Case Study: Fixed Income Fund
A multi-billion dollar Hedge Fund, who invests in credit-oriented and fixed income strategies involving OTC derivatives, required order management and trade flow processing functionality that could not be accommodated by existing vendor systems.
Business Challenge:
The Hedge Fund was using an offsite Portfolio Management and Risk System (Imagine) to manage positions and risk, but the entry of trading activity was done manually in-house. As the Fund grew in size and trading volume, their reliance on Excel-based spreadsheets and other manual processes became prohibitively difficult and error-prone.
The Hedge Fund evaluated several off-the-shelf Order Management Systems (OMS) and found that none of them did a good job of modeling, valuating, and processing credit derivatives, which comprised of a large portion of the Fund's book. Additionally, none of the vendors had experience integrating with Imagine. Finally, the Fund needed to integrate with ICE Link for auto affirmation and to prepare for CDS Clearing.
Solution
In response to the above challenge, NorthPoint implemented an operating platform that consisted of the following major components:
- Trade Capture for multiple asset classes including credit derivatives
- Security Master with integration with Markit and Bloomberg market data
- Trade Blotter-driven integration with Markit and Bloomberg market data
- Position Keeping and Reporting
- Valuation for credit instruments
- Reconciliation between multiple systems
Today, the Trade Capture functionality, in conjunction with the Security Master, allows traders to very quickly enter and allocate trades. The trades and allocations, as well as necessary security information, feed to Imagine in real-time. The ICE Link auto affirmation is fully automated and equity trades feed in automatically via FIX. This enables traders, trading assistants, and operations personnel to book, process, and reconcile an increasingly high volume of trades across multiple asset types (including derivatives).
NorthPoint's Security Master and Valuation Service work together to make security definition and trade capture very fast, without the need to manage separate calculations in external spreadsheets.
Benefits
- Increases efficiency by removing the dependency on Excel worksheets and manual entry
- Enables fast trade entry and allocation with minimum errors
- Provides a consolidated reporting function via a centralized data warehouse that supports all of the fund's asset types
- Offers a customizable and flexible reporting and reconciliation tool
- Acts as a foundation to support additional investment vehicles and assets through a scalable operating platform
