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Paul, why was Alternative Investment Solutions (AIS) started, and what makes your services unique?
AIS provides a total outsourced solution of the middle and back office to hedge funds and was started to fill a void in fund administration and NAV calculations. Prior to AIS, our CEO, Boris Tiomkin had run two separate fixed income prime brokerage businesses on the street. Over the years he had been told repeatedly by hedge fund managers and investors in hedge funds of their dissatisfaction with matters such as; timeliness and accuracy of NAVs, the inability to report on securities and strategies that were not plain vanilla, the total lack of daily P&L and NAV reporting and most importantly a general failing in level of service.
With an intimate knowledge of the operational needs of hedge funds and a deep understanding of technology, Boris Tiomkin and co-founder, Dr. Yuval Lirov, set out to design a platform to address these issues. AIS uses state of the art technology and true straight through processing to provide a premier service oriented company.
A fund administrator is charged with NAV calculation at month end. AIS treats every day as if it were a month end. AIS reconciles trades, positions and cash on a daily basis, regardless of security traded or strategy employed. AIS relieves the hedge fund manager of having to learn about and build an operational infrastructure. We are told by our clients that have used other vendors or have tried to do it themselves what a relief it is to have us on their side. They don?t ever seem to get tired of telling us and we certainly never get tired of hearing it. AIS offers an outsourced operational infrastructure that is scalable and offers flexibility on both the front and back ends.
Who are the partners and what are their backgrounds?
Boris Tiomkin, CEO, founded AIS and has extensive experience in technology. After developing many technology platforms at Salomon Brothers he was asked to develop the technology platform for what was then a new business, Prime Brokerage. After having developed a platform that could report all fixed income products including mortgages, Boris was asked to join the newly-formed prime brokerage unit and ended up as co-head of the business unit. He later joined CSFB where he was responsible for building up their prime brokerage business on the fixed income side.
Dr. Yuval Lirov, CTO, co-founded AIS with Boris. Prior to co-founding AIS, Dr. Lirov founded eSpoc, a Straight Through Processing service provider in the financial industry, and was a Senior Vice President at Lehman Brothers, where he managed the support of all distributed technology. Dr. Lirov's Ph.D. dissertation in Systems Science from Washington University in St. Louis specialized in rapid solutions of highly complex problems. During the 1990s, at Lehman Brothers, he used it to build a support framework for monitoring applications and databases, cataloging batches and market data delivery, and tracking all aspects of the delivery process.
Peter Jinks, COO, is responsible for all aspects of financial control at AIS and ensuring that services provided to clients meet or in many cases exceed industry standards. He has over 18 years experience in the financial service industry. Prior to joining AIS, Mr. Jinks was Chief Financial Officer at Everest Capital Limited - a Bermuda based hedge fund, having managed up to $2.9bn of assets. As a Partner and Controller at Cantor Fitzgerald, LP, Mr. Jinks was responsible for all risk and credit issues for the European operations. Mr. Jinks is a member of the Institute of Chartered Accountants of England and Wales.
Paul Chain, Director of Sales and Marketing, is responsible for all aspects of marketing and sales. He has over 17 years experience in sales and portfolio management. Prior to joining AIS, Mr. Chain founded Lone Wolf Asset Management (LWAM), specializing in High Yield and Distressed Debt. Prior to LWAM, Paul held senior sales and management positions at Lehman Brothers and Salomon Brothers. Paul was responsible for sales of Fixed Income and Foreign Exchange products to high net worth families and hedge funds and advised wealthy families on hedging techniques relating to their equity, interest rate and foreign exchange exposure.
You mentioned flexibility on the front and back end. Can you go into a few details?
