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Comada’s Q1 2016 release of M.A.T.ware delivers the latest technology and features

It has been standard procedure for Comada to add features to its releases to meet the challenges of real-time changing business parameters.  However we also appreciate that the system’s architecture must also keep pace with modern demands.  Our latesrelease delivers significant improvement in functionality combined with modernisation in the system architecture which brings its own immediate benefits.

A new technology framework  

As business moves to operate on a wide variety of platforms and yet remain secure, we have introduced a framework which supports the browsers that people now want.  This means that M.A.T.ware operates on Chrome and Safari as easily as Internet Explorer or indeed any number of secure browsers.  This means consistency in the presentation and interaction aiding in the ease of use.

Our new framework also works for users operating on tablets as it supports touch screen systems.  With  modern work running on a variety of devices to support remote working as well as in-office work and given M.A.T.ware’s private cloud-based solution, it’s completely in line with operating securely anywhere.

Multiple approval process 

M.A.T.ware is used by both large institutions with a significant number of users and smaller firms that have only a handful of users.  It’s been critical to users that their way of working including internal controls, is suited to their business scale.  M.A.T.ware’s core strength is based on its configurability  that enables clients to actively manage every day complex processing and reporting with ease. This configurability not only ensures their system is sized best for their business today, but also provides the necessary scalable framework required for the business changes ahead.

One such area is multiple approvals (commonly referred to as “four-eyes”).  M.A.T.ware has well-established multiple approval controls over the trade process.  However this release extends a universal feature that allows businesses to configure multiple approvals as needed over functions.  An immediately useful implementation of this is in Price and Performance Management where firms that desire internal controls over price discovery can implement them.  Of course up front controls including data validation and tolerance checks have long been in place but multiple approvals extends this for best practice.

Increased speed 

M.A.T.ware has always been characterized by its precise, dynamic valuation process.  Supporting onshore and offshore hedge funds, private equity partnerships and equities through a pricing evaluation model allows for no compromises.  In order to enhance speed, Comada has targeted this critical area with a highly optimized process that means getting this information instantaneously is managed and delivered consistently.  Ultimately we know users want to get the results rather than spend time on a system.

Out with the old

As technologies evolve we constantly upgrade M.A.T.ware – for this release we have moved to Microsoft’s newest .NET architecture version.  We have also removed and replaced older (which today may only be a few years old) technology.  It makes us able to build new features more efficiently and therefore respond to the business requirements of our clients.

Comada enhances security offering for hedge fund investors

Migration of servers to new high security platform will offer clients more flexibility in their operational choices.

Hamilton, BERMUDA, July 2012: Comada, the provider of transaction-driven software solutions for investors in hedge funds, has migrated its servers to a new next-generation data centre hosted by QuoVadis Services Limited. The new Infrastructure-As-A-Service (IaaS) platform will bring considerable advantages to Comada’s customer base, including users of Comada’s award-winning M.A.T.ware software.

The new platform has been built using the latest generation networking equipment, high speed SAN for data storage, and servers designed for high density CPU and memory. It enhances the levels of security Comada can now offer its clients, with options for either multi-tenant or dedicated infrastructure. The platform also supports Comada’s programme to offer clients more flexibility in the way they use Comada technology.

Said Rupert Vaughan Williams, co-founder of Comada: “Security is a key requirement for today’s fund managers and their investors. With QuoVadis we are still able to offer clients robust solutions when compliance requirements mean they are unable to host software or data in a multi-tenant environment.”

Comada’s M.A.T.ware software is designed to be highly scalable, allowing it to be seamlessly deployed across a multi-tenant environment, along with highly configurable reporting features for fund managers and investors. Its scalability for both small and large firms in the alternative investments space requires a hosting environment that can meet the most stringent technological due diligence criteria.

Said Gavin Dent, CEO of QuoVadis Services (QVS): “QuoVadis has provided IaaS hosting to Comada for eight years, working with the company to support their fast growth and technology evolutions. By focusing on the performance, availability and security of the underlying platforms, QVS allows Comada’s team to focus on evolving the software at the heart of their services.”

