SS&C Technologies, Inc., a global provider of financial services software and software-enabled services, held its 5th Annual Hedge Fund Symposium, on 13 March at the Westbury Hotel in London. This industry event discussed two key trends facing hedge funds today: risk and liquidity management. The event attracted more than 85 hedge funds and featured a thought leadership panel on current and future challenges for hedge funds.
The panel was moderated by Richard Greensted of Scrip Issue, and participants included Simon Hookway, CEO of MSS Capital; Stuart McLaren, Partner at Deloitte & Touche; Mike Murphy, Head of Equity and Derivative Prime Services London at BNP Paribas; Kerrie Walsh, Special Counsel at Shulte Roth & Zabel; and Joe Seet, Senior Partner at Sigma Partnership. On the general liquidity landscape theme, Mike Murphy, Head of Equity and Derivative Prime Services London at BNP Paribas, commented, "This is the worst lending liquidity cycle we've seen. The current cycle reaches further than what happened back in 1998, which was primarily based on Long Term Capital Management and Russia".
Expanding upon the current liquidity issues facing the industry, Joe Seet, Senior Partner at Sigma Partnership, asked, "Is a portfolio of structured products which are engineered by the banks, truly safe investments given that the bid-ask quotes on these are often only available from the banks themselves? The problem gets worse when the collateral value of these investments is determined solely by the banks."
On the topic of risk management, Simon Hookway CEO of MSS Capital advised, "The aftermath that resonates most from sub-prime is risk management and mitigation. Clearly this particular episode rendered VaR as an inferior methodology. Depending on their style, managers should employ a duty of care on behalf of their client by deploying appropriate models and measures to ensure risk containment is optimised."
Co-host of the event Frank Glock, Manager of SS&C Funds Services EMEA, an independent Fund Administration service provider, elaborated on the risk management subject, "As hedge fund managers and industry practitioners, the industry is in a very different place to where we were at our last symposium in June. Clearly 2008 will present multiple challenges but also many opportunities for the alternatives sector. In many ways, this year will be a defining period with clear evidence in the last few months showing a wholesale decline in start ups but conversely exponential growth in the already established players. Having the right service provider and technology partner helps ensure that managers stay ahead of the game. As one of the largest players globally, SS&C Fund Services is a well-placed partner who can offer hedge funds peace of mind and collateral to focus on their core competencies â to generate alpha."
The panel concluded that hedge funds that effectively address liquidity and risk management and risk mitigation will achieve success now and for the future. In addition, the panel believes the ability to overcome the challenges of an evolving regulatory environment, increasingly volatile markets and increased competition has never been more critical.