Multi-manager transparency: allocations, fees, and performance

The UK-based Man Group employs a multi-manager platform, perhaps the most complicated hedge fund business model, in which they gain exposure to diverse segments, asset classes, and sectors. In doing so, they can execute virtually any strategy, and trade in multi-asset portfolios. It is working; Man Group has grown its asset base by 25% in five years.ⁱⁱⁱ

To make these funds excel, they must have the operational agility to look at the overall portfolio but also drill down to manager-by-manager data within their roster of independent investment teams. Transparency into manager-level exposures and risk from a top-level perspective is a necessity in understanding how different strategies interact. However, precise allocations to track performance and management fees for optimized fund performance is no simple task, especially in firms still using fragmented systems and manual data quality management processes.

Solving complex multi-manager allocations and performance

In a multi-manager structure, the firm incentivizes each manager to perform with performance and management fees and evaluates them based on their portfolio. If a firm incorrectly tracks allocations or the performance of individual managers, they risk inaccurate accruals or payments, errant investor reporting, and a skewed appraisal of liquidity and cash flow. Further, the firm will be hamstrung when it comes to rewarding and extending capital to the best managers.

Arcesium’s multi-asset hedge fund operations platform, called Opterra, includes modules like Financial Data Stack for mastering reference data across asset classes, markets, and life cycle events, Universal Book of Record (UBOR) investment accounting, and PerformA investor accounting. It is designed expressly to help funds thrive in the kinds of complexity like multi-manager structures, offering them separate strategy views, allocations, and performance. For more information on the critical factors for hedge funds to consider when moving to or investing in a multi-manager platform model, see our previous article The Rise of Multi-Manager Hedge Funds.

The aforementioned Man Group is a behemoth fund, boasting over $190 billion in AUM. However, multi-strats are no longer the sole domain of large shops. Technology has changed the playing field.