Landytech Helps Hedge Fund Achieve Substantial Cost Savings

Case-study


Introduction

Managing multi-strategy portfolios in a fast-changing market environment is hugely challenging from a risk perspective. After a recommendation from a market peer, a UK-based multi-strategy hedge fund approached Landytech for a managed solution that would provide expert risk management support, as establishing and maintaining this function inhouse would come at significant cost. By taking advantage of Landytech’s Sesame solution and professional service expertise, the hedge fund has been able to achieve substantial cost savings compared to employing an equivalently qualified in-house risk resource.

Client: Multi-strategy hedge fund

Description: UK-based hedge fund launched in 2020 with a focus on credit

The Business and the Challenge

Launched in early 2020 by two senior professionals from a leading alternative asset manager, the firm runs two convertible arbitrage funds, with a focus on long convertible bonds, some single equity short positions, SPACs and low volumes of long common stock positions. From their experience working at a large alternative asset manager, the founders knew how imperative effective risk management would be to their success. To meet their needs, they needed a sophisticated, granular risk analysis solution with a credit-oriented focus and ability to cover credit arbitrage.

As a start-up manager with approximately $50m in assets under management, the firm didn’t want to be saddled with the substantial cost burden of establishing and running an in-house operations team. Instead, the founders wanted a managed solution that could provide the expert risk management support they required.

The founders wanted a managed solution that could provide the expert risk management support they required.

The Solution

One of the hedge fund’s market peers recommended Landytech’s investment and risk reporting solution, Sesame, to the founders.

Sesame’s cutting-edge technology centralises investment data of any type and from any source to provide decision makers with a single source of truth. Through a strategic partnership with MSCI RiskMetrics, Sesame delivers advanced risk and performance analytics – including customisable scenario analysis, historical and (non) correlated stress testing, VAR sensitivity and performance contribution/attribution – to provide non-tier 1 asset managers with tier 1-quality risk, compliance and client reporting at a fraction of the traditional cost.

Sesame’s intelligent tools allow easy navigation into the complexities of the investment portfolios, producing sophisticated analysis, on-demand visualisations and custom reports, along with critical alerts on any internally-determined limits to help users make better and more informed investment decisions.

The Sesame risk platform combines with Landytech’s managed service offering, bringing the added value of experienced, professional risk oversight. The combination has proven a perfect fit for the multi-strategy hedge fund.

The Sesame risk platform combines with Landytech’s managed service offering, bringing the added value of experienced, professional risk oversight

Reaping the benefits

Working in partnership with the fund, Landytech began by creating a set of customised risk measures and reports to meet the client’s exact coverage needs and ensure continuous oversight of the modelling of bonds in RiskMetrics. The focus was on VaR sensitivity, CSO1, DVO1 and portfolio Greeks, along with position, exposition and sector concentrations.

Customised reports detail the different types of risk in the portfolios. The reports cover exposures by strategy and asset class, top long and top short, the VaR for each position, and various ‘on-demand’ stress test scenarios that Landytech created in RiskMetrics to meet the client’s requirements. For certain metrics, the hedge fund requires the exclusion of some assets, with the results reflected in the reports as well. The Landytech solution also checks on an ongoing basis that the data in RiskMetrics matches that from the hedge fund’s custodian.

In addition, the client and Landytech collaborated to develop and implement a robust risk governance framework covering risk limits, risk processes, weekly risk meetings, investment limits, alerts and daily risk reports.

Covid-19 hit soon after the hedge fund’s launch. The Landytech team responded quickly by creating specific analytics for a crisis environment – including dedicated Covid-19 stress tests, and V-, U- and L-shaped recovery scenarios – while ensuring business continuity and report analytics accuracy.

This rapid responsiveness remains a key element of Landytech’s ongoing service. As the client’s instrument coverage requirements continue to evolve, Landytech in turn has expanded the multi-strategy coverage for the firm to include SPACS, new issuance restructuring, debt restructuring, new equities, high delta convertible bonds, deep value credits, less liquid credit investments and credit default swaps.

