HEDGEMARK

BEST MANAGED ACCOUNTS PLATFORM

The pandemic has proved a busy period for BNY Mellon’s HedgeMark, the winner of this year’s Best Managed Accounts Platform award, with 2020 and 2021 being two of its most active years for its managed client accounts.

Joshua Kestler, Global Head of HedgeMark, comments: “At the outset of the pandemic, allocators faced challenges putting capital to work given the inability to visit managers onsite. The protections associated with managed account structures, including control, improved governance and transparency, helped many of our clients overcome these challenges. The flexible and customised nature of managed account structures helped clients rapidly deploy capital to take advantage of unique market opportunities, such as coinvestments and SPACs.”

Several key trends have dominated the past 18 months which have driven client adoption of managed accounts and related growth in HedgeMark’s business.

Risk Mitigating Strategies (RMS) portfolios are intended to hedge or offset the significant equity risk in pension plan portfolios and are intended to generate positive returns when equities decline. RMS programmes generally utilise three strategy components, which include long treasury duration, trend following/capture and alternative risk premia.

“The customisation, control and transparency afforded by managed account structures, along with the ability to rebalance the portfolio intra-month, make such structures ideal for implementing an RMS programme. The initial wave of RMS allocators performed very well during some of the pandemic-related market volatility, and this success has driven a second wave of allocators implementing RMS programmes,” Kestler says.

Allocators are increasingly focusing on counterparty exposure and single-name risk. Concerns relating to counterparty losses, associated with Archegos and the volatility around internet meme stocks, such as AMC and GameStop, have driven investors to increase their focus on these specific areas of risk.

MANAGING RISK

Managed account allocators have a significant advantage in terms of understanding and managing this risk as the transparency afforded by the managed account structure allows them to monitor counterparty and single-name exposure on a daily basis. HedgeMark has therefore developed dashboards for counterparty monitoring, as well as single name monitoring, including crowded shorts, unusual volume and highly active stocks.

Allocators are also monitoring their portfolios for ESG scoring and other related analytics, with managed account structures being the ideal way to implement a portfolio requiring ESG monitoring, given the ability to customise the investment strategy and apply specific investment guidelines, and the availability of daily transparency and related tools.

Kestler also identifies co-investments as a major trend. “Many allocators see an opportunity to extract unique or additional alpha by working with managers on overflow ideas and co-investments. Clients have used managed account structures to access coinvestment opportunities in order to quickly deploy capital to these investments and maintain asset control.”

To meet these trends, Kestler says that clients are looking to outsource the noninvestment functions associated with building and operating a dedicated managed account platform, including platform structuring, fund formation, document negotiation, operations and accounting services, service provider oversight, plus risk and guideline monitoring and other analytics.

“The resources required to operate a Dedicated Managed Account (DMA) platform are specialised and significant,” Kestler says. “HedgeMark has the staff, processes, technology, and scale to deliver platform services to our clients in an efficient and cost-effective manner which alleviates the constraints of client resource capacity and the need for clients to absorb significant fixed costs associated with their platforms.”

JOSHUA KESTLER

GLOBAL HEAD, HEDGEMARK

Joshua Kestler is responsible for overall management of the business, including development and implementation of business strategy. Kestler has more than 20 years of experience in the hedge fund industry. Prior experience includes Head of Managed Account Platform Operations for Deutsche Bank’s X-Markets Hedge Fund Platform in the US and CAO of DB Advisors Hedge Fund Group. Kestler was also an associate at Schulte Roth & Zabel LLP. Kestler received a JD, cum laude, from the University of Pennsylvania Law School and a BA, summa cum laude, from Rutgers College.

HEDGEMARK

Dedicated Managed Account Solutions

BNY Mellon’s HedgeMark specializes in supporting institutional clients in the development and operation of their own private hedge fund dedicated managed account platforms.

HedgeMark combines a singular focus and a deep bench of experienced staff to offer what we believe is the most comprehensive model in the industry. HedgeMark seamlessly handles the set-up, operations and oversight of your DMA platform. We do one thing: launch and service DMAs. We’ve developed and refined our operations and technology with one purpose — to make every step of the DMA process easier, more efficient and more transparent.

HedgeMark

To learn more visit www.hedgemark.com

No representation is made that any Dedicated Managed Account’s investment process, objectives, goals or risk management techniques will or are likely to be achieved or be successful or that any Dedicated Managed Account or any underlying investment will make any profit or will not sustain losses. The risks of investing in hedge fund strategies will not be negated or even mitigated by HedgeMark’s Dedicated Managed Account platforms, analytic tools, compliance policies or monitoring and no assurance is given that any Dedicated Managed Account will not be exposed to risks, including but not limited to, significant trading losses and loss of principal. Dedicated Managed Accounts are not insured by FDIC (or any other state or federal agency) and are not deposits of or guaranteed by BNY Mellon. An investment in hedge fund strategies is speculative, should be discretionary capital set aside for speculative purposes, involves a high degree of risk and is not suitable for all investors. Investors could lose all or a substantial portion of their investment and must have the financial ability, sophistication, experience and willingness to bear the risks of an investment long term. Hedge fund strategies may be significantly leveraged and performance may be volatile. Accounts pursuing hedge fund strategies commonly enter into swaps, futures, forwards, options and other derivative transactions for various hedging and/or speculative purposes that can result in volatile fund performance.HedgeMark is a wholly owned subsidiary of The Bank of New York Mellon Corporation. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation and may also be used as a generic term to reference the Corporation as a whole and/or its various subsidiaries generally. Products and services may be provided under various brand names and in various countries by subsidiaries, affiliates, and joint ventures of The Bank of New York Mellon Corporation where authorized and regulated as required within each jurisdiction. Not all products and services are offered at all locations. The statements contained herein, are not an offer or solicitation to buy or sell any products (including financial products) or services or to participate in any particular strategy mentioned and should not be construed as such. Trademarks, service marks and logos belong to their respective owners. © 2021 The Bank of New York Mellon Corporation. All rights reserved.