Hedge Fund Intelligence New standards in Investor Transparency | Page 16

NEW STANDARDS IN INVESTOR TRANSPARENCY
data management – which aid faster and better investment decision-making – on
the one hand, and enhanced alpha above and beyond the strategy-specific alpha
generation in the portfolio,” he says.
For example, says Sanchez, the general consensus is that Dodd-Frank and EMIR
guidelines will lead to a requirement for market participants to hold higher levels
of eligible collateral and access to more secure short-term liquidity.
“This is leading to a greater emphasis on collateral, liquidity and funding optimisation, more timely rebalancing based on exposure, and FX cash overlay transparency on a firm-wide basis,” says Sanchez. “These are all examples of areas where
enhanced transparency and controls can add alpha-generating performance to
the bottom line.”
Beyond investors themselves, there are a number of clear winners to have emerged
as a result of the broader move towards transparency. One of these is managed
accounts platforms, which are generally seen as having revolutionised transparency standards in the hedge fund universe. “The best way to address the issue of
transparency is undoubtedly through managed accounts,” says Fawcett at Permal.
“I don’t think there’s any evidence that because you have a managed account,
information leaks out to the market and your positions are compromised.”
The other major winner from the industry’s increasingly strident calls for pellucid reporting practices is administrators in general, and the larger, more global
hedge fund servicers in particular. The fastest-growing of these, says Sanchez, is
Northern Trust, which has enjoyed something of a turbocharged expansion since
its acquisition in 2011 of Omnium, a hedge fund administrator which at the time
had some $30 billion of hedge fund assets under administration as well as the
$40 billion Lehman Brothers Estate.
In the three-year period since then, says Sanchez, Northern Trust has worked
with Lehman to wind down the estate, while at the same time its client base has
grown three-fold and its hedge fund assets under administration have more than
tripled. By year-end, Sanchez reports, the total increase in administration assets
will be more than eight-fold, once several key conversions are completed. “Our
growth has been global, because we have significant operations in Europe and
Hong Kong, but the predominant growth has been in the US,” he says.
Growth, says Sanchez, has been qualitative as well as quantitative. “Our capabilities
in technology, which are well-known for being among the best, and combined with
16 Special Report June 2014

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