Reaching well beyond typical back office reporting, fund administration provider Butterfield Fulcrum is committed to providing robust and highly effective hedge fund front and middle office solutions to a wide array of funds across the alternative asset management industry.

Our middle office offering is designed specifically with the investment manager in mind and represents a tremendous value-add in an ever-evolving and fast-paced environment.  As an organization, we leverage our multiple geographic locations and best-in-class technology to deliver high-quality reporting on T+0 to an investment manager, ensuring that informed decisions can be made in a timely fashion.

The range of hedge fund administration services includes, but is not limited to:

• Trade date flash positions with P&L
• Trade and position break reporting
• Flexible portfolio reporting at the summary and detail level
• Daily valuations of both listed and OTC positions
• Corporate action processing
• Customized P&L
• Vendor data and modeling
• Daily NAV and NAV estimates

In addition, Butterfield Fulcrum has constructed its middle office offering to be seamlessly integrated with many industry leading front-end order and portfolio management applications.

This integration allows an investment manager to manage a portfolio through their chosen front-end order management system, all without the need for a system conversion.

Coupled with our leading back office hedge fund administration platform, we are able to offer a full suite of fund administration solutions to all investment managers, regardless of their portfolio composition, trading frequency, or fund structure.

Acting as the liaison between investment manager and investors, our dedicated Hedge Fund Administration Investor Services group offers a comprehensive solution concerning capital activity, investor reporting, and a host of other critical aspects.

For any hedge fund manager, it is imperative that all aspects of the relationship with a fund’s investors are handled professionally, efficiently, and effectively.  Our organization takes this responsibility very seriously and has built an infrastructure to complement the traditional fund accounting group with customized communication and reporting solutions.

Butterfield Fulcrum’s Hedge Fund Administration Investor Services group will handle all aspects of subscriptions, redemptions, and transfers for all investors and work to ensure compliance with a fund’s offering documents.  In addition, we offer robust and flexible reporting solutions for all types of hedge funds, ranging from customized investor statements to adaptable confirmation letters of all capital activity.

Our commitment to prompt, pleasant service guarantees a positive experience for all investors, regardless of scale or complexity.

In addition, our dedicated Hedge Fund Adminsitration Investor Services group seeks to mitigate risk to all concerned parties.  In this day and age, there are a multitude of risk factors in the alternative investment management industry, but we strive to minimize these risks and leave the investment manager to focus on generating returns for their investors.

The breadth and depth of our anti-money laundering checks are compliant with a host of jurisdictions and our stringent KYC and source of funds examination ensures tight controls are placed on capital inflows and outflows.

Hedge Fund Administration – Front and Middle Office

In recent years, hedge fund administration valuation of assets and portfolios has taken on a heightened level of importance and is now subject to increased scrutiny and review.

Few hedge fund due diligence reviews will omit the topic of valuation; indeed, investors often will make the topic a primary focus before allocating capital as they seek to better understand risk and preserve their capital.

Butterfield Fulcrum’s legacy as a fund administrator with in-depth knowledge of hard-to-value assets has afforded us the position of being ahead of the curve in terms of independent asset and portfolio valuation.  Our pedigree of servicing the most complex funds with the most unique and exotic investments has afforded us the enviable position of being a true industry leader with respect to transparently and correctly valuing a wide variety of assets.

Our organization employs a full team of risk and valuation professionals in multiple jurisdictions around the globe.  The group is staffed by individuals with entire careers devoted to investment valuation and an equally deep knowledge of the entire spectrum of asset classes.

No matter what type of holdings a fund may be trading, regardless of how exotic they may be, we can guarantee that we have the requisite knowledge and experience to fairly account for and value those assets in an independent and efficient manner.

As the financial markets evolve, the necessity for a fund administrator to evolve is a basic requirement.

Butterfield Fulcrum prides itself on being able to handle the most complex of asset classes, leading to an efficient fund administration process rooted in accurate and independent valuation.  Our commitment to industry leadership in the area of valuation will never waver and will continue to be a hallmark of our administration services.

