A Shadow Solution

AlphaQ  |  December 14, 2015

Post 2008 hedge funds have increasingly outsourced their back offices to fund administrators. However, with a need to maintain control, these hedge funds are now turning to a middle office shadowing solution to be performed as the next area for outsourcing. 

This need is being met by The Gravitas Platform, set up by Gravitas Founder and Chief Executive Officer Jayesh Punater, which provides front and middle office solutions, including reconciliation, cash and collateral management, regulatory reporting and risk reporting, to hedge funds. Punater says that investors like the idea of shadow functions because it gives hedge funds redundancy in key operational areas, thereby mitigating their operational risk. 

Founded in 1996, Gravitas now has over 80 international clients whose assets under management have nearly doubled in the past year, growing from USD 690 billion in 2014 to USD 1.1 trillion in 2015. 

“From supporting the portfolio manager through the general ledger or Investment Book of Records, the middle office is undergoing change,” Punater says. “The trend to use outsourced providers versus operating solely in-house has caught on because hedge funds are realizing that such providers are better equipped with both technology and workflow process to maximize their fund’s scalability.”

Gravitas is headquartered in New York with over 250 employees based out of its five worldwide locations in Chicago, Greenwich (Connecticut), Mumbai and Ahmedabad, and at various client sites. “Our primary focus at this time is the US. London is on our horizon in the next 12 to 24 months,” says Punater, as the firm is enjoying rapid growth.

“What we are discovering is that hedge funds are becoming more like asset managers. As they execute long-only products, such as UCITS or 40 Act funds, they are diversifying into different asset classes and fund structures. A 2015 hedge fund looks very different from the 2004 model,” Punater says.

The constant search for alpha, particularly in the last couple of years of mediocre performance has forced hedge funds to evolve. “They need to be agile and our platform allows them to do that,” Punater says.