Managing multi-strategy portfolios in a fast-changing market environment is hugely challenging from a risk perspective. By taking advantage of Landytech’s Sesame solution and managed service, the hedge fund has been able to achieve substantial cost savings compared to employing an equivalently qualified in-house risk resource. The sophisticated capabilities offered by the Sesame solution are also adding to the firm’s bottom line, helping it navigate the market dislocations and achieve a 10% return in its first year – impressive performance in highly unusual and difficult circumstances.

The hedge fund has been able to achieve substantial cost savings compared to employing an equivalently qualified in-house risk resource.

Related content

16 Sep 2022 | Blog

The data problem behind SFDR reporting and disclosures
In order to be SFDR compliant, firms will be dependent on both reliable and trustworthy data. Learn more about the key challenges firms need to overcome.
Read blog arrow-read-more

17 Aug 2022 | Guide

Saving time and resources on regulatory reporting
In this guide, we outline the key regulatory reporting challenges and how technology can play a vital role in relieving the operational burden and costs of compliance.
Download now arrow-read-more

10 Aug 2022 | Infographic

Top 5 Regulatory Reporting Challenges for Asset Managers in 2022
Asset managers have faced nothing short of a regulatory onslaught in recent years. With demands set to only increase, explore the top 5 challenges firms face when it comes to regulatory reporting.
Download now arrow-read-more

3 Aug 2022 | Blog

The Top 10 Asset Management Trends in 2022
In this blog, we look at the top 10 trends shaping the asset management industry in 2022 and their implications. 
Read blog arrow-read-more

28 Jul 2022 | Blog

Quarterly Regulatory Round-up: Q3 2022
In this regulatory round-up, we break down the key regulatory updates and their practical implications for EU and UK-based asset managers in the coming months.
Read blog arrow-read-more

27 Jul 2022 | Checklist

Client Reporting for Asset Managers

For emerging managers, exceptional reporting can go a long way to creating loyal clients and greater client retention. Identify where you could make efficiencies and upgrade your reporting with this checklist.

Download now arrow-read-more

4 Jul 2022 | Blog

The asset manager’s how-to guide to ESG reporting
Reporting is not an easy landscape to navigate when it comes to ESG. To tackle the ambiguity, we've put this guide together to help asset managers navigate the challenging world of ESG reporting.
Read blog arrow-read-more

1 Jun 2022 | Blog

How Sesame Revolutionises Reporting for Asset Managers
As investor service expectations evolve in their pursuit of clearer insights, new risk metrics and visually compelling reports, asset managers need the on-demand flexibility to keep up.  Find out how Sesame revolutionising reporting for asset managers. 
Read blog arrow-read-more

31 May 2022 | Blog

The Ultimate Guide to Offshore Trust Jurisdictions
When deciding which jurisdiction is the most suitable for an offshore trust, there are several factors to consider. In this blog we explore the top locations to set up an offshore trust.
Read blog arrow-read-more

26 May 2022 | Blog

4 top trends driving the ESG reporting agenda in 2022
Inflows into ESG funds have increased exponentially in recent years, but what is shaping the ESG agenda for asset managers?
Read blog arrow-read-more

13 May 2022 | Blog

6 things you need to build investment reports that clients love

Through conversations with asset and private wealth managers our Client Operations Director, Kathleen Henrick, has identified six key requirements for creating investment reports that clients love.

Read blog arrow-read-more

6 May 2022 | Blog

SFDR Article 6, 8 and 9 products explained. What do the classifications mean?
In this article we dissect what is meant by SFDR Articles 6,8 & 9 and the implications for asset managers.
Read blog arrow-read-more

4 May 2022 | Guide

10 things to avoid when choosing an investment reporting provider

Selecting a digital solution for data consolidation and investment reporting is a big decision, one many asset and private wealth managers cannot afford to get wrong. It can be hard to know where to start when assessing a provider, and there are many pitfalls.

