Treasury management is a term used to describe the process of managing an enterprise’s holdings and liabilities, with the ultimate goal of controlling the firm’s liquidity and mitigating its operational, financial, and reputational risk. Treasury management is integral to the operations of a variety of financial institutions, including hedge funds who typically run complex and ever-changing books.
By leveraging modern treasury management technology, a more streamlined, transparent, and controllable operational strategy can be solidified. This allows the responsible managers and stakeholders to oversee all areas of the business’s finances, with a clearer understanding of items like leverage, collateral, securities lending, wallet, reporting, capital management, and risk management. This is critical as it helps institutions make wiser financial decisions on the behalf of their customers and investors.
While treasury management systems are popular, even necessary, within the banking sector, hedge funds of all sizes are increasingly starting to implement this technology into their own operations. Hedge funds are quickly identifying the benefits to such management systems and moving to onboard these third-party integrations into their daily workflows.
Why Treasury Management Benefits Hedge Funds
By nature, hedge funds carry a great deal of risk associated with them. By trading in liquid and illiquid assets, and using investment techniques like short selling, leverage, and derivatives, improved performance can be achieved. Yet, these methods are not certain and can yield a higher chance of negative results compared to other more conservative investment models.
Treasury management systems help improve financial oversight and act as a cost-savings tool. This is accomplished through the simplification and normalization of data files received from a hedge fund’s prime brokers, administrator, and their order management system (OMS). A treasury management system works to audit and organize data in a way that is more transparent and understandable for the related managers. This allows hedge funds the ability to better manage their cash and increase profit margins over both a short and long-term period.
While this technology presents tremendous upside, many hedge funds are still unaware or slow to adopt treasury management solutions. In doing so, they continue to incur unnecessary costs through the same inefficiencies they have been facing the past several years. Combined with the challenging environment to generate performance, this has cascaded into intensifying pressure from investors for managers to improve profitability.
As a result, hedge funds have been in search of ways to lower costs. Significant reductions have been made in the areas of execution and research, leaving portfolio financing as the last large overhead to address. Despite being the next biggest expenditure outside of personnel, hedge funds are limited in their ability to reduce financing costs due to transparency issues that exist within the space. Most hedge funds lack clear visibility and understanding of what they are paying for through their prime broker relationships. The overwhelming, complex and sometimes obscure data makes auditing for reductions near impossible from both a time and technology perspective. This is where treasury management comes into play. These technology solutions are able to audit and normalize data in a way that wasn’t possible before. Through this process, discrepancies and inefficiencies can be spotted and addressed. Items like differing prime broker spreads, shortening of currency values, and other inconsistencies help highlight areas of improvement — and money savings.
Unfortunately, many hedge funds are blind to the fact that money is being left on the table. By integrating treasury management technology into their own systems, these institutions can make a positive investment in their business, lower investor concerns, and improve financial transparency.
A Treasury Management Solution for Hedge Funds
With such a sensitive topic as financial cost-savings and prime broker data analysis, a hedge fund is rightfully wary of choosing the right technology solution. Kayenta is a revolutionary tech-forward answer to the repetitive issues that hedge funds face today. Our technology has been designed by a team of experienced finance veterans who have worked in a variety of roles at both prime brokers and hedge funds.
We understand first-hand the challenges that hedge fund managers face. In an effort to improve the relationship between both sides, we have constructed a solution that minimizes your overheads while maximizing prime broker return metrics.
You no longer have to build spreadsheets or compile reports from the multiple data reports sent by prime brokers each day. Instead, we have crafted technology that allows you to more actively and accurately manage your exposures and capital. Each day, you will see and understand what you are paying for with each of your service providers.
Our technology easily integrates with any in-house systems to provide the best ease of use for your fund. In turn, it provides a user-friendly front-end interface that allows managers to see what discrepancies exist, what charges are being placed, and where cost-savings actions can be taken. With the most accurate data available and API connectivity, our treasury management solution is delivering the most detailed and trusted information — allowing your hedge fund to make better financial decisions.
Built on the newest technologies, our solution is secure and precise. Your answer to improved finance transparency and cost savings is an investment tool called treasury management. Contact us for a free month trial, and see how your hedge fund can start saving today.