Hedge Fund Management Software Desired Features

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By Adriana Noton

Efficient hedge fund management software will not just automate specific functions, but also integrate all the front, back and middle office functions into a single seamless system with the general ledger as the core. It will capture trades, integrate investor accounting with portfolio management as an end-to-end solution, and update data in real-time. But the platform's full potential can only be realized if it can be used with a range of global instruments and derivative products.

Let's take a look at the features an investment manager would want in this system. In the front office, it will provide real-time monitoring and order management. Scenario analysis tools and FIX connectivity to interface with brokers are definitely on the desired features list, and so are hedging overlays and modeling.

But in order to seriously justify the use of this system, it has to be able to handle every major currency and an array of instruments. The desired ones include fixed income types like asset backed securities, and others such as options and futures, swaps and bank debt, equity derivatives, etc. A single system that can do all this will spectacularly outperform similar funds where multiple systems or manual work are required.

The way it works is that a single data point of entry begins with trade capture. From here, the system updates every tool, function and report in real-time. It handles routing and order management. Reconciliation is an important feature, with complete automation for corporate actions like dividends, coupon payments and stock splits.

Full workflow automation all the way from trade execution interfaces to investor accounting allows the firm to take on more clients, higher trading volumes and additional products. A scalable system ensures that there are no additional overheads or staffing needs for this growth. Audit trails with pre and post-trade compliance are standard features expected in all hedge fund management software, regardless of who the provider is.

Reports are provided on a dashboard with real time updates and plugged in market data. Once the front and middle office finish processing trades, the data automatically flows into the general ledger. Every transaction impacts the ledger, so it is the best place for warehousing data that can be used for generating reports.

More reports and filtering options will allow the investment manager to minimize risks with drilled-down exposure reporting and performance attribution categorized by strategy, funds, sector and trader. Realized, unrealized and net P&L should be visible for the day in question, month to date and year to date, not to mention open to date. The Profit & Loss data is automatically updated as the markets fluctuate and positions change.

Hedge fund management software is not meant to replace investment managers. It will, however, be irreplaceable once fund managers get used to it. There is no other way to achieve the same scalability and high growth rate without incurring additional administrative expenses. With the recent availability of these packages on hosted SaaS platforms, even the initial upfront investment required for buying, installing and maintaining the package and the required IT hardware has been eliminated.

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