FoHF liquidity analysis


Environment

The client is a key player managing significant assets in the fund of hedge funds (FoHF) market.

Indicative volumes are:

● 18 USD Bi of AUM
● 100+ portfolios
● 200+ FoHF
● 500+ HF
● 5000+ securities

Challenge

The Global Head of Risk required an accurate view of the liquidity of all the fund of hedge funds (FoHF) assets, notably to identify any mismatch between the redemption terms of the HoHF and the underlying assets . The information on the liquidity of the FoHFs and the hedge funds had previously been stored as comments in various databases. Any analysis was extremely time consuming.

Solution

Soft-Finance designed a structure to capture the redemption conditions of the hedge funds and fund of funds.
This meant that it was possible to fully automate the process of contractual liquidity analysis.
The Financial Services Authority subsequently invited Soft-Finance to address this topic at an internal workshop
in October 2008, a critical period of systemic regulatory concern.