FoHF Investment Manager - FoHF Operating Model

Case Studies

FoHF Investment Manager

FoHF Operating Model

Employed by a well-known investment manager the objective of the project was to design and implement a fund-of-hedge-fund operating model before launch of 3 funds in three months.

The client is a well-known investment manager with a large pension fund client-base. They had recently been through a significant operating model change to reposition themselves as a boutique asset manager firm having previously outsourced their fund accounting service and components of their middle office. In part, the objective was to create a platform onto which whole investment teams could be adopted.

Business Challenge

The first team to be adopted onto the platform was to be a fund-of-hedge fund (FoHF) boutique team. However the client had limited internal experience of FoHFs and so the challenge was to design and implement an operating model, complete with the associated portfolio management systems and outsourced services on the client’s operating platforms that would support research & analysis, investment operations, cash management; fund, FX and derivative overlay dealing as well as establish the necessary checks and controls to ensure best practice. To be successful this had to be established for the launch of a number of funds within three months.

Solution Approach

Legal restrictions mandated that the operating model be completed in isolation from the incoming investment and operations team.

Working with the client in a combined team, but with sole responsibility for the operating model design and implementation, our approach started by comparing the requirements of a best-practice FoHF investment and operations solution with the available capabilities on the client’s platform, that of their outsource partner, and external 3rd parties. Each potential solution was benchmarked by cost, feasibility, risk and operational capability to identify the optimal operating model configuration. Working with the client we were able to determine a solution based on their principles and requirements.

The solution ultimately included the use of a specialist FoHF solution provided by the client’s outsource provider but fully integrated into their standard platform. Leveraging the capabilities of this solution a complete suite of business process flows were documented in BPM Notation that extended across the client’s platform, their outsource provider and the incoming investments team.

To implement the operating model an operational readiness exercise was undertaken to establish, configure and test the key components ahead of the arrival of the investment team. This was completed in parallel with the legal set-up of the new funds, the operating contracts and service level agreements that would underpin the model.

Following launch the project team provided operational support and handover to the incoming operations team up-to and including the first NAV point.

Value

The team were able to bring relevant experience of FoHF operations and systems as well as operating model design and implementation to bear to provide the client with a rapid, but successful solution.

Outcome and Business Benefit

The client was able to launch and support a number of new fund-of-hedge-funds on their platform in an aggressive timeframe and under difficult legal circumstances without having the necessary FoHF operating model experience in-house.

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