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Hedge Funds Outsource to Independent Fund Administrators

In wake of financial crisis and Madoff case, hedge funds look to outsiders to verify positions and net asset values.

With the events of last year in the credit markets and the Madoff scandal sounding another alarm bell, hedge funds are turning to independent fund administrators to validate the net asset value of their funds and calm investors.

Yesterday, Millennium Management LLC, a global multi-strategy investment management firm with over $13 billion in assets under management, said it outsourced fund administration to GlobeOp Financial Services. GlobeOp is an independent financial technology specialist that provides integrated middle and back-office, administration and reporting services to hedge funds and asset management firms.

"Given what's happened last year and given the Madoff situation, you can't be careful enough," commented Hans Hufschmid, CEO of Globe Op who is based in London.

While Millennium had used GlobeOp for independent valuation, share registry and transfer services for the Millennium International fund since 2006, the outsourcing firm received the expanded mandate a few weeks ago, said Hufschmid. "We'll do everything that is required to essentially verify the books and records, positions, trade records and valuations," said GlobeOp's chief executive.

Though Hufschmid said he had not see a position sheet, in general multi-strategy funds means a fund manager is trading all sorts of different strategies including equities and fixed income and most likely is involved with over-the counter derivatives. According to its Web site, Millennium allocates capital globally across a diverse set of strategies and asset classes including relative value/fundamental equity, merger arbitrage, futures/currency arbitrage, statistical arbitrage, options arbitrage and distressed investing. Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio

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