About Comada
Comada is a global technology company specialising in building and implementing software solutions for the alternative investment industry. In particular, Comada’s flagship M.A.T.ware product delivers an unprecedented level of interconnectivity and transparency to the portfolio management and STP process in the alternative investments space. Praised for its flexibility, M.A.T.ware can be scaled to suit the needs of family offices as easily as large custodian banks. M.A.T.ware is already being used by custodians, fund administrators and funds of hedge funds. For more information, please go to www.comada.com.
About QuoVadis

Founded in 1999, QuoVadis Limited is an Internet security provider with operations in Switzerland, Netherlands, the United Kingdom, and Bermuda. The company is a global provider of digital certificate and digital signature services used to enhance privacy and confidentiality, data integrity, and strong authentication over the Internet. Drawing upon the company’s experience and investment in high performance datacenters, QuoVadis Services Limited (QVS) provides secure collocation, virtual hosting, and disaster recovery services to international organisations. For more information, please go to www.quovadis.bm.

Creating effective liquidity reporting

A detailed liquidity report of an underlying portfolio of hedge funds, one that could be dynamically updated, was the Holy Grail for many funds of funds in the dark days of 2008. Proper liquidity reporting is underpinned by effective data and tools. It requires a degree of investment in technology that can be proactive, agile and responsive.

One of the real tests of any portfolio management system occurs when things go wrong: in the world of money management, operational failures, for instance on the part of a business further down the service provider chain, can force the portfolio manager to re-evaluate retrospectively. Can he be sure that such revaluations are being consistently applied, especially if multiple individuals within the same firm are juggling dozens of spread sheets? Once mistakes creep into the historical portfolio picture, they can be difficult to track down and correct, and they can continue to have an unforeseen impact on reporting further down the line.

Beyond the problems of effective performance tracking, investors in hedge fund portfolios today want to feel they have a better grip on what is happening in underlying hedge funds. This means being able to view a more complete operational picture. Their questions cover key issues relating to fund liquidity, including whether funds have the ability to gate withdrawals, whether gates have been initiated, the expiry of each tranche lock up, and what the options are to reduce lock ups and when. Better information on the liquidity scenario can deliver important additional advantages to the portfolio manager.

It all comes down to a question of confidence: can an investor feel confident that a trade has been properly executed? Has it been confirmed by the relevant custodian and underlying transfer agent? How long does it take to receive the estimated and real NAVs? Do they always come in on time? Are communications with relevant parties secure and dynamic enough to process real-time information flows?

With a more detailed picture comes a higher degree of confidence in the underlying investment and a superior level of reporting to end investors when required. This also helps the portfolio manager to allocate further funds more efficiently.

Dealing blind: are you 100% confident about your trade location?

The parties to any single trade, be it the fund manager, the custodian, the investor or the administrator, are incorporating a degree of estimation in the course of the transaction process. It is still difficult to operate otherwise. Each participant is using different parameters to view mission critical data and communications. Each still relies on paper-based processes and spread sheets to manage billions of dollars of alternative investments. But can any of them express with 100% confidence that a specific trade is at a specific location in the transaction trade at any given time of the day? And can they put a value to it when they do find it?

At this juncture in time we stand in an industry that is becoming increasingly institutional, with over 60% of the assets being managed by hedge funds now originating from institutional clients. The client complexion of the industry has changed while the legacy technology in use within many firms harks back to an earlier and simpler era.

Technology issues are becoming a bottle neck for institutional investors, particularly with regard to managing and reviewing hedge fund portfolios. This is creating a demand for a more proactive and integrated approach to client reporting using technology that has the ability to break down the different components of the hedge fund trade. By bridging these operational processes, institutional investors can manage and review accurate data with a higher degree of confidence.

The scale of the problem facing the industry has been highlighted by Swift’s SHARP (Swift Hedge Funds Harmonisation Project) initiative. Swift identified a number of key operational issues within the hedge fund transaction process. While custodians and administrators can handle the paper trail when transaction volumes are low, the largest service providers to hedge funds now process well over 1000 transactions every month. Each order may come with up to 50 pages of documentation attached. A typical team within a hedge fund administrator might be handling 600-700 orders with a dedicated staff of a dozen or so. Apart from reconciling data with their own records, they must also ensure investors are complying with KYC and other regulations.

