HEDGE FUNDS Hedge360 managed services

Achieve.

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SunGard Hedge360

HEDGE360

Achieve Institutional Credibility

SunGard Hedge360



Achieve institutional credibility

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Overview The rise of institutional investment in hedge funds has made it critical for fund managers to demonstrate robust, credible, institutional standards of technology infrastructure and business processes. By achieving operational stability, integrity and transparency across the full investment life cycle, and inspiring the confidence of regulators and investors, hedge funds can gain the “institutional credibility” they need to attract assets, maintain profitability and support ongoing growth.

Increase Operational Efficiency

Enhance Risk Management

Support Scalablity

reduce operating costs, strengthen infrastructure and support multiple strategies and complex instruments

manage regulation, increase transparency and ensure an integrated approach to risk

prepare operations for growth and focus on investment management strengths

SunGard can help Hedge360 is an integrated delivery platform that supports the full investment life cycle across front, middle- and back-office processes for hedge funds and alternative asset management firms. It helps firms achieve institutional credibility by enabling them to increase operational efficiency, enhance risk management and support scalability. The platform can be customized to include SunGard’s proven solutions for portfolio management, portfolio accounting and reporting, market risk management, risk reporting, convertible arbitrage, partnership and investor accounting, independent valuation, reconciliation, market data, and collateral consolidation and optimization, in any combination. Hedge360 is available on an installed or hosted basis. For a truly turn-key solution, it can be delivered as a fully hosted technology solution with businessfocused managed services, which operate as an extension of the hedge fund’s middle- and back-office operations team. Through this combination of technology and business managed services, Hedge360 is the only complete platform for hedge fund operations available from a single source.

SunGard Hedge360

Hedge360 Platform Components

SunGard’s Hedge360 delivery platform includes solutions for: ¡¡Portfolio management – a powerful, real-time, enterprise-

a robust, comprehensive partial differential equation model for convertible bonds and asset swaps investor accounting and reporting solution ¡¡Independent valuation – a hosted portfolio valuation

service for individual trades and holdings ¡¡Reconciliation – comprehensive, automated reconciliation

and exception management services ¡¡Market data – providing global access to real-time and

historical market data, news and analytics in a lightweight application ¡¡Collateral consolidation and optimization – a single

platform and real-time global inventory for optimizing collateral

PORTFOLIO MANAGEMENT

CONVERTIBLE ARBITRAGE

C & O C O

C

MARK ETM AP

A PT

FA S

TV

AL D ALEPE UA ND TI EN ON T

IN V

¡¡Partnership and investor accounting – a flexible, robust

RIS KR

¡¡Convertible arbitrage – dedicated functionality and

ON ATI CILI RECON

service for an independently validated view of risk

H TC L IMA A INTELLATIONL O P E RN T R O CO

¡¡Risk reporting – a cost-effective, fully hosted managed

MARK ET D AT A

portfolio construction and rebalancing via optimization

APT

¡¡Market risk management – for flexible risk reporting,

M

E ER APLAT L O

T RISK RKE MENT MANAGE MA

currency, front-to-back-office accounting and investment management solution

FRONT ARENA

& G

¡¡Portfolio accounting and reporting – a real-time, multi-

AC POR C T RE OU FO PO NT LI RT IN O IN VP G

AL N ER TIO N AT A IO LL LIDIZAT O SO M N TI X AL P

wide portfolio and risk management platform

PORTFOLIO MANAGEMENT

EPO RTING

Platform components

MO

I N V E ST I E R

PARTNERSHIP & INVESTOR ACCOUNTING

NI

S

BL TI E ERRAG V N IT COARB

E

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SunGard Hedge360



Hedge360 Managed services for hedge fund operations

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DID YOU KNOW Nearly a quarter of hedge funds expect to outsource parts of their investment management infrastructure in the next three years. SOURCE 5: AITE GROUP – HEDGE FUND TRENDS AND CHALLENGES: ACHIEVING INSTITUTIONAL CREDIBILITY.

