Tuesday, January 29, 2013

Major Hedge Fund Will Run Two Sets Of Books!



           
According to the good people at Forbes Bridgewater Associates, one of the largest hedge funds in the world with $120 billion in assets, will soon use Northern Trust to shadow the fund administration work it outsourced to BNY Mellon in 2011.

For asset managers, outsourcing middle and back office work to custodians is nothing new; it has been going on for years as the big custodians like JPMorgan, Citi, BNY Mellon, Brown Brothers Harriman and Northern Trust use their skills, plus massive deployments of technology, in the high-volume, low-margin business of fund administration.

The first big fund to outsource was PIMCO back around 2000, said Pete Cherecwich, head of global fund services business unit at Northern Trust. As in-house systems age, funds facing the decision to invest in new technology have often decided to to outsource instead. The big custodians can provide depth of expertise, the latest technology, a large staff of technology experts and career paths for technologists that they wouldn’t find in a bank.

For hedge funds, using outside administrators is a relatively recent development.   Historically a lot of hedge funds did their own fund administration, said Cherecwich.  Spurred by the Madoff scandal, many institutional investors began to insist on third party fund administration. Citadel, the Chicago-based hedge fund, sold its sophisticated fund management system, Omnium, to Northern Trust in 2011 and became a client….


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