Hedge Fund Administration Investor Services

At the core of Butterfield Fulcrum’s hedge fund administration offering is our commitment to providing first rate fund accounting to a global base of alternative asset management clients.

Beyond the typical back office reporting solutions, our platforms enable us to provide customized, flexible outputs based on the needs of our clients.

We fully recognize that the provision of high quality, cost-effective hedge fund accounting is our core business and central to all other service offerings and, as such, we take our fund accounting very, very seriously.

Regardless of the hedge fund administration and accounting services that are provided by Butterfield Fulcrum for a client engagement, we are committed to a transparent, robust process for reconciliation and valuation.  Our Level II SAS 70 accreditation is a testament to our rigorous controls and procedures in everything that we do.

For us, independence and transparency are not simply trends in the industry; they are the very foundation upon which we were founded and operate.

In support of our philosophy of excellence with respect to fund accounting, we invest heavily in our staff, encouraging and promoting internal and external training designed to foster a highly capable workforce.  We actively seek the most talented, experienced professionals in the fund administration industry and nurture an environment where capable personnel are allowed to make decisions with the best interests of the client and its investors in mind.

The result is a deep, talented pool of client relationship managers throughout the organization and across our jurisdictions.

You can be sure that your fund accounting is being handled by industry-accredited professionals with the requisite experience at every stage of the fund administration process.

Hedge Fund Administration Valuation

Hedge Funds Seek Specialist Help with Distressed Debt

Operating Model in Hedge Fund Administration

In order to be a leader in global fund administration, Butterfield Fulcrum has enacted an operating model that allows for timely and cost-effective fund administration solutions.

By leveraging ten offices in nine countries around the globe, we are able to deliver flexible, high quality investment services regardless of your time zone.   Furthermore, each client has a dedicated Client Relationship Manager, ensuring a single point of contact for all aspects of the relationship.

In fund administration, we know that continuity and consistency is critical, and our operating model is built with this stability in mind.

Our commitment to efficiency and accuracy has led to the utilization of some of the most reputable and recognized technology leaders in the hedge fund administration industry, allowing us to focus on what matters most: delivering quality fund services to our clients.  In addition, Butterfield Fulcrum continues to add to its technology platform with proprietary offerings, allowing us to stay on the cutting edge of an ever-evolving industry.

Our operating model allows us to do far more than simply fund accounting; we are able to offer a full range of fund administration services to the alternative asset management industry.  These services extend well beyond the usual back office offerings, encompassing a complete and robust solution for both the front and middle office requirements of today’s investment managers.

Regardless of whether you are an emerging manager or an established player, trading listed assets or managing truly exotic investments, Butterfield Fulcrum’s operating model is built with your needs in mind.

Hedge Fund Administration – Accounting

London – Butterfield Fulcrum, a top five independent alternative fund administrator, has been “Top Rated” in categories spanning large and small hedge fund portfolios by respondents in the Global Custodian 2010 Hedge Fund Administration Survey.

Butterfield Fulcrum received “Top Rated” status in the service of “Leading Clients” (a new category Global Custodian describes as reflecting “the ability of a provider to attract and satisfy the most sophisticated and knowledgeable type of client, familiar with multiple providers, as the sternest and truest test of the capabilities of a hedge fund administrator”), fund of funds, funds with < $100m in assets and funds with a single provider.

These ratings are a testament to the great work of our passionate and dedicated staff. To be able to give top rated service to a broad spectrum including ‘leading clients’ and complex fund of fund portfolios, as well as funds with less than $100 million in assets speaks to the flexibility of our platform and our people.

Client feedback included in the survey reported that Butterfield Fulcrum’s strengths lay in its “generally excellent client service and attention to detail”, “timeliness and accuracy of information and low staff turnover” and “highly responsive, can-do, constructive attitude.”

The Global Custodian survey has become an industry symbol for recognition over the 15 years it has been conducted. It is compiled by questioning 1,420 hedge funds and 81 fund administrators about 15 key services: client service and relationship management, value for service, fund accounting and valuation, OTC derivatives, investor services, reporting to investors, reporting for fund managers, compliance and taxation, corporate administration, fund structures, fund of funds, middle office, credit/leverage, technology and risk management.