Business overview

SunGard can help

For hedge funds today, technology can represent both a solution and a challenge. On the one hand, sophisticated front-, middle- and back-office systems are critical to delivering the institutional standards of infrastructure, transparency and reporting that investors and regulators now demand. On the other, despite high levels of automation, these high-performing applications need ongoing management and maintenance, which fund managers themselves may have neither the time, expertise nor inclination to undertake.

SunGard’s Hedge360, an integrated delivery platform for hedge funds and alternative asset management firms, is available as a fully hosted, turn-key technology solution with business managed services to address middle- and back-office processing requirements. Through Hedge360 managed services, SunGard will integrate the technology components and business functionality you require as an organization. As well as hosting the entire technology platform in secure and resilient data centers, according to industry best practice, we will run it on your behalf to manage day-to-day middle- and back-office processing and operations. As the owner and developer of the platform, we are in the strongest possible position to help hedge funds maximize the potential of Hedge360, without having to host, manage or operate the software themselves. Through our unique combination of technology and services, Hedge360 is the only complete platform for hedge fund operations available from a single source.

In large financial institutions, an entire, multi-disciplined, operations team is at the disposal of the fund manager. With margins and fees under pressure, small or newly established hedge funds will struggle to replicate this environment. However, there is now more urgency than ever to ensure high-quality operational support. To both achieve institutional credibility and maintain profitability, the operational challenge for hedge funds is therefore to: ¡¡Ensure rapid time to market for new funds or strategies ¡¡Support operations cost-effectively, with staff that have

specialist understanding of both technology solutions and complex hedge fund strategies and processes ¡¡Demonstrate robust operational capabilities for investor

due diligence ¡¡Keep on top of training requirements and updated

technology applications ¡¡Reduce the “key man” risk of dependence on individuals

or solution knowledge or experience ¡¡Provide global reach and round-the-clock processing

capabilities, without hiring operations staff in multiple locations

End-to-end management of your hedge fund operation

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SunGard Hedge360

Managed services for hedge funds Through our managed services for Hedge360, we can help hedge funds run their business more efficiently and costeffectively, with less operational risk. A small, newly launched hedge fund, for example, may lack the personnel, infrastructure, expertise and budget to get the best from a technology solution. With only a predictable, monthly fee to consider, a managed service will reduce the costs and complexity of building an institutionally credible infrastructure and training staff to operate it. Alternatively, a major financial institution such as an investment bank may be setting up or acquiring a new hedge fund. In this case, managed services could help the organization’s internal IT team reduce both costs and time to market for the specialist operations and processing that hedge fund trading requires.

The scope of our managed services SunGard has developed managed services for Hedge360 to meet two main objectives for hedge funds. The first is to run Hedge360 on your behalf. With 24-hour application monitoring and a dedicated service desk, we will manage third-party data feeds, user access requirements, reporting metrics and staff training requirements. In addition, we will handle all technical and product upgrades and fixes including minor system changes and security patches. As the solution vendor, our experienced consultants are always in the strongest position to manage the application on a day-to-day basis, provide long-term continuity of skills, and help to proactively identify new and changing requirements. The second objective is to help hedge fund managers accelerate and achieve best practice by operating the technology that makes up Hedge360, as an extension of the hedge fund’s operational team, to support middleand back-office processing needs. Through managed services, we can take care of your: Middle-office operations ¡¡Valuation ¡¡Real-time profit and loss ¡¡Desk-level risk ¡¡Business data processing ¡¡Collateral management ¡¡Securities processing

Back-office operations ¡¡Fund accounting and shadow Net Asset Value

Having already largely outsourced back-office functions, hedge fund managers are seeking additional operational efficiencies by outsourcing other non-core activities – particularly technology, legal and compliance and middle-office functions.