Because subscriptions processing is time consuming and error prone, the entire cycle from the time when the order is taken to taken until confirmation is received and accounts are reconciled can be as much as a month. Faxes of subscription agreements must be sent to transfer agents, which in turn must be confirmed by phone, with final documents being sent over by courier.

For a fund with monthly liquidity, these transactions can prove costly, particularly if the market has moved. Missing a deadline for an order could lead to a fund holding unnecessary cash, while a missed redemption deadline would leave a fund exposed to an unwanted position for another month, quarter of a year or more.

If funds restrict liquidity, or extend their lock-in periods, or raise gates, the risks of moving transactions in and out of funds grows. It is still very hard for custodians to provide funds of funds with accurate status reports, particularly when they are bombarded by faxes from administrators and transfer agents at the end of the month. For larger custodians, with dozens of service providers to deal with, the problem is only magnified.

Comada nominated for technology innovation at European Custody Risk Awards 2012

LONDON: Comada has been nominated for Technology Innovation of the Year in the European Custody Risk Awards 2012. The nomination is a joint one alongside fund administrator Custom House, for the CHARIOT 2 project, which went live in March 2012. Chariot allows investors to deal online in funds administered by Custom House.

The awards, hosted by Custody Risk magazine in London this month, recognise excellence in the provision of custody, fund administration and associated services in the European asset management and securities industries.

“Chariot Phase 2 was a ground breaking project for the European hedge funds industry, and it is great to see this being independently recognised,” said Rupert Vaughan Williams, co-founder of Comada. “Significantly, its implementation allows seamless dealing in equalised funds administered by Custom House, bringing with it greater transparency for hedge fund investors.”

Said Mark Hedderman, CEO of Custom House: “Here at Custom House we are committed to a culture of innovation for our hedge fund clients. We chose to work with Comada because of the group’s ability to deliver solid, institutional grade technology which would meet our own high standards of security and investor confidence.”

For further information please contact:

Stuart Fieldhouse
Media Relations
Email – sf@comada.com
Tel: +44 (0) 7793 882230

About Comada

Comada was founded in 2004 to provide the alternative funds industry with technology solutions that would revolutionise operational processes and the way the industry communicates. Our vision has always been to deliver system solutions that make a real difference to our clients, which facilitate the way they do business, and help them to radically reduce operational risks. At the core of this delivery is our M.A.T.ware transaction-driven technology.

Meeting the hybrid portfolio challenge

Today’s liquidity-aware fund investor is still seeking the appropriate solutions for cash flow monitoring within alternative portfolios.

Investors in alternative funds are managing far more diverse portfolios than they used to. And even within the hedge funds universe, they are grappling with wildly different structures and liquidity terms. Investors are set to increase their overall allocation to alternative investments, a trend that was already becoming established prior to the financial crisis, but by doing so they are creating some immediate operational challenges when it comes to monitoring their critical cash picture.

Fund allocators embrace new conditions of risk when they invest in alternatives. From an operations perspective, one of the key obstacles is the implementation of appropriate technology within the business that will allow for the effective management of alternative portfolios alongside other investments like long only funds and ETFs, where liquidity timelines and redemption conditions are very different. It is not unusual to have a UCITS fund with daily dealing sitting in the same bucket as a conventional hedge fund with monthly liquidity or a private equity or real estate fund with even longer liquidity time frames.

We are now living in an environment where more emphasis is being placed on internal risk controls and the quality of real time reporting is an important part of the overall risk management package. Portfolio managers and risk officers within investor organisations need to make sense of and fully understand the divergent cash flow and liquidity picture. Failure to do so will only create further pain for the organisation when another disruptive market event occurs.

Today’s institutional allocator will have a number of alternative funds within their portfolio:

  • Onshore hedge funds, including Limited Partnerships
  • Offshore hedge funds, usually employing a unitised holdings model including series of shares or equalisation allocations
  • Private equity investments, again with a Limited Partnership structure with a commitment and funded periodically on a capital call basis
  • Real estate funds
  • Alternative UCITS with daily or weekly dealing
  • ETFs used as indexed hedges of based on alternative markets (e.g. based on commodities futures)

There is a need for a diverse range of alternative investment funds to be managed and analysed via a single platform, particularly when a portfolio manager requires accurate reporting on cash flow and liquidity terms. Managers of alternative fund portfolios now need to see all the way out the liquidity curve, to a year or more if needed. Private equity cash flows, for example, are much less frequent than conventional funds and need to be accounted for efficiently if the investor is going to ensure sufficient cash is on hand to meet PE commitments.

