Northern Trust (Nasdaq: NTRS) has enhanced its offering to clients investing in hedge funds – including funds of hedge funds managers and direct institutional investors – with the launch of a new set of compliance monitoring capabilities that will enable clients to monitor their investments in real time according to their own investment guideline criteria.
Criteria can be created to monitor key aspects of holdings within hedge funds, such as: the level of portfolio diversification, liquidity risk in the fund, investment strategy and performance attribution. Benefits include increased automation, transparency and timeliness of information, enabling clients to assess portfolio investments more quickly and in more detail, and to identify areas where the portfolio is breaching guidelines so that action may be taken if necessary.
This is the latest enhancement for clients using Northern Trust’s Hedge Fund Monitor solution, which became available through financial applications company, youDevise Limited, in January 2008.
“As the global economic landscape continues to present challenges, investors in hedge funds need to demonstrate effective control and transparency over their portfolios in addition to a world-class governance and control-focused operating environment,” said Ian Headon, Northern Trust’s product manager for alternative asset administration.
“Our clients are telling us that the ability to measure liquidity and counterparty exposures in detail is of particular importance to them. With our newly enhanced Hedge Fund Monitor, investors in hedge funds can now manage exposure to individual institutions acting as prime-broker, custodian, administrator or credit provider for the hedge funds in a portfolio,” Headon said.
“Equally, they can now assess – quickly and effectively – key questions such as how much of their portfolio is invested in self-administered funds, emerging market strategies or cash.”
The core set of criteria under which assessments can be created include: • portfolio diversification and concentration • attribution and classification, e.g. investment strategy, counterparty exposure • liquidity limitations and parameters, e.g. setting a minimum limit to ensure that a certain proportion of a portfolio can be redeemed over a certain time period • counterparty concentration.
Peter Cherecwich, chief operating officer for Corporate and Institutional Services at Northern Trust, said, “This latest enhancement to the Northern Trust Hedge Fund Monitor tool is in line with our strategy of managing information for funds of hedge funds and other institutional investors with exposure to hedge funds, including liquidity and counterparty concentration, and enhanced levels of automation and transparency. It follows our other recent Hedge Fund Monitor development that enables investment managers to assess the impact of gates on their liquidity in real time, and demonstrates our continued commitment to supporting our fund administration clients, particularly in challenging economic times.”
Northern Trust has a growing hedge fund and fund of hedge funds servicing business, with assets under administration of US$75.5 billion as of June 30, 2009, an increase of 54 percent over the prior year. Northern Trust services nearly 300 hedge funds worldwide, as of June 2009, and in the previous 12 months provided global operations services to more than 120 new fund launches and transitions.