SOURCE: EY – EXPLORING PATHWAYS TO GROWTH: GLOBAL HEDGE FUND AND INVESTOR SURVEY

¡¡Cash management ¡¡Regulatory reporting ¡¡Risk reporting ¡¡Security master maintenance ¡¡Reconciliation and break resolution

SunGard Hedge360



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Keep operations simple but effective

Taking care of infrastructure

Ultimately, by delivering Hedge360 as a fully hosted technology solution with business-focused managed services, SunGard enables hedge funds to concentrate on their core strengths as investment managers and their main goal of alpha generation. As the only technology vendor that can meet all your operational requirements through a single platform and service, we are best placed to keep operations simple.

As standard, we will provide and manage all the hardware and software infrastructure necessary for the effective running of Hedge360, through a secure, resilient, global data center network. Ensuring 24-hour access to fully scalable IT infrastructure, we operate a robust delivery and operations framework that incorporates formal change control management, capacity management, incident and problem management, and a formal disaster recovery commitment. Thousands of customers globally trust the data centers used by our managed services for hedge funds to meet their mission-critical IT requirements, thanks to their exceptional uptime record and a commitment to independent audit and compliance standards, including ISAE-3402/SSAE-16, ISO/ IEC:27001:2005, and FFIEC.

At the same time our managed services will add value by helping to: ¡¡Improve straight-through processing and automation,

for more rapid and efficient operations ¡¡Provide better, faster analysis of trade breaks ¡¡Ensure more accurate valuation ¡¡Build scalability into operations, enabling firms to take

on new asset classes without hiring new staff – taking advantage of our own expertise

Our expertise Timely, accurate risk and regulatory reporting As well as in-depth knowledge and experience of our software, we guarantee: ¡¡Familiarity with the challenges of global hedge fund trading ¡¡E xperience of the most common errors made by prime

brokers and fund administrators ¡¡The capacity to bring new clients on board without

disrupting operations ¡¡An ability to integrate easily with your hedge fund’s culture ¡¡Expertise in the valuation of complex, exotic instruments

Timely, accurate risk and regulatory reporting

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SunGard Hedge360

Benefits of managed services for Hedge360 End-to-end management of hedge fund operations — run a cost-effective infrastructure with less operational risk By providing end-to-end management of your operational environment, from the application and servers to middle- and back-office processing, we will take a proactive role in the smooth running of your business. Tasks normally carried out in-house as part of the day-to-day function and running of our solution suite and the processes they support can be accomplished more efficiently, and with reduced risk, by SunGard. Our managed services team draws on in-depth experience of the hedge fund industry and consistently applies industry best practice. Ease of use — access a complete operational ecosystem without having to host or maintain it While SunGard hosts and runs the Hedge360 platform on your behalf, you need only a workstation and compatible internet connection to access its powerful intuitive functionality. Behind the scenes, our services team has direct access to the experts responsible for developing the core Hedge360 solution suite. We can therefore draw continually on the expertise of engineers and domain specialists to ensure our systems meet your requirements. Rapid establishment of institutional credibility — reduce time to market for robust hedge fund operations For new firms, our managed services aim to ensure unsurpassed operating efficiency and effectiveness from the start, instantly meeting the due diligence requirements of institutional and high net worth investors. Safe in the knowledge that day-to-day middle- and back-office processes are being managed in a secure, professional manner by an industry leader and domain experts, your staff can concentrate on their core strengths in investment management.

Generation of high-quality, customized data for scalable operations — introduce best practice, greater automation and standardization to data management By transforming the increasingly complex ecosystem of posttrade life-cycle data into standardized, customized information, and integrating it into your day-to-day operations, we can increase your capacity to add new funds, structures and assets, and overlay both business and investment intelligence tools.

