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Solutions Overview
Scenario
The client is a convertible hedge fund whose growth had gotten ahead of its systems. The position keeping and trade reconciliation systems were essentially manual and were lacking comprehensive risk assessment. The client wanted to upgrade their systems with an eye for future enhancements from the desktop.
Company Profile
The client is a CA-based convertible arbitrage hedge fund with over 300 million in assets.
Situation
As the firm grew, accounting systems had not grown with it. The firm was looking for a comprehensive system that would include position keeping, risk reporting and trade entry, while keeping both sides of the hedge transaction together. They were comfortable with Excel, but knew that they had outgrown the Excel-based system developed when they were much smaller. Willow implemented a SQL Server database, with Excel templates for trade entry, reconciliation, and report generation. With the data now dynamically accessible in a database, the client can take their performance analysis to the next level.
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- The client hired Willow Solutions to improve their hedge accounting and reporting.
- Willow streamlined order entry and hedge accountability while improving data control and vastly improving productivity.
- Data was moved from an Excel-based, worksheet driven storage system to a SQL Server database. Excel was used for data entry and report generation.
The client is a hedge fund that specializes in convertible arbitrage. The firm has grown substantially over the years and their trading system and position-keeping system was not keeping up with the growth. Positions were entered manually in at least two places, including reportage to Polar, their prime broker Bear Stearns' position keeping system. As they doubled, then tripled the number of traders in the firm, the system became unwieldy: the daily reconciliation required 3 hours and the monthly reconciliation required 3 days.
The central problem with convertible arbitrage position keeping is to maintain a balance between the prices of the convertible bond and the underlying stock. As prices change, positions must be adjusted, while keeping careful tabs on all positions entered into as part of the strategy. When the firm was ready to dissolve a strategy and unwind the hedge position, they needed to be sure the hedge was closed out completely.
Willow set out to create a flexible position keeping solution that would keep Excel's ease of use on the desktop, while adding power to the back end with a SQL Sever database engine. Trades would only be entered once and their relationship to an overall strategy was documented. An automated report was created to supply to information to their prime broker, eliminating double bookkeeping.
Willow recognized the client's desire for flexibility by incorporating Excel in the report generation solution. Templates were created for common tasks and to use as a guide for future development needs.
Willow delivered huge productivity increases: the daily reconciliation, which had previously taken three hours, was finished in seconds. The monthly reconciliation was ready in moments. These gains freed time for performance evaluation and risk assessment.
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