NEW YORK (HedgeWorld.com)–Taking advantage of demand for customized hedge funds of funds and transparency, Arden Asset Management is launching a new fund of funds initiative catering to large institutional investors.
The customized fund of funds will offer full risk transparency with comprehensive risk analysis and attribution reports. The reporting functions were built using the data aggregation and risk management technology of RiskMetrics Group, New York. Investors will get risk transparency information based on the full position data provided by underlying fund managers.
In turn, Arden is using RiskMetrics to conduct stress testing and scenario analysis of the fund of funds portfolio. Arden officials said that the RiskMetrics’ platform will not only complement the overall risk management process at Arden, but will not compromise the confidential nature of the underlying managers’ portfolios.
Fund of funds provider Tremont Advisers Inc.* also hired RiskMetrics last November to develop web-based risk reporting for hedge fund managers and investors.
“We have come to believe, based on feedback from large institutional investors, that there is a gap in traditional risk management and reporting for traditional portfolios,” said Henry P. Davis, managing director and member of the investment committee at Arden. “What this represents is a form of risk reporting that can be integrated with traditional long-only risk reporting programs.”
The new customized fund is currently in use by a large institutional investor, which Mr. Davis declined to identify. The underlying managers are providing full position data and in turn institutional investors are able to have independent third-party verification of the portfolio’s risk factors. The underlying managers, which in total are an inventory of respectable size, Mr. Davis said, would also get a copy or their risk exposure report compiled by RiskMetrics.
Separately, Arden announced that its London office recently received approval from U.K. regulator, Financial Services Authority, and has begun operations there. Ian McDonald and Todd Walters, both formerly of Morgan Stanley’s International prime brokerage group, will run the office, primarily focusing their efforts on hedge fund manager due diligence and capital market research.
It’s expected that the London office will help Arden to monitor European financial markets and develop closer ties with European hedge fund managers. Arden’s overall investment process is coordinated from New York by the firm’s three member investment committee, consisting of Mr. Davis, who is responsible for manager due diligence and monitoring at Arden, Averell H. Mortimer, president of the firm and Stefan Zellmer, who oversees Arden’s risk management activities.
Dedicated to managing absolute return funds of funds, the firm has US$2.5 billion in assets under management. Arden manages assets for both institutional and high-net-worth investors. In June 2001, Arden formed a strategic partnership with Phoenix Investment Partners Ltd., Hartford, Conn., to develop and distribute a hedge fund of funds program to Phoenix’s client base.
*Tremont Advisers Inc., Rye, N.Y., is a minority investor in and strategic partner with HedgeWorld.