nearly 50% of hedge fund managers are using non-traditional data like social media data, private company data, supply chain, and other alternative data sources to enhance their investment strategies.

The opportunity for hedge fund and private equity managers today necessitates they meet the investor demand for diversified fund allocations. The challenge is having a technology infrastructure that enables them to support that demand efficiently and profitably.

 

The Leading-Edge Solution is Collimate & RyanEyes

RyanEyes’ Collimate is a data warehouse solution that provides hedge funds and sell-side firms transparency, automation, and actionable insights. Collimate integrates perfectly with RyanEyes software to deliver our clients a refreshed, intelligent level of information across the front, middle and back office including their research, trading, accounting, and compliance solutions. While many data warehouses and analytics solutions are cumbersome, require training, and difficult to use, Collimate provides clients with simplicity from throughout the solution.

Based on a proprietary platform that can normalize, aggregate, and enrich your data across the enterprise. Ryan Eyes replaces pain staking, manual tasks leveraging intelligent automation throughout the operations of the firm.

 

How Complex Multi-Strategy Hedge Fund Leveraged Collimate & RyanEyes to Create a Next Generation Data Management Solution

Complex Multi-Strategy Hedge Fund, a leading fund in the structured credit investment space was benefitting from RyanEyes software by having an integrated Data Warehouse and Trading System. Further, Complex Multi-Strategy Hedge Fund was capitalizing on the “watching” technology inherent in RyanEyes. Not only were operations notified of breaks, but also the response to those breaks. RyanEyes provided links to commonly used systems, email, trading and excel to capture how effective fund operations were at catching mistakes.

In the front-office, investment managers can leverage a data warehouse to perform real-time pricing, P/L calculations, and what-if scenario analysis across the trading day in real-time. From the middle-back-office perspective, risk managers can use the private Cloud for valuation and risk management calculation, including VAR and credit risk across all of the desks.

Hedge funds can perform both batch and real-time calculations in their preferred environment. These calculations could include quantitative analytics, investment strategies, back testing, risk analysis, P/L calculations, portfolio NAV calculations, and anything reporting related. With RyanEyes, our hedge fund clients can commission the private Cloud resources on an as-needed basis, while retaining control over their data and security. 

Data warehouses help asset managers to reconcile their various data inputs (especially with regard to multi-custodial relationships). Managers need to make sure their data systems are ready to handle SEC requests for information, SEC audits and most importantly investor requests for data.

Regulation is going to drive what “transparency” means.  Old systems were not designed for the way that business is now done – data warehouses now allow managers to bring all information into a central repository and helps the manager to have a holistic view of their portfolios.  These data warehouses can also help ease the regulatory burden by speeding up the time it takes to search and categorize data.

The benefit of RyanEyes Collimate is that it provides clients the ability to leverage the raw data in their database or intelligence through the RyanEyes solution to more easily manage and monitor risk, compliance, transactions, and tax issues and obligations.

The real value is that RyanEyes delivers the information seamlessly, securely, quickly, and graphically, in an easy-to-read single pane-of-glass experience. Fund managers eliminate manual spreadsheet entry, constant data tracking, onerous report writing and concerns about integrating multiple data sources.

 

Complex Multi-Strategy Hedge Fund Cut Costs and Administrative Errors by Leveraging a Data Warehouse Solution

For years hedge funds have lost millions of dollars in incorrect communications and bad data delivered to third parties as well as the time and effort of operations, IT and accounting in tracking those problems. Complexity breeds errors and those errors can affect the bottom line of funds and investors. 

Firms require a consistent, holistic view across all stakeholders; data warehouse solutions have to evolve and have the ability to present insights in real-time. Without the insights firms are likely to make poor decisions because of poor data management solutions. Firms are evolving from storing data such as equity positions, performance, and history across data points in separate places. Firms are leveraging RPA or Robotic Process Automation saving administrators dozens of hours by automating tasks that historically required manual time-consuming collection and analysis of data using e-mail and spreadsheets to track processes.

The critical variables in an asset management data warehouse for fund managers are position, performance, risk, and transaction. Asset managers had unenviable task of assembling this data from a variety of intelligence sources to generate the actual calculations, insights, and reports to assess investment opportunities. To make matters worse, managers had to cobble together incompatible tools, use a variety of applications and in most cases had single-use solutions that would only assist with risk or performance; but rarely both.
Making investment decisions with current, accurate data is one of the numerous benefits of a data warehouse. A cloud-based, encrypted, mobile enabled warehouse allows fund managers to evaluate investment opportunities using a variety of variables in order to select the right investments accurately and efficiently.

 

How Can RyanEyes Empower Firms to Cut Costs?

We ask Ted Ryan, President of RyanEyes to discuss exactly how RyanEyes software helps Hedge Funds and Private Equity Funds streamline operations and cut costs. Ted explained, “fund administrators and folks in back-office positions are responsible for executing hundreds or even thousands of jobs annually; based on my 20 years or so working with funds each job can take between 3 to 5 minutes on average. Essentially, these professionals are manually handling their calculations, forecasts, compliance requests and of course dozens of other jobs in excel.”

“RyanEyes handles these jobs automatically and transparently so the average time per job is reduced to essentially 0 from 3-5 minutes and fund administrators and other back-office folks have transparency through the software.”

Measuring Value

Measuring Value can be tricky in any software system, except RyanEyes where a full history of events is logged, how quickly issues are resolved and how much time and money has been freed up for the workers to do monitor and address rather than click, stick files somewhere and send.

Below is representative sample of the jobs of just one year one firm ran over 250,000 jobs through RyanEyes. Some jobs are simple and do one thing. Other jobs are more complex. In one particular job, RyanEyes applies macros in an excel file that saves on average 1 to 2 minutes. These jobs ran over 100,000 times. Saving approximately 150,000 minutes, 2500 hours. The equivalent of 1.25 resources for a full year.

 

Below is table that illustrates Job or “Task Types” that RyanEyes performs and number of times that it performs them.

 

For example, one of our very favorite clients, ran 1,350 jobs through RyanEyes in just the first 3 quarters of the year. Let’s say that each FTP, import, or tax lot margin job takes 3 minutes; that’s nearly 100 hours of processing time that the firm saved.  

“We have been using Ryan Eyes for the last 7 years and it has become an essential part of our workflow. With hundreds of jobs and tasks embedded in our workflow, it seamlessly, integrates automated and manual tasks and provides internal reporting that is core to our firm.”

Chris Hughes, Complex Multi-Strategy Hedge Fund Capital

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