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Credit Suisse to Offer SMF to Hedge Funds

Elizabeth Lumley

NEW YORK - Credit Suisse plans to expand its prime broker services to its hedge fund clients by offering its securities master file (SMF) via a multi-function, front-to-back office alternative investment platform provided by Paladyne Systems.

The bank and vendor have started working to integrate the Paladyne suite of hedge fund systems with Credit Suisse's prime broker services, including its SMF, says Sameer Shalaby, chief executive officer at Paladyne. In addition to enabling the trade auto-routing functions of the platform, the first phase of the project will focus on the reference data services and establishing securities definitions, says Shalaby. "Reference data is a very important part of the prime broker offering," he adds.

Credit Suisse expects to offer the full suite of the hedge fund platform to its clients by the end of this year, says Shalaby.

Credit Suisse and Paladyne recently announced a strategic alliance to integrate the vendor's suite of hosted systems, aimed at the hedge fund market, with the bank's prime broker business. The partnership will allow the bank's clients to access both the Paladyne technology platform and existing Credit Suisse infrastructure. The alliance will also allow Credit Suisse to offer outsourced middle- and back-office services to hedge funds. "This is a long-term relationship with Credit Suisse," Shalaby adds.

To support reference data, the Paladyne suite contains the Security Master, which provides a centralized terms and conditions repository and distribution engine with real-time updates and corporate actions alerts, as well as the Price Master, which provides automated collection, storage and analysis of prices and market data from third-party sources.

The Security Master will integrate data from third-party datafeeds as well as from Credit Suisse's own SMF and will act on the 'golden copy model' for securities identifiers, according to Shalaby.

Paladyne has signed a deal with a large data vendor to integrate its reference datafeed with the hedge fund platform. The feed will become the preferred data supplier for Paladyne and, as a result, for Credit Suisse's prime broker services, says Shalaby. He declines to name the vendor. However, clients would be able to access additional data sources as well.

The Price Master will access data from more than 50 brokers as well as data vendors, "such as Markit," to create a historical repository for prices, says Shalaby. "Hedge funds deal with a lot of illiquid and hard-to-price securities," he says. "The repository will hold all the histories in order to price the funds."

Data cleansing for the Credit Suisse service is performed via Paladyne's relationships with providers of fund administration services, says Shalaby.

Paladyne is working with Credit Suisse to make the integration with its platform transparent to the hedge fund customers," says Shalaby. "Credit Suisse's clients should only see the prime broker, all the reporting and reconciliations should happen behind the scenes," he adds.

The Paladyne technology platform will allow Credit Suisse's clients to deal with multiple prime brokers. Most prime brokers offer proprietary technology to the alternative investment community, effectively locking them into a relationship with one prime broker, says Shalaby. "Only the largest hedge funds could afford to deal with more than one prime broker," he adds.

"Credit Suisse was very forward thinking," says Shalaby. By offering a multi-prime broker platform, the bank is running the risk of its clients extending their business to competing brokers, he says. In an official statement, Philip Vasan, managing director and head of prime broker services at Credit Suisse, stresses that the bank's priority is to meet the needs of the hedge funds industry.

Shalaby says that Paladyne had been in discussion with several other prime brokers before choosing to work with Credit Suisse - the relationship with the bank is not exclusive.

The Paladyne suite also includes Portfolio Master, which takes care of order management and allocation, portfolio management, real-time profit and loss and strategy-based performance tracking; Portfolio Analytics for analytics, data aggregation and custom reporting tools; the Client Master customer relationship management system and the Geneva portfolio accounting system from Advent Software.

Credit Suisse did not respond to a request for comment by press time.