Keeping Track

FGG uses a number of tools to track and evaluate investment vehicles and managers. The firm has tools that are used for basic statistical risk-return profiling and historical performance analysis, "and then we have some very sophisticated tools on the risk-monitoring and oversight function," says Vijayvergiya.

One of the main tools, called CAI (developed with Burlingame, Calif.-based Cogency Software), allows the firm to process the collected information, add additional terms and conditions or market data, and perform data scrubbing and reconciliation. Then FGG is able to "present a portfolio at the end of every day on what our holdings are and marry that with other market fields," explains Vijayvergiya.

CAI's investment compliance module helps FGG ensure that its managers are adhering to their mandates on a daily basis, in terms of staying within certain concentration limits as to instrument type, market capitalization, sector, industry or other parameter. The firm also monitors certain portfolio activity or turnover limits.

All the information that is collected through FTP sites and other means is rolled up into the module, aggregated and fed through the platform, which then produces reports at the end of each day alerting the firm to what it terms yellow and red thresholds. "It's very useful for us because it allows us to stay very proximate to the portfolios and effectively utilize the raw, position-level data, synthesize it, efficiently aggregate it, and then represent it in an efficient and scalable manner," Vijayvergiya relates.

Jeffery Axelrod, chief technology officer with Cogency, says that investors want to know that underlying hedge funds are sticking to their investment mandates. "If one fund of hedge funds has a sloppy Excel spreadsheet and another has a nice system to be able to show some degree of transparency or at least the compliance piece -- weekly or monthly -- to their investors, that might look better to a prospective investor doing due diligence," Axelrod points out.

CAI's second module, which is populated with the same data, handles portfolio oversight. The data compiled in the module is presented in a security table featuring performance indicators, summary statistics, concentrations of top holdings, concentrations by sector, and industry and credit ratings. When the FGG investment group arrives at work, each member can monitor the funds for which he or she is responsible.