US institutional broker Cuttone & Company has teamed up with software firm Nirvana solutions to launch Compass, a combined trading and portfolio management system designed to help hedge funds manage multiple prime brokerage relationships.
The platform provides funds with a real-time view of assets, risk exposure and profit and loss across all their prime brokerage accounts and offers an integrated execution and order management system that supports multi-asset and multi-currency trading, auditing and reporting. This allows funds to examine exposures at all stages in the trade life cycle.
Cuttone claims that Compass will help funds tackle two challenges they face in the post-Lehman market: the need to spread risk among more counterparties; and the need for faster updates on trade status in volatile markets.
“With counterparty risk coming to the forefront of all hedge funds’ businesses, multiple prime brokerage has gone from being a luxury to a necessity,” Fred Scuteri, senior vice-president and head of prime brokerage business at Cuttone, told theTRADEnews.com. “Even smaller funds want to manage counterparty risk, make sure their assets are in multiple places to be better prepared for the types of events that affected Lehman and Bear Stearns.”
Scuteri says that prime brokers typically provide daily trading activity reports on a T+1 basis. “Because the landscape of the business has changed so much, clients need that information dynamically and on demand,” he said. “We have taken all of the information that is normally provided to a hedge fund client on T+1 and given it to them in real time and on trade date.”
While Compass is aimed at hedge funds of all sizes, Cuttone thinks it could be particularly appealing to smaller funds, who have previously shunned multi-prime relationships because of the cost of managing them. “Providing smaller hedge funds with a lot of the same trading, reporting and accounting capabilities as their bigger counterparts allows them to compete with those funds to raise capital and grow,” said Bret Goldin, director of prime brokerage sales at Cuttone.