About Butterfield Fulcrum

Butterfield Fulcrum, a top five independent alternative fund administration company by assets under administration, has 20 years experience servicing the alternative investment industry. It provides administration, middle office and risk reporting services to hedge funds, fund of funds, managed accounts, private equity and real estate funds.

The company has a unique Global Operations Model leveraging time zones and talent to deliver transparent and highly customized solutions in real time via FIRST (previously BFonline), a client access Web portal. Headquartered in Bermuda, the company services more than 700 funds and has 10 offices in eight countries.

Contact Us

Media Contact

Lisa Jane O’Neil
LJO Associates, Inc
Email: lisajane@ljoassociates.com
Tel: +212 786 7629 or 917 361 8303

Financial News Online by Julia Shieffer - Hedge funds, cashing in on the credit crisis by buying distressed credit, are turning to third-party hedge fund administrators to help them handle the back-end processing of these complex securities.

Stuart Feffer, co-chief executive of LaCrosse Global Fund Services, a hedge fund administrator based in Chicago, said “We are being approached by firms that are lining up to go after one aspect of this credit crisis — investing in distressed assets or distressed credit in various forms. Servicing the distressed credit products is becoming a sub-specialty for us.”

Funds are buying distressed credit assets to hedge with an interest-rate swap, a credit-default swap or a currency exposure. Rather than expand their own operations teams, many hedge funds are calling in specialist administrators to provide operational support and ensure the products are properly valued and accounted for.

Feffer added: “We’ve launched a couple of clients and we have a few in the pipeline and we are being approached at an increasing pace — we are approached a couple times a week somewhere in the world.”

Fund administrator Fulcrum has also received interest in distressed credit products from existing clients, according to Tim Thornton, head of strategy and product development in London. He said specialist understanding of these products was essential, particularly for valuations and helping hedge funds communicate with investors.

However, distressed debt is not an area in which all fund administrators and asset servicing companies will want to compete, according to Gary Enos, executive vice-president and head of relationship management and client service for State Street’s Alternative Investment Services business.

He Said: “New distressed credit products are getting more scrutiny and administrators have to look at whether or not they want to bring it on.” State Street has serviced credit funds and structured products for more than two years.

Although most administrators will be involved in long-short and distressed products as part of fund managers’ 130/30 and 120/20 funds, many providers will want to avoid going overweight on specific strategies, preferring instead to build businesses that mirror the broader market, said Enos. Securing independent valuations is one of the most complex aspects to servicing these products, he added.

Isabel Schauerte, analyst at finanacial consultancy Celent, agreed. She said: “Issuing valuations of hard-to-value instruments on time and with the highest degree of accuracy requires platforms, human capital and processes not all players can line up.”

Leading administrators, however, must be able to understand all new investment instruments, according to Schauerte.

She said: “The administration of less complex strategies is becoming commoditised and, as such, the margins available are falling. As a consequence, large administrators need to keep pace with the demands of more complex clients or risk being marginalized.”

This document is for your personal non-commercial use. Any further copying, reporduction, distribution is strictly prohibited. To obtain permission please contact reprints@efinancialnews.com – © 1996-2008 eFinanialNews Ltd. Used here with permission.

Money Management Executive, by John Morgan – NEW YORK: Cautious investors will be watching 130/30 funds over the next few years to see how the new products perform.

Many investors are attracted to these active-extension strategies capable of hedge fund gains. But with higher fees than regular mutual funds and short-term track records, even though they are often under the supervision of well-established financial services companies, 130/30 funds are still very new and considered a gamble.

“If you do have a track record, it’s a tremendous advantage,” said Yin Luo, managing director and head of North American quantitative research for Macquarie Capital at the National Investment Company Service Association’s Alternative Investments Conference last month at the New York Athletic Club.

Their popularity could launch into orbit if these strategies are able to meet their promise of producing alpha, especially during a market slump, but if they barely beat or fail to meet benchmark indexes, investors will question whether they’re worth the cost.