How can daily cash flow commitments to alternative investment funds be monitored on a forwards basis out to 12 months?

Proper cash flow management within the alternative portfolio in this challenging environment goes beyond normal accounting requirements. There is a need to budget and estimate both future commitments and withdrawals, taking into account actual and anticipated liquidity terms. Accurate risk management and forecasting can be managed on a dynamic basis from a single point, but not with an Excel spreadsheet. The sophisticated cash flow requirements of today’s industry go beyond what is economically achievable with Excel.

Today’s portfolio management solution needs to take account of a range of varying factors – liquidity terms of a hedge fund, or a particular side letter for example.  It has to be sufficiently customisable to dynamically track commitments over time, and provide an accurate picture of cash and asset positions, on a daily basis if necessary. To do this manually seems a reckless waste of man hours at a time when many investors are very conscious of both the lack of effective reporting on their portfolios and the costs they already incur in their operations.

The typical institutional fund portfolio will hold a range of assets with varying liquidity terms that will behave very differently under liquidity stress test scenarios:

Managing the balance between longer and shorter dated assets

It is important that, as the investment manager maintains his own diversification between different asset classes, he also keeps a clear picture of the pricing and liquidity terms of the portfolio of funds. This can even change several times a day. Juggling the short and long term liquidity picture simultaneously without appropriate monitoring can be like driving a car at midnight with no headlights. An Excel basic road map may help you, but you are still placing yourself at risk.

In addition, today’s portfolio manager will also need to model liquidity scenarios on an allocation-by-allocation basis, including hypotheticals. This can have an increasingly important bearing on decisions to allocate in the first place. The biggest variable, however, is the cash flow picture.  Is the manager overweight on monthly dealing funds? Can liabilities be met without altering exposures? Can they monitor and transact on both manager and client portfolio liquidity dynamically?

During the credit crunch of 2008, managers of alternative investment portfolios were forced to turn to their most liquid investments to access cash in the shortest possible time. Sometimes this meant liquidating holdings with some of the better performing fund managers. It is an experience that has created more emphasis on controlling and diversifying the underlying portfolio liquidity picture across sophisticated hybrid portfolios. Doing this effectively without resorting to manual and error-prone Excel-based processes is another matter.

Custody Risk #2: Producing statements with no Central Securities Depository

This is the second in a series of articles from Comada on the subject of custody risk.

The challenge for custodians in safekeeping alternative assets like hedge funds is that there is no Central Securities Depository they can rely on. For conventional securities, CSDs exist to help investors and custodians by providing an easily accessible record of securities owned. Historically, the CSD would take delivery of physical share certificates – today an electronic registry is maintained which allows investors and company registrars to keep track of who owns what.

For the vast bulk of hedge funds, which are not actively traded on stock exchanges, there is no CSD. Nor is there a broker to broker network like the Depository Trust Company’s National Securities Clearing Corporation. Custodians are therefore forced on a monthly basis to request statements of hedge fund holdings from the transfer agents who maintain funds’ registers of shareholders. The problem with this is that there is a large universe of TAs in the market, each acting for only a small portion of the total universe of hedge funds.

[…]

Tailoring your data to investor requirements

Making life easier for investors can help funds to keep mandates

In the increasingly competitive world of investment management, it is still possible to achieve a critical edge by simply presenting information to clients in an efficient and secure manner. Many money managers subconsciously see a client as being invested solely in their fund, and yet investing clients have their own difficulties keeping track of the numerous different funds and other investment types they have exposure to.

For investors, one of the big battles continues to be around procuring information about alternative fund investments in a format that meshes effectively with their own internal mechanisms. This conundrum offers the fund of funds manager an opportunity to seize a distinct competitive advantage and win investor goodwill at the same time.

Investors face the weekly struggle of collating performance information, much of which can get lost or arrives in a format which can only be transcribed with much manual effort and with the data errors which are an inherent risk with such a process.

A typical medium sized investor will be receiving data from alternative investments as emails, sometimes as PDFs. This contrasts with data on listed securities, which is cheaply and readily available in a convenient format. It is an enormous irony of the hedge funds industry that while the fund strategies themselves are highly sophisticated, the way in which their performance is reported is not.

