Many investors understand and realise the benefits of investing into a hedge fund Managed Account. Investing directly into the underlying "Benchmark" Hedge Fund has been the traditional route but has significant disadvantages over investments into Managed Accounts.
Many investments into Hedge Funds are made by subscribing directly for shares. The prospectus (also known as the Offering Memorandum or Listing Particulars) will detail the redemption terms which in many cases are monthly, quarterly or even longer. The Fund which is managed by a Hedge Fund manager or Trading Advisor will then report to the Investor on the Fund's progress, performance and share valuation on a quarterly or bi-yearly basis.
The transparent and asset controlled route is to invest into a Managed Account which replicates and mirrors the performance characteristics of this Benchmark Hedge Fund. A Managed Account is a proprietary segregated fund vehicle where investors’ assets are pooled and are managed by the Hedge Fund Manager of the Benchmark fund. Reporting and Redemption terms are usually more favourable and the investment can be argued as less risky. MSS runs HIP which is a platform that controls many Managed Accounts.
The MSS open architecture Managed Account platform HIP is the world's largest independent platform. It segregates the assets of the Hedge Fund into a fund that replicates the characteristics and performance of the Benchmark Fund with the additional benefits of daily risk management control and reporting. If there are any potential issues with the Benchmark Fund, MSS has total control over the assets and can liquidate easily without the contamination risks usually associated with Benchmark Funds.
The role of MSS is to ensure the Hedge Fund Manager replicates his strategy pari passu with the Benchmark fund and abides by various operational and trading requirements as specified in a counter signed Investment Management mandate. MSS can also control the selection of Brokers, Clearing, OTC, CFD, Repo and other Trading Counterparties and also maintains control over the Prime Broker (books and records), the Administrator (valuation and shareholder services) and other third-party service providers. Management and Performance Fees are usually kept in line with the Benchmark fund and so incentivising the Hedge Fund Manager to manage the account in the same way as they manage the Benchmark Fund.
MSS ensures initial and on-going due diligence, style drift and risk monitoring are performed along with daily valuations. Since MSS has full access to all trades and positions it has full transparency in the Hedge Fund Manager’s trading activity and can therefore risk monitor between the Managed Account’s and the Benchmark fund’s positions and performance on a daily basis.
For the Investor, a Managed Account platform such as HIP allows access to the Hedge Fund asset class while offering more transparency in the underlying strategy, thorough risk monitoring of trading activity and valuation procedures, and enhanced liquidity thanks to order aggregation and assets’ pooling. In addition, HIP provides report customisation to better respond to specific investors’ requirements.
Investors in FTSEhx have the added transparency advantages of the FTSE Hedge index with daily NAVs available on Blooomberg, Quick and in the Financial Times.
HIP utilises the support services of a number of globally leading companies. The Administrator is SS&C Technologies and our Bankers are JP Morgan. The Custodian is Daiwa.
The Prime Brokers to the Managed Accounts include all the leading players including Goldman Sachs, Morgans Stanley, Bear Stearns, Fimat, Bank of America and UBS.