CASE STUDY: IMPROVING INSTITUTIONAL CREDIBILITY AND REDUCING OPERATIONAL RISK WITH BUSINESS-FOCUSED MANAGED SERVICES Customer profile: Global macro investment firm. Business challenge: The customer needed to demonstrate institutional standards of infrastructure and credibility to its investors. Portfolio investment decisions required robust analysis but its existing, legacy portfolio management technology made this process increasingly challenging. Additionally the customer needed to reduce risk across its operations. Solution: SunGard’s Hedge360 was deployed as a fully hosted technology solution with business-focused managed services to support the customer’s full investment lifecycle. The solution replaced its existing portfolio management system and related spreadsheets, with real-time portfolio and risk management across its complex multi-asset portfolios, including OTC derivatives. Benefits: ¡¡Outsourcing of key operational areas including: full shadow Net Asset Value services, corporate action processing, daily position and cash reconciliations, exception management and ad hoc reporting. ¡¡Reduction

in the number of software platforms and system integrations requiring support.

¡¡Fewer

exceptions, improved portfolio visibility and real-time, accurate intraday portfolio reporting.

¡¡Elimination

of key man risk thanks to SunGard’s managed service experts.



Economies of scale and specialist experience — reduce staff costs while ensuring high levels of expertise With long-term cost transparency and predictability, and no hidden or unexpected expenses to consider, we can minimize your total cost of ownership for operations. We will provide a qualified operations team to manage highly complex hedge fund processes for a fraction of the cost of hiring personnel inhouse. This can provide, for example, immediate proficiency in valuations and accounting for a new asset class and eliminate concerns about staff turnover or training. Our ability to deliver a comprehensive, single-provider service will help you reduce complexity as well as expenditure. Timely, accurate risk and regulatory reporting — support complex strategies with efficient data management and a validated view of risk Combining consultancy with data processing, SunGard can help hedge funds collect, track and store the data required for regulatory reporting and interpret regulations as they relate to each individual business. Through our risk reporting service, we can also guarantee a wholly independent and accurate view of risk, across multi-asset portfolios and hard-to-value assets, applying a full range of risk measures. We help create timely, reliable, high-quality reports for investors, regulators and senior management, executing the data management processes that are so critical to risk management, especially for illiquid and over-the-counter instruments. Providing global processing on a 24 hour basis, and with access to a broad set of validated market data, we provide sophisticated tools for a whole range of risk measures, allowing hedge funds to model a broad array of assets with complete accuracy. Customized reporting for a more effective front office — give traders and chief financial officers instant access to reliable reports Improving the probability of outperformance frequently relies on access to high-quality historical and current information during the trading, valuation and accounting of holdings. Instant access to reliable, customized reports in a central repository will help the front office compare the advantages and disadvantages of trades on exchanges worldwide. In addition, rapid aggregation of data from multiple sources will give chief financial officers the collateral and margin pricing information they need to fund trades most cost-effectively.

SunGard Hedge360

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Reduced risk — guarantee a highly available, secure and resilient technology platform Adhering to industry best practice, including recognized standards-based frameworks for solution delivery and operation, we can deliver infrastructure and application management and monitoring 24 hours a day, 365 days per year. We will ensure proactive monitoring of both business and operational risk. Application availability will be underwritten by an appropriate, business-based SLA, and the consistent knowledge base we provide reduces the “key man” risk associated with staff turnover. Meanwhile, operational transparency is continuously assessed for internal and external compliance. Integrated support and single point of contact — ensure timely management of service requests We deliver both incident management and application feature enhancement via our dedicated service desk. Requests will be automatically routed or escalated, as appropriate, through incident resolution or feature development workflows. The service desk and an incident management and tracking portal operate on a true 24-hour basis, and allow requests to be managed efficiently, effectively and accurately while maintaining a single customer interface. Ensure expert management of your operational environment With a dedicated focus on hedge fund operations, our managed services will provide an optimal, user-friendly platform to promote investor confidence and regulatory compliance, while reducing costs and risk. To achieve institutional credibility through your operational environment, contact SunGard at [email protected]

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SunGard Hedge360

Hedge360 middle-office and back-office services SERVICES

DESCRIPTION

Operational – daily

¡¡Trade processing

By relying solely on their internal operations team, hedge funds are potentially sacrificing opportunities to build scalability, run their businesses more efficiently and differentiate themselves. They may also be less able to provide the level of transparency that regulators and investors now expect. By providing the following depth and breadth of services, SunGard can help hedge funds manage the numerous challenges of today’s increasingly complex investing and operating environment.