Know your client

Today’s hedge fund investor is looking increasingly institutional in character; moving up the sophistication curve from the individual investor towards the requirements of pension funds or insurance companies, reveals a demand that information be delivered in an easily digestible format.

For the fund of funds manager, it becomes increasingly important that you identify the manner in which your investing clients would like to receive information. It becomes critical that you become aware of how your clients view that information and particularly how that data relates to the way your investors make use of their assets – for example their risk analysis protocols.

A fund of funds manager needs to understand that his fund still comprises only a small percentage of an institutional investor’s overall portfolio. Yet, all other things being equal, the investor is likely to favour the fund which will offer him better reporting, that can allow clients to readily process the information it generates.

Tailoring your data

To secure your competitive edge, you will need to consider the process you are using to report to investors, including the data points your clients want to see, and automate this process as much as possible. In today’s back office environment the technology now exists to provide high quality transaction-driven data in a format that is easily configured to the requirements of different stakeholders.

Funds of funds must recognise that for most investors, alternatives will comprise less than 50% of their portfolios, and frequently less than 25%. Therefore, managers of alternative investment fund portfolios need to be able to report into a framework that has probably been designed to harvest information from listed security investments. It will require involving service providers like fund administrators in the reporting conversation, and being consistent about how data is marshalled and presented. It will also require investment in tools which can be shared by service providers, helping to drive down the cost of delivery.

Overall operational compliance within the hedge funds industry needs to be a lot less problematic if funds are to meet the established reporting frameworks of institutional clients. As the character of the hedge fund investor base becomes increasingly institutional in nature, fund managers will need to make more use of technology – like the secure reporting opportunity offered by the Cloud – to ensure they make the most of the competitive edge efficient data delivery can become.

Custody Risk #4: Liquidity

Why custodians may not be aware of the risks they are running when acting as brokers for investors in hedge funds.

Liquidity emerged as a major risk for hedge fund investors during the 2008 credit crisis, but it remains a major source of risk for custodians of alternative assets. Again, it is worth comparing the risks posed by alternative assets against those of more traditional securities.

In the world of normal trading, a broker who makes an error can usually rectify it quite speedily. This is because he is trading in a continuous market – the period during which the broker is exposed to his mistake is limited. He might only be at the mercy of price movements for an hour or less. And because systems between counterparties in conventional securities markets are automated, brokers can limit financial losses caused by errors with relative confidence.

Within the alternative investment market, where custodians are acting as brokers for investors in funds, potential errors are magnified because of the time it takes to confirm a trade. Mistakes in orders are uncovered in the reconciliation process, but it can take days before a counterparty will issue a trade confirmation.

Consider then the situation a custodian faces once an error in an order is discovered, for example when a sell order is confused as a buy order. Because shares in hedge funds are so illiquid, it can prove very difficult to have a mistake resolved, particularly as the custodian bank is dealing in a principal market – i.e. the fund is creating the security for the investor.

Funds have very little leeway to address errors, particularly since corporate governance might prohibit them from favouring a specific investor. Redemption terms can mean a trade will not be resolved for six or even 12 months, during which time the price of a fund will change with little or no scope to hedge it.

Custodians participating in the market for alternative funds are not being rewarded for the liquidity risks they are taking on a daily basis. Once such risks are fully understood, many banks may decide that it is not worth the slim rewards they earn. Custodians have improved the language used in agreements with clients as they have started to wake up to the liabilities they face, but another solution would be the introduction of electronic execution, speeding up the trade confirmation process and radically reducing manual errors.

On the other side of the coin, investors may want to use their alternative investments as collateral when raising cash. However, due to the lack of hedge funds’ liquidity, it can often be difficult to discover an accurate price. There is no readily available market data source, requiring significant proprietary effort to procure a recent net asset value (NAV).

Investors will often want to raise cash more quickly than shares in a hedge fund can be redeemed, and the lack of daily or weekly market prices means the lending bank can create significant risk for itself by lending against hard to value assets or assets than themselves can take some time to liquidate (frequently three months or more in the case of many hedge funds). Again, investment in electronic pricing interfaces can ensure more accurate and speedy pricing and support faster decision making.

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