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Currently, we are collaborating with a select group of hedge fund accountants who are responsible for vital financial tasks within hedge funds. These tasks encompass the meticulous organization and monitoring of fund money flows, account maintenance, transaction execution, and comprehensive record-keeping.

Our system enables us to capture trade and pricing data from major prime brokers, custodians, and data vendors. Additionally, we efficiently manage both master-feeder structures, utilizing equalization or series processing, and partnership arrangements. Our services encompass:

  • Portfolio valuations, financial statements, and other tailored reports.
  • Calculation of Net Asset Values (NAV) and maintenance of accounting records.
  • Accrual and calculation of Performance fees, Management fees for the Investment Manager, Custodian Fees, and Administrator fees.
  • Handling payment of the Fund's expenses and invoices.
  • Maintenance of the fund's General Ledger.
  • Assistance in matters of Corporate Governance.
  • Processing investment trade-related transactions and corporate actions.
  • Reconciliation of portfolio positions with independent broker/custody statements.
  • Cash reconciliation for the fund's bank and broker accounts.
  • Accrual and reconciliation of dividends and interest, aligning them with broker/custody statements.
  • Prepare accounting reports and other related documents for the investment manager and the auditor.

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Equalization accounting

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Equalization accounting Historically, hedge funds typically provide for some form of performance-based compensation to the investment manager of the hedge fund (as set out above under section 3).   This has generally been a percentage of the increase in the gross assets over the prior high water mark.  For example, if the prior performance fee period had a net asset value of 100 and the following period's net asset value was 120 then the further performance fee for the period will be paid on the amount of that increase which is 20 and the high water mark for this following period would be set at 120. Thereafter if the net asset value fell below 120, no performance fee would be payable.  Although relatively simple to understand, there were certain situations where individual shareholders would suffer a fee not in line with performance and, consequently, the investment manager would receive either too large or  too small a fee relative to the individual shar...
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PERFORMANCE FEE EQUALISATION

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When setting up a fund, one of the first decisions a manager has to make is the choice of fund structure. Partnership structures are very common in US domestic funds because they offer tax transparency to investors. Accounting calculations for partnership structures are relatively straightforward. Individual capital accounts are maintained for each partner and performance fees are calculated at the capital account level per partner. Therefore, there are no equalization issues for managers to contend with.   In Europe, a combination of other fund structures is frequently used which requires calculations of per share/unit price.   In calculating performance fees in these structures, the overriding concern among managers has been in determining how to fairly reward the manager for positive performance while at the same time ensuring investors are treated equitably. Essentially, this is where the various forms of performance fee Equalisation come in.   One of t...
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Equity Swap - Accounting

1. Learning Objectives Gain an understanding of the three primary components of equity swaps. Recognize distinctive features of equity swaps. Comprehend the motivations behind investors engaging in equity swap transactions. 2. Content An equity swap is an over-the-counter (OTC) derivative where two parties exchange cash flows. One cash flow mirrors the performance of a commonly traded stock, while the other represents interest. Cash changes hands solely at the contract's closure, either during a sale or a cover transaction, which is a characteristic shared with most derivatives. 2.1. Three Profit/Loss Components of an Equity Swap 2.1.1. Equity Leg This component reflects the performance of the underlying stock. 2.1.2. Interest Leg or Financing Leg This component signifies the interest payment the "long" side of the contract pays to the "short" side in return for benefiting from the stock's performance. Consequently, the "long" side is termed the ...
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