Hedge funds at both ends of the spectrum are facing pressures to upgrade their portfolio, risk, and order management systems. For emerging fund managers, the cost and time associated with establishing a trading and back-office infrastructure can severely restrict capital raising efforts.
At the opposite end of the spectrum, the largest funds must deal with trans-national regulations that their prime brokers and fund administrators may not be equipped to handle.
“The regulations require more governance around the reference data you’re using to make regulatory findings, as well as the ability to manipulate data through a data warehouse,” said Bennett Egeth, president of Broadridge Financial Solutions’ Investment Management division.
Broadridge has moved to address these needs by expanding its buy-side capabilities, by focusing on investment management, reference data, and risk management.
“We have 20 hedge fund administrators and prime brokers as clients,” said Egeth. “We allow them to decrease cost of ownership and focus on client-facing infrastructure, and ability to service diverse needs of clients.”
Broadridge, which has a strong presence in the sell-side as a provider of securities processing and investor communications, has consolidated the assets of Paladyne, a company it acquired in 2011, to make a push into the buy-side arena.
“A major component of our investment management business is coming from the rebranding of our Paladyne acquisition,” said Egeth. “Broadridge traditionally covered the sell side, and has a significant market presence in the sell side. We felt that the reputation we’d established in the sell side was easily transferrable to the buy side.”
Paladyne’s products serviced prime brokers and fund administrators as well as hedge funds, and those were divisions of the banks and broker dealers with whom Broadridge already had relationships. “On the hedge fund side, there was something unique about Paladyne’s product set,” said Egeth. “They were able to service the emerging manager, midsize managers, and at the time of the acquisition, six of the top 12 global hedge fund complexes with their products.”
In the two years since the Paladyne acquisition, Broadridge has added over 130 new buy-side relationships, and has institutionalized the business. It’s also introduced a market and credit risk product, both integrated in its trading tools and as a standalone system; the first 12 beta clients are either onboarded or imminently onboarded.
“When we acquired Paladyne, we didn’t understand how powerful the reference data tools were,” said Egeth. “Broadridge has a lot of reference data capabilities that we’ve combined with those from Paladyne, and we have both technology and a managed solution for managing terms and conditions and corporate actions.”
Separately, Broadridge and Lombard Risk Management, a provider of integrated collateral management, regulatory compliance and reporting, have teamed to address changing industry needs in the collateral management sector.
Collateral management is a natural extension of Broadridge’s product portfolio. It processes more than $5 trillion of fixed income and equity trades on average per day and has a significant inventory of data already residing on its platforms.
“Through our COLLINE collateral, clearing, repo and optimization technology we have significant amounts of collateral being handled through our platform and several Tier 1 banks on our client list. Our alliance will extend the use of Lombard Risk’s technology and our joint expertise within key markets and segments, particularly in the important North American market,” said John Wisbey, founder and CEO of Lombard Risk.
