SmartStream takes Hedge Fund market by storm with Audit & Risk Control system
April 29, 2004
SmartStream, the global leader in Transaction Management solutions has been taking the Hedge Fund market by storm, signing multiple significant contracts with leading US Hedge Funds. In the last six months SmartStream has signed an additional four Hedge Fund clients to add to a prestigious list the company's already working with.
The Hedge Fund market has seen explosive growth over the last year and Hedge Funds of all sizes, as well as Funds of Funds and Fund Administration Outsourcers are turning to SmartStream, as a tier-one application vendor, for Audit & Risk Control solutions. “With ever increasing volumes and complexities of transactions occurring daily on trading desks, Hedge Funds in particular can be in a position where they expose themselves to unnecessary risk without proper Audit and Control systems in place,” said Lou Longhi, VP SmartStream Inc, “It is critical that an infrastructure be put into place where CFO’s, COO’s and Compliance Officers are given the confidence that their traders are presented with accurate security position and cash balance information.”
The strategies being traded by Hedge Funds are often complex, not only consisting of multiple products involving Cash, Securities and FX products but the funds themselves will be traded by multiple traders in high volumes. It is not uncommon for Audit & Control systems to have to cope with volumes in excess of 900,000 trades a day.
“This places huge demands on any Audit & Control system to be highly scalable. SmartStream’s TLM® solutions are unique in the market place in their scalability and flexibility, able to achieve unparalleled matching rates across Cash, Securities and FX which makes them perfectly suited for the Hedge Funds market.” continued Longhi.
With significant growth rates expected in the Hedge Fund community, firms are looking to leverage technology to increase efficiencies by reducing the dependencies on human intervention for processes such as reconciliation. To cope with this growth they are investing now in mission critical systems.
SmartStream has been able to offer a unique solution which delivers real-time position management integrated with exceptions processing for both Cash and Securities. “We have been working with several clients to help them reconcile their portfolio positions and transaction activity against the data provided by the prime brokers associated with their portfolios. This has usually involved the solution taking feeds from up to 10 prime brokers” explained Longhi.
Additionally, the SmartStream Audit & Control solution addresses the regulatory and reporting issues faced by the Hedge Funds. Although a long way from becoming law, security regulatory bodies, such as the SEC, are considering a proposal where hedge fund managers would be required to register as investment advisors. A move that would require the periodic review of the hedge funds’ book of records. With a concrete audit and control process in place the CFO can be confident that each fund is audited and reconciled accurately.
“We believe that this Hedge Fund sector is a market we already dominate and expect to become stronger in as we go forward. Few, if any Transaction Management solution providers, can claim to have the domain expertise that SmartStream has built up by working with Hedge Funds, Funds of Funds and Hedge Fund Administration Outsourcers ” states Longhi. He concludes “In the United States we’ve demonstrated time and time again our ability to outperform the competition from a functional and technological perspective. We are now taking our Hedge Fund Audit & Control solutions to markets in Europe and Asia Pac and fully expect to have the same market acceptance in those time zones.”