Fees for 130/30 funds are often higher than the typical actively managed mutual fund, potentially cutting into performance. Furthermore, their long-short strategy can act as a double-edged sword if the markets move in the wrong direction, magnifying both gains and losses.

Selecting the right sales channel and primary broker to sell 130/30 funds is also key.

For the time being, at least, the attention and assets flowing to directionally long strategies has exploded recently-estimated to be in excess of $100 billion-but money managers should be careful not to misclassify these products, said Russell Kamp, CEO of the global structured products group at Invesco.

“There is an unfortunate new movement among a handful of academics and financial firms to classify these strategies as hedge funds or market-neutral strategies, and develop actively managed indexes to benchmark their performance,” Kamp said. “A 130/30 is like market-neutral lite.’ A 130/30 fund is not an alternative investment product; it is an alternative approach to investment management, because it maintains the beta.”

Benchmarking investment performance can be a critical tool for measuring the skill and risk of an active approach, but it also has its limitations, Kamp said.

“The benchmark is forcing you to be sub-optimal,” Kamp said. “A benchmark constrains your allocations. Hedge funds, on the other hand, are unconstrained.

“Traditional portfolios are, by their nature, not linear because of the inability to express one’s underweight convictions to the same extent as overweight convictions,” he said. “Active managers have the opportunity and flexibility to significantly overweight their highest-rated stocks, but they are prohibited from underweighting their lowest-rated stocks to the same extent because of the long-only constraint.”

With a directionally long strategy, the manager shorts a certain percentage and reinvests that in their highest-rated stock, such as 110/10, 120/20, 130/30, 140/40, 150/50, etc.

A 130/30 strategy is the most popular because the alpha range takes a steep jump between 120/20 and 130/30, then levels off, Luo said, adding that, “in theory, a 130/30 fund can get alpha at any level.”
2008 Factiva, Inc. All rights reserved.

You’re never going to offer a product that’s right for everybody, Luo said. A conservative investor will likely have little interest in taking on so much risk, but the funds can play a diversification role among institutional investors and pension funds.

“I believe [130/30 funds] can add value and are an effective tool for a balanced portfolio,” Kamp said.
The funds are good for clients who are comfortable with them, but there is a big difference in client preference, said Jason Segal, managing director and co-head of 130/30 strategies for Citi Prime Finance.

For 130/30 specialists like Segal, there are exciting new tools and tricks for chasing alpha without sacrificing the transparency, simplified tax reporting, lower fees, daily valuation and liquidity that is lost when investing in hedge funds.

Investment methods like shorting from within, enhanced leverage and rehypothication (the process of lending a security that has already been used as the collateral for another loan) are risky, but can be extremely successful in the right manager’s hands.

Those non-hedge fund managers who can master the alpha will be able to command higher fees.

“As more managers desire to borrow or short stock, costs will go up,” Segal said. “With higher costs of borrowing, more pension funds will be willing to step up.”

Long positions need to be held at a custodial bank, and short positions need to be held at a prime broker, but both these positions need to be consolidated for reporting, he said.

“Your prime broker can make or break you, so you need to make sure you’re comfortable,” Segal said. “Does your prime broker have diversity in the underlying client base?”

Firms will also need to improve reporting efforts to meet ’40 Act requirements such as Regulation T and Rule 431, which define margin securities and margin, respectively.

It’s also imperative to train and educate your investment manager, said Steve Slessor, managing director of client services and manager of hedge fund services for Fulcrum Fund Administration.
Their complexity and high risk may be a turn-off for less sophisticated investors, but that doesn’t mean they’re a bad product. For the right investor, a 130/30 fund could be the perfect way to help break out of a market slump.

Ultimately, the success of these products will depend on their performance and the willingness of investors to take risks. If they are successful, the strategy could expand to other investment products, like 130/30 exchange-traded funds, Kamp said.

“The majority of future equity products will have some sort of long-short aspect,” Segal said. “The question is when.”

(c) 2008 Money Management Executive and SourceMedia, Inc. All rights reserved. Used here by permission.

