Hedge Fund: OpHedge
Solve Problems, Get It Done
Optimum Service, After Trades
Second in a continuing series
The interview: Meet Stephen Kane, principal, and Robert A. Harris, CCO and general counsel, of OpHedge Investment Services (Rye Brook, New York) who explain the firm’s role as a fund operations/administration provider of solutions for middle and back-office operations. OpHedge is a fund operations/administration service provider, headquartered in Rye Brook, New York, with offices in Shanghai, China, and Georgetown, Cayman Islands.
By Russ Jones
with Lisa Schroder
Markets Editor
Stephen Kane, principal, and Michael Heffernan, principal, OpHedge
Investment Services."No problem can stand the assault of sustained thinking." - Voltaire
Deliver solutions with consistent quality and intergrity and the world of business will find a way to your door.
In the universe that is hedge funds operations, attention to details matters.
Middle and back-office operations involve everything after that trade is done, meaning settling all the trades, pricing the book on a daily basis, calculating a NAV (net asset value), doing all the reconciliations, reconciling all the cash accounts—the nuts and bolts.
"All the accounting, all these things that absolutely have to get done," says Stephen Kane, principal of OpHedge Investment Services. “That gives that hedge fund manager a little bit more leverage when he goes to the institutional investor and simply says, ‘Look, this is what I’m good at. I know how to trade, I know how to make money. These guys over here, they’re clearing everything for me, they’re doing all the pricing on a daily basis, they’ve got very thorough monthly controls, daily controls."
“And the investor says, ‘This makes me feel good. I can give you my money, and I know there’s somebody who’s not legally affiliated with you processing your trades and doing your P&L.’”
There are a lot of things that need to happen on a daily basis, Kane says, noting that the firm from the very beginning has always been focused on automating as much as possible.
Kane lists some of the services that OpHedge offers for middle office, which involves facilitating the processing of trades, approving trades, making sure they are booked correctly, confirming them with their executing brokers on the street collateral management, which involves taking all the exposures of clients’ portfolios, getting market data, and pricing their portfolio; treasury functions, facilitating how clients want to execute trades to invest that money on a daily basis; profit and loss (P&L), including a daily end-of-day P&L for all clients for their entire portfolio.
“We don’t trade. We are not allowed to trade,” Kane explains, but OpHedge does arm clients with the correct information that they need to help them manage their cash, including currency exposure reports and repo/financing rollover reports.
Is there a need for hedge funds to outsource functions to a third-party provider?
“I think there’s a tremendous need in the marketplace for a hedge fund administrator that is knowledgeable and proficient at solving problems and enabling hedge funds to do what they do best,” says Kane. “Expect new things to happen every day. When new things happen, an administrator has to be able to adapt, improvise, and solve problems.”
He tells prospective clients: “You’re not simply hiring a canned service provider, that’s not what we’re doing here. You are basically hiring us as individuals. You’re hiring our skill set. You’re hiring our ability to be your middle and back office.”
He continues, “When new things come down the road, the answer will not be ‘No, we can’t do it.’ The answer will be ‘Let’s figure out the best solution for this new kind of thing—together.’”
Kane says he views interacting with clients as a partnership.
“I want them to look at us as somebody who will help them to solve some of the complex problems that come along with settling and pricing complex derivative securities or whatever it is they have in their portfolio.”
Robert Harris, OpHedge CCO and general counsel, comments on what sets the firm apart.
“The seven principals of this company have all in their own spheres reached levels of professional achievement and don’t need the particular jobs they have right now. We set ourselves out to be—[OpHedge CEO] Tom Chang uses the phrase—the 'Tiffany provider’ of the industry,” says Harris. “There is a great deal of professional pride in terms of quality of service that these guys have. We recognize that if we are in fact going to be the 'Tiffany', that we have to be able to tailor our services as opposed to being the department store with just a rack of clothes, where you come and you buy what we have, and if we don’t, then too bad. We understand what it takes in order to fulfill the market niche that we’ve set out for ourselves.”
OpHedge’s target clients are multi-strategy hedge funds that invest in a wide range of securities, both cash traded and OTC (over the counter) derivatives. “We are not going to be all things to every fund,” says Kane. “We’re targeting the multi-strategy funds who will see the best benefit from what we do. The funds that have various portfolio managers trading a number of different strategies that we’re familiar with.”
Kane emphasizes that OpHedge is all about efficiently processing and efficiently performing all the services for its clients. “We clearly see a need for a premiere service provider in this marketplace and we are doing that,” he says. “That’s what we do every day.”
Resources: OpHedge is a fund operations/administration service provider, headquartered in Rye Brook, New York, with offices in Shanghai, China and Georgetown, Cayman Islands. For more information call (914) 935-8000; e-mail info@ohis.com or visit www.ophedge.com