Discover the 10 key things to avoid when choosing an investment reporting solution.

Download now arrow-read-more

19 Apr 2022 | Blog

Why investment reporting needs to change

Across the investment management spectrum, the need for a radically different approach to investment reporting has never been greater.  

In this shifting landscape, implementing a data-driven, agile approach to investment reporting can help asset and wealth managers get back ahead of the game. 

Read blog arrow-read-more

15 Apr 2022 | Webinar

Risk management: What do allocators expect?
Watch as our expert panel discuss the best practices in risk management and what asset managers need to ensure they can attract institutional capital, at a time of increased market volatility and increasing allocator expectations.
Watch now arrow-read-more

29 Mar 2022 | Blog

The best practices in investment risk management you need to follow in 2022

For risk management, the ability to demonstrate extensive expertise alongside a deep understanding of the investment side of the business is crucial. But what best practices do firms need to follow to achieve an institutional-level standard of risk management? 

Read blog arrow-read-more

23 Mar 2022 | Whitepaper

Risk management: What do allocators expect?

An in-depth guide to risk management featuring insights from asset management and due diligence professionals.

 

Download now arrow-read-more

10 Mar 2022 | Blog

Portfolio analytics: Why cloud solutions are the future
The need to manage large volumes of data and perform complex calculations at speed have left many firms’ legacy systems and outdated technology struggling to keep up.  It’s time to take to the cloud. 
Read blog arrow-read-more

1 Mar 2022 | Blog

5 reasons you need a wealth management API

As fast, sophisticated data management becomes business critical, what are the benefits data APIs can offer your organisation?

Read blog arrow-read-more

15 Feb 2022 | Blog

Cloud-based investment management software: 5 reasons you can’t afford anything else  

In a world of rising client, regulator and staff expectations, portfolio and risk management capabilities quickly become outdated. Cloud-based platforms offer the solution.

Read blog arrow-read-more

11 Jan 2022 | Blog

The cost of meeting allocators' risk management expectations for asset managers

Implementing a fit-for-purpose risk management and reporting function is expensive. But for asset managers, the cost of sub-standard risk capabilities is even higher.

Read blog arrow-read-more

16 Dec 2021 | Case Study

Landytech Helps Hedge Fund Achieve Substantial Cost Savings

After a recommendation from a market peer, a UK-based multi-strategy hedge fund approached Landytech for a managed solution that would provide expert risk management support, as establishing and maintaining this function inhouse would come at significant cost. Read the full case study here.

Read case study arrow-read-more

15 Dec 2021 | Blog

The 5 must-have capabilities for managing the risk function in-house

So you know you need a robust, institutional-grade risk management capability to attract investor allocations and meet clients’ ongoing demands. But what does a fit-for-purpose risk management and reporting function entail in practice?

Read blog arrow-read-more

7 Dec 2021 | Blog

4 things asset managers should look for in a risk management provider

Faced with demanding investor and regulatory expectations, asset managers are increasingly turning to third-party risk management providers.

Read blog arrow-read-more

24 Nov 2021 | Case Study

Equity Manager Transforms Risk Management and Institutional Client Reporting Process with Sesame

Skerryvore Asset Management needed a sophisticated risk management and data analysis platform to meet the exacting due diligence requirements of institutional investors and so help grow its business. Read the full case study here.

Read case study arrow-read-more

18 Nov 2021 | Whitepaper

The True Cost of Risk for Asset Managers

Comprehensive risk management capabilities are an integral and growing ingredient in asset manager success. Since the 2008 financial crisis, the value a strong risk management infrastructure and team bring has moved to the fore. Download our whitepaper examining the true cost of risk for asset managers.

Download now arrow-read-more

Get in Touch

If you would like to learn more about Landytech’s solutions for asset managers, and how we can help improve risk management, analysis and reporting to clients and regulators, please contact our team of experts.

Get in touch illustration