Nezu Asia, a Hong-Kong-based hedge fund with over $1 billion in assets under management, has deployed trading technology firm Portware’s Enterprise execution management system throughout the company.
Nezu, a long/short equity fund, chose the solution to help support its growing business, the firm’s head trader, Nick Longcroft, told theTRADEnews.com. “The challenge is that we now have multiple people managing different slices of capital,” says Longcroft. “The trading system needs to be able to manage that and make sure exposure is being reflected to those managers in the way they need to see it. Then it needs to change that exposure, which results in trades that the system handles, in a way that is truly transparent and accurate. That is highly complex.”
Given Nezu’s exacting requirements, the firm needed a highly adaptable system. “We wanted to be able to buy something that could be customised to the way that we handle tickets from the fund managers and route those tickets seamlessly to the market,” explains Longcroft.
The search took two years because most of the available systems would only do part of what Nezu needed. “There were applications that did ticket management quite well, there were applications that did execution management quite well, but there was very little that did both,” says Longcroft. “After two years the only application we could find that could be customisable to the degree we needed was Portware.”
Nezu wanted to avoid using one provider for the core trading module and others for the customisable elements because of the resulting complexity. Two different providers means two different technical support teams, and it is not always clear which one is responsible if a particular issue arises with the platform, according to Longcroft. And growing and adding more features would add still further complexity.
“Before you know it, you’ve got a Frankenstein’s monster that is extremely expensive and complex to manage, and tends to be unreliable,” says Longcroft. “The good thing about Portware is that we do everything in that system. All of the customisation is done using the algorithmic nature of Portware.”
Because the platform is customisable, Longcroft believes it should be able to adapt to any further changes Nezu makes to its trading strategy. “At the moment we are long/short equity, but there is no reason that we can’t plug any other strategy into the system,” he says. “There is no reason why Portware won’t be able to handle the share routing component of those strategies. That is a compelling proposition for us.”
The new trading platform should also help Nezu tackle some of the challenges of trading in Asia’s diverse markets, including those in which a hedge fund or asset manager has to submit the registration ID for a particular fund when trading for it. “If you have multiple funds within a strategy, you have to send that ID with that slice of shares and you have to pre-allocate,” says Longcroft. “That’s pretty complicated, and very few systems that we found can handle all of that pre-allocation process and ID matching and all of the connectivity issues.”
Because many of the available systems are built outside Asia, they are often not suited to handling the nuances of the region. “Most out-of-the-box solutions come from the US or the UK where, with the exception of CFD trading, there really isn’t that much of a swap-related component to these applications,” says Longcroft. “We were able to design all of that into Portware, which was a big value-add.”
Given the pace of change in Asian markets, and the number of new trading venues and algorithms emerging, traders need a tool to help pull all this together, according to Scott DePetris, global head of accounts at Portware. “Hedge funds and the buy-side institutions are now looking for a single, consolidated environment to increase workflow efficiencies and transparency internally, have a full audit trail and take advantage of the new pools of liquidity and algorithmic offerings that are now available,” he says.