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Hedge Funds use Technology to alleviate burdens of Transparency

Hedge Funds use Technology to alleviate burdens of Transparency

Date: August 31st, 2009
In the face of the Hedge Fund Transparency Act, and the increasing demands from investors and prospects to disclose more detailed and frequent information, many hedge funds find themselves spending a great amount of their resources gathering, organizing and sharing information. This is not an easy task, as critical data is commonly stored and processed in many systems and databases that often do not communicate with each other. Further complicating this process has been the adoption of a multi-prime broker strategy by many hedge funds.

One option that may help funds solve the data consolidation issue is building a proprietary data warehouse. Simply put, a data warehouse is a central repository that pulls select data elements from disparate sources and can be used for advanced analytics and reporting purposes. Data warehouses can also be used as a data source for front-office applications, such as customized Investor Websites, which provide secure and hassle-free platforms for sharing performance data with investors, while meeting transparency requirements.

Specialist software development firms are able to build highly secure web-based platforms that offer investors around-the-clock access to their account information including balances, transactions, account performance returns, general fund performance, and communication letters. Furthermore, data can also be easily broken down by fund, asset class, strategy, and other criteria as required by the manager or the investor. Historical performance records can be viewed through an easy-to-use interface, and certain data elements can be downloaded in PDF or Excel formats.

Many fund managers take a further step and use Investor Websites to facilitate a more effective communication with their investors. They use the technology to distribute investor letters, make announcements, solicit feedback, share educational materials, SEC filings and other data to improve the investor relations and follow the industry best practices.

Natalie Kaminski is the Founder and CEO of FinCode Solutions, a boutique software development and consulting firm that focuses on the alternative investment industry. For more information on Ms. Kaminski and FinCode Solutions, please click here.