We are in a service business and with regards to that, we wanted to conform as much as possible to the needs of the fund manager, not the other way around. Different strategies and styles preclude a "one solution fits all" for the front end. Many managers have spent a lot of time and money developing or buying a sophisticated execution platform that fits the specific needs of that fund. AIS will build pipelines to the front end the manager uses or AIS can take flat files with trade information formatted as needed. However, many of our managers, particularly those in fixed income, take advantage of the alliance we have with Bloomberg that enables us to provide the Portfolio Order Management System or ?POMS?. The Bloomberg "POMS" system allows a manger to write trade tickets on any security or derivative. The system is intuitive with virtually no learning curve and no additional costs for anyone with a Bloomberg. Once a trade is entered, the position appears on your "POMS" portfolio screen and is also instantly transmitted to AIS. So now the fund manager can choose the solution that is best for the fund and is not forced to use a system that may be bulky or hard to learn.
The back end or general ledger (GL) and reporting system is the most important leg in any operational infrastructure. Our GL, Shadow Suite, is a system that was designed to run a broker dealer. This system allows us more flexibility on behalf of our clients than the typical GL that was designed to run the books of a hedge fund. Shadow handles all securities and derivatives including mortgages. It not only has a full security master database but also an investment ledger which allows us to easily place investments into tax lots for tax reporting purposes. We have added additional flexibility by creating our own suite of reports instead of relying on canned reports that may or may not suit the specific needs of the fund. Our reports are all developed with the needs of the CFO in mind, are all GAAP compliant and are extremely audit friendly.
For a company that specializes in operations, your team has a strong background in technology and finance. How do you view AIS as a company and what is most important about what you bring to your hedge fund clients?
AIS is first and foremost a service company. We use our personal experiences in building and assessing technology platforms as well as on the operational side of the business as a foundation for the service we provide to hedge funds. AIS allows a hedge fund to be up and running in a shorter time frame with a state-of-the-art back office. The manager has access to full daily P&L and attribution reporting, and an infrastructure that most hedge funds could not afford even if they had the operational experience to build. We use this foundation to provide the three things most important to the mission of AIS
If a manager is unhappy with their current situation, what does it take to convert to AIS and how onerous is the process?
This is a great question! We recently took over a fund that was unhappy with their current vendor but also very apprehensive about how difficult the transition would be. We suggested running our service parallel for one month before taking over full responsibility. After receiving a file with all positions and tax lot information as of month end we reconciled our
information with the current vendor and brokerage statements. We then reconciled cash movements. By the end of the month we were producing our daily NAV reports. Month end was finished by the third day of the month, two weeks ahead of what the fund was used to. This was an account with hundreds of swaps and derivatives in addition to their securities portfolio.
We see many managers whose dissatisfaction with their current vendor is matched by their reluctance to undertake a conversion. I can only tell you we have been through the process and the fear is greater than the reality.
There has been tremendous growth in assets under management in the hedge fund sector. How can this stress an in-house operational infrastructure and how does AIS handle that same situation.
A fund management company may have set up their operational infrastructure to handle a situation that was relevant during an earlier stage of the business. Since then they may have experienced growth in assets which in turn can generate higher trading volumes, new security types traded, a need for an additional prime broker, etc. Any of these changes that may seem minor on the surface can greatly stress an infrastructure that did not anticipate such growth and changes. An infrastructure that can handle almost all of the situations a fund is involved with is not good enough. The few situations than an infrastructure struggles with will cause an inordinate amount of problems and start to distract the managing partners away from their core competencies and distract them from their mission of investing. AIS was designed to handle not only the operational situation of the fund today but also to keep up with the operational needs the fund will have tomorrow.
Any closing comments?
AIS has a specific expertise on the operational side of the business. AIS uses technology and automation to find solutions and create a true straight-thru-processing service. Operations are what we do and where we excel. AIS performs the non-strategic but critical function that any hedge fund needs to perform. With SEC registration a potential requirement, funds will face stricter requirements for bookkeeping and a bona fide disaster recovery plan. The operational side of the hedge fund business will only grow in complexity. The outsourcing of this function is a service; it is not a platform or software package you can buy and needs to be performed by people dedicated to that fact.
For further Information contact:
Paul Chain, Director of Sales and Marketing
Alternative Investment Solutions (AIS)
201 708 9777
paul@aisgrp.com
www.aisgrp.com