¡¡Pricing/valuation based on manager’s valuation policy ¡¡Corporate actions processing ¡¡Position and market value reconciliations with prime broker (PB), counterparty (CP)

or fund administrator (FA) › Cash reconciliation with PB, CP or FA ¡¡Break resolution and escalation ¡¡Expiration and exercising ¡¡End of day ¡¡Fixing and extensions

Operational – monthly

¡¡Position and market value reconciliation with PB, CP or FA ¡¡Pricing/valuation based on manager’s valuation policy ¡¡Cash reconciliation with PB, CP or FA ¡¡Accruals for income and expenses ¡¡Gross asset value (GAV)/net asset value (NAV) comparison with FA ¡¡GAV/NAV calculation

Reporting – daily

¡¡Cash/trade reconciliation report ¡¡Positions, market value and cash reconciliation with PB, CP or FA ¡¡Held positions and profit and loss (P&L) report ¡¡GAV and performance estimates report ¡¡GAV comparison report (with FA)

Reporting – month end

¡¡Positions, market value and cash reconciliation with PB, CP or FA ¡¡GAV/NAV comparison › GAV/NAV and performance ¡¡Investment P&L ¡¡Receivables/payables (dividend/interest/others) ¡¡Due to/from broker report ¡¡Portfolio exposure report and attribution ¡¡Financial statements ¡¡Investor allocations

SunGard Hedge360



Daily middle-office reporting services

DAILIES/INTRADAY REPORTS/ACTIVITY/DELIVERABLE

LOCAL T+0

Trade recapitulation

End of day

Trade confirms status

End of day

Profit and loss

End of day T+1

Position appraisal

8:00AM

Profit and loss

8:00AM

Corporate actions

8:00AM

PB/FA/CP RECONCILIATIONS ¡¡PB position reconciliation ¡¡PB cash reconciliation ¡¡ Over-the-counter (OTC) derivatives

position reconciliation

T+1

8:00AM 8:00AM

COLLATERAL MANAGEMENT ¡¡Margin call summary ¡¡Detailed margin computation

(security level)

8:00AM 8:00AM

¡¡ Open-trade-equity position

T+1

9:00AM 9:00AM 10:00AM

¡¡ Counterparty reconciliation

2:00PM

¡¡ Pledge analysis

reconciliation ¡¡Break resolution updates

T: Trade day; S: Settlement day

Intraday

OTC settlement reporting

S-1

Settlement wire package

S

Prime broker margining

T+1

Stock borrow report

T+1

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About SunGard’s Hedge360 SunGard’s Hedge360 is an integrated application suite that supports the full investment life cycle across front, middle and back-office processes for hedge funds and alternative asset management firms. Hedge360 helps customers achieve institutional credibility by assisting them in improving investment decision making, increasing operational efficiency and better managing risk and regulatory compliance. The offering can be customized to include SunGard’s proven solutions for portfolio management, accounting and reporting, risk management and reconciliation. Firms can use Hedge360 as a hosted, integrated platform, or deploy the individual applications on a hosted or installed basis. For more information, visit www.sungard.com/hedgefunds

Enabling the adaptive enterprise Sitting at the intersection of technology and finance, SunGard is focused on delivering fresh ideas and inventive solutions to help our customers adapt and thrive in an ever changing environment. With a blend of software solutions, cloud infrastructure, global service capabilities and deep domain expertise, SunGard is capable of supporting virtually every type of financial organization, including the largest and most complex institutions in the world. For more information, please visit www.sungard.com

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