Hexam Capital Partners

Case Studies

HEXAM Capital Partners LLP

Front Office System and Outsource Implementation

HEXAM Capital Partners LLP (HEXAM) is a long only equity fund manager dedicated to Emerging Markets, formed in July 2006 by the ex-Baring Asset Management Global Emerging Market team in London.

HEXAM had been operating its business model via a joint venture with Ignis Investment Management (Ignis) whereby Ignis provided all of the trade execution, middle and back office support to HEXAM as well as the information technology compliance, operational risk, HR and financial control functions.  Since HEXAM’s creation in 2006, HEXAM’s assets under management (AUM) had grown to c. US$ 1.9 billion at the May 2011 transition date.

Business Challenge

HEXAM determined to restructure its business operations to create a platform on which its business would operate independently of Ignis from May 2011. This involved establishing new front office investment management and order management systems and procedures; middle office trade management record keeping, valuation and performance measurement capability; regulated funds administration (Trustee, fund accounting, custody and transfer agency) capability; and compliance, company secretarial, finance, information technology and HR capabilities.

The Assets Under Management (AUM) is represented by a Dublin domiciled UCITS fund, a UK OEIC and a number of segregated client mandates from the UK, Europe, USA and Australia.

By agreement, HEXAM and Ignis determined to complete the change programme within 12 months. HEXAM’s four partners, who formed the fund management team responsible for investment management and performance, having no previous experience or large scale change programmes were dependent on securing external expertise and assistance and on hiring permanent members of staff to establish and provide key functions to the business.

Solution Approach

One of the key objectives throughout the project was to ensure that the HEXAM partners were not distracted and continue to give full focus to their investment management duties. This was achieved by creating a programme governance structure, operated by dedicated resources tasked with delivery, and whereby programme oversight and decisions were discussed with key stakeholders through structured and efficient steering meetings.

Contract with Bloomberg, implement and migrate to the Bloomberg Asset Investment Management (Bloomberg AIM) system to provide HEXAM with investment management tools, pre and post trade compliance, trade order management, investment record keeping, and deal execution management capability. This included contract negotiations; Bloomberg AIM integration testing with State Street; UAT; configuration of pre-trade and post trade compliance rules; design and implement procedures; controls and reporting for the end-to-end processes; and a migration from Ignis records to create and validate starting positions and valuations in Bloomberg AIM.

Select, and contract with, State Street for middle office trade processing, investment operations, investment record keeping and valuations and performance measurement and attribution services. Implementation included service description and process flow mapping for in-scope services and finalising contract and SLA / KPI levels.

Migrate to the State Street solution for middle office trade processing, investment operations, investment record keeping and valuations and performance and attribution services. This included set up of client and market static data, transfer of performance and attribution history, testing of the migration process and a ‘big bang’ migration event, migrate investment accounting records and validate to Bloomberg AIM and Ignis records.

Establish and implement an independent dealing function, by selecting, contracting for and implementing State Street’s agency execution brokerage service for equity and StreetFX product for foreign exchange executions. This included contract negotiations, integration testing, UAT, and implementing processes, procedures, controls and reporting.

Contract with IFDS Managers for hosted fund services and migrate the UK authorised OEIC to IFDS’ UK Authorised Corporate Director (ACD) service from Citibank to provide consolidated services for trustee and depositary, transfer agency, fund accounting and administration, and global custodian functions. This included contract negotiation, finalisation of the hosted fund services operating model and deliverables, client communication, custody transfer, transition of transfer agency records from a bureau based model to a full service model, migration of fund accounting records and validation of migrated records to Bloomberg AIM and Ignis records.

Launch a new Dublin UCITS umbrella fund and convert the two existing Ignis umbrella sub-funds to it. This included provider selection, contract negotiations, regulatory approval, establishing management company and funds, client communication, and finalising operating model and Service Level Agreements (SLA’s) / Key Performance Indicators (KPI’s). Manage the set up of two UCITS sub-funds and transition to State Street, Dublin’s fund accounting and administration service from HSBC. This included set up of static data and fund expense levels, custody in-specie transfer, migration of fund accounting and records and post-migration validation to Bloomberg AIM and Ignis records.

Establish and implement a service provider oversight function to monitor and report on adherence to SLA’s, including hire of oversight team and an Operational Risk Manager.

Knadel Value

Knadel were instrumental in helping HEXAM finalise their outsource operating model scope, in determining their end-to-end outsourced solution, and in leading the implementation to migrate to it. Knadel provided programme management and leadership, created the implementation plan and secured HEXAM, Ignis and State Street plan sign-off, provided investment operations and administration subject matter expertise at programme and workstream levels, managed the workstream interaction between HEXAM, Ignis and State Street, managed the migration events, and ensured clear operational readiness and go-live criteria were set and adhered to.

Knadel were instrumental in the design, test and HEXAM acceptance of the trade flow interface files from Bloomberg AIM to State Street, executed foreign exchange files from State Street to Bloomberg AIM, and the overnight position and cash files from State Street to Bloomberg gateway, including documenting procedures and controls.

Knadel provided insight, guidance and focus to the HEXAM partners throughout the programme.

Knadel provided post-implementation and operational oversight support to HEXAM allowing new staff hires to settle into their roles and followed up the programme delivery with a review of, and supplement to, the procedures and controls documentation to support HEXAM’s intended certification under International Standard on Assurance Engagement 3402 (ISAE 3402).

Outcome and Business Benefit

HEXAM achieved its operational independence from Ignis, completed the implementation comfortably within the 12 month target timeline, has a highly automated and efficient front to back operating model and enjoys a strategic partnership with State Street who is able to support them as they grow the scope of their business and who is able to help them meet the upcoming operational challenges posed by their clients, regulators and the markets in which they operate.

Get In Touch

+44 (0)20 7489 6356

The success and timely implementation of the HEXAM operating platform in line with the authorised project plan is a testament to the Knadel project manager. He provided technical and industry knowledge and showed tenacity and commitment to achieve the desired result.

Grant Shotter

Partner, Hexam Capital Partners LLP