Securities Industry News - by Maureen Nevin Duffy: Though it was not a new product, SuperDerivatives noticed a decidedly heightened interest in its SD-Revaluation service during last summer’s credit crunch.

“This is really where we saw clients come to us for a very real-time solution–same day or as close to trade as possible,” says Dani Weigert, manager of the SuperDerivatives revaluation center.

“Every single institutional investor on the buy side and sell side is looking for an independent revaluation service, either out of fears regarding risk management and … losses caused by mismanagement of derivative positions or pressure from regulators,” says Weigert. Over the second half of 2007, the London- and New York-based options pricing, benchmarking and analytics provider saw interest peak in valuations of plain vanilla credit default swaps (CDS), credit default indexes (CDX) and collateralized debt obligations.

SD-Revaluation, introduced in 2004, also performs valuations on derivatives and underlying assets for interest rate swaps, equity options and foreign exchange options. Prices are generated through a combination of in-house modeling and market data contributed from a variety of sources. The company believes it has a better handle on valuing less-liquid, infrequently traded products due to its benchmark pricing models, which–although they don’t publish them–are “freely accessible via our pricing applications,” explains Weigert. “This is as transparent as it can get.”

Markit Group, a data and valuation services provider that specializes in over-the-counter derivatives and last month announced that it would later this year launch Markit Valuations Manager, a multidealer, cross-asset-class platform, would disagree. Jeff Gooch, Markit’s global head of trade processing and valuations, calls SuperDerivatives’ model “a black box. You can send trades and they send back values, but it won’t give you any transparency as to how their mathematics works or where they source their data from.”

Gooch asserts that Markit uses “standard math models to value trades and consensus or public sources of data along consensus credit curves. We do calibration for all banks [Markit's clients] at month’s end; and we believe we use the best data sources in the best way.”

Weigert counters: “Transparency is about providing an accurate price–not to publish a series of models. Our aim is to simulate the price that is actually traded in the market.” As to Markit’s characterization of the product, Weigert claims “that’s a sign the competitor is worried.”

Bermuda-based fund administrator Fulcrum Group, which has $10 billion in assets under administration, distributed among 50 funds, started using SD-Revaluation in August. Fulcrum services the complex strategies of investment funds, hedge funds and funds of funds, offering a range of functions from simple month-end net asset valuations to daily middle- or back-office needs.

Clients depend on Fulcrum to supply independent portfolio valuations, for which the group uses different vendors. It relies on the SuperDerivatives service primarily for valuations of CDS, CDX and a variety of OTC option types–plain vanilla, equity and FX.

“SuperDerivatives provides a much wider snapshot for what’s actually happening in the market on which to base evaluations,” says Tim Thornton, director of risk at Fulcrum. “The service provides genuine trading values, rather than theoretical market prices.”

During times of volatility, when it is difficult to mark to market, Thorton says that SD-Revaluation’s historic market data–in addition to its validated data–and models help to give a fuller picture. Because SuperDerivatives offers these details and the risk variables used to arrive at the valuations, the process is “fully transparent for our clients and the investors,” notes Thornton.

Despite last year’s market surges, Fulcrum didn’t experience any bottlenecks in submitting files and getting prices back, a process that involves collecting data across portfolios and submitting Excel files via e-mail to SuperDerivatives. The positions from SD-Revaluation are returned to Fulcrum in spreadsheets populated with customized fields. That information is then uploaded to Advent Software’s Geneva, which Fulcrum uses for portfolio management and fund accounting.

Valuation transparency became particularly important when market concerns during the volatile period prompted extra scrutiny of the process by clients, says Thornton. Fulcrum had to field more inquiries from clients doing “due diligence on how we administer or would price the portfolio,” he says.

Thornton says that he’s found the SuperDerivatives valuations to be as accurate as any found in the market. “Ultimately you’re looking for the price that represents the reality and can be supported on independent sources,” he adds. A number of auditing groups also use the SD-Revaluation service.

(c) 2008 Securities Industry News and SourceMedia, Inc. All rights reserved. Used here by permission.