Lighthouse Using Paladyne Platform for Managed Accounts
January 9, 2007 - Hedge fund technology company Paladyne Systems said that Lighthouse Partners of Palm Beach Gardens, Fla., which has $5.6 billion under management, will use the Paladyne ASP hosted system for its managed accounts business. The ASP, or application service provider, system will provide Lighthouse managers direct access to front- and middle-office functions such as order management, real-time profit and loss, and portfolio management, while ensuring a full range of information technology and business continuity support.
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Lighthouse chose Paladyne after “an extensive technology review,” said Rob Swan, COO of Lighthouse, which in addition to its Florida headquarters has offices in New York and Chicago. The full Paladyne suite will automate trade capture, reconciliation, terms and conditions, corporate actions and other processes across the trade cycle. “We selected Paladyne due to the broad range of its product offering and its integration with our new accounting system,” San Francisco-based Advent Software’s Geneva, said Swan.
The Lighthouse-Paladyne announcement Tuesday coincided with other technology releases from hedge fund industry servicers indicