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Prime brokers doing away with OTC ‘give ups’

Wednesday, February 18, 2009 : Permalink

West Palm Beach (HedgeCo.net) – Hedge funds of varying sizes report being given notice by prime brokers that OTC derivative give up arrangements will end – quickly. Funds ranging in size from $25M to $2.5B are being told new derivative trades "done away" will no longer be accepted near the end of the first quarter and that give up relationships will end completely in April.

‘Give up arrangements’ are where the executing broker writes trade tickets on behalf of both counterparties to the trade – provided hedge funds with three advantages: easier post-trade operations, cross margining and credit intermediation.

“Challenged by investors to provide increasing levels of transparency, independent validation and reporting frequency, funds would also have to find the operational bandwidth and capability to efficiently manage the complexities of OTC trade processing involving multiple instruments, high volumes and multiple counterparties." Hans Hufschmid, CEO of GlobeOp Financial Services commented, "And the February 28 deadline after which major dealers will not accept novation consents by email looms.”

GlobeOp also noted that during the Lehman Brothers crisis in September 2008, hedge funds began diversifying counterparty risk by abandoning the practice of single prime broker give ups and converting to multiple direct counterparty relationships.

Now, Hufschmid observes, “Intense revenue pressure on banks and on credit risk overall is forcing banks with prime broking activities to take a very tough approach to profitability. Give ups were, for many, never a core business, used to support the profitable business of lending securities to hedge funds. As risk tolerances and the lending business have become less attractive, the reasons for providing low or non- profitable support services like give ups are falling away."

“If the initial signals become a trend as financial markets and the hedge fund sector restructure, out sourcing will increase in appeal as hedge funds simultaneously face increased investor demand for independent administration and robust infrastructure declining fund performance and management fees to fund or ramp up the required technology and people resources continued attractive opportunities for strategies involving OTC derivatives.”

Alex Akesson

Editor for HedgeCo.Net
Email: alex@hedgeco.net

HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on www.hedgeco.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds!

Tags: 25m, 5b, complexities, consents, core business, counterparties, credit risk, globeop financial services, independent validation, lehman brothers, palm-beach, prime broker, prime-brokers, profitable business, restructure, risk tolerances, trade operations

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Millennium Outsources all Fund Managment to GlobeOp

Thursday, January 8, 2009 : Permalink

West Palm Beach (HedgeCo.net) – Millennium Management LLC, a global multi-strategy investment management firm with over $11 billion in assets under management, has outsourced fund administration to hedge fund manager GlobeOp Financial Services.

GlobeOp became administrator of record for all three Millennium funds on January 1, 2009 (Millennium USA, LP, Millennium International, Ltd., and Millennium Global Estate, LP).

“We are sending a strong signal about our commitment to transparency and the independent validation of Millennium’s portfolio positions, asset pricing and expense allocation by appointing GlobeOp as an independent administrator, and by increasing our online investor portfolio reporting,” said Terry Feeney, co-president and chief operating officer of Millennium. “This is also consistent with our strategy of enabling our fund investment professionals to concentrate their energies on what they do best – managing portfolios – supported by the trading, operational, technology and risk management infrastructure which is essential in this industry. The quality of the services GlobeOp has provided since 2006 was key to our appointing them as our independent administrator.”

“We welcome this opportunity to strengthen our relationship with Millennium by providing independent fund administration services,” said Vernon Barback, GlobeOp president and chief operating officer. “We will quickly demonstrate to Millennium’s investors the value of our robust and scalable technology platform, 24/5 global support network, and process controls affirmed by SAS 70 Type ll certification.

Established in 2000, GlobeOp serves more than 180 clients worldwide, representing $95billion in assets under administration. As an independent financial technology specialist, GlobeOp provides automated, integrated middle and back-office administration to hedge funds and asset management firms—including banks, insurance companies, mutual & pension funds and proprietary traders.

Alex Akesson

Editor for HedgeCo.Net
Email: alex@hedgeco.net

HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on www.hedgeco.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds!

HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds!

Tags: asset-management-firms, assets-under-management, barback, expense allocation, fund administration, global estate, global support network, independent administrator, independent fund, independent validation, investment management firm, investor portfolio, millennium international, millennium management, portfolio positions, risk management infrastructure, sas 70, scalable technology platform, usa lp

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Prime brokers doing away with OTC ‘give ups’

Millennium Outsources all Fund Managment to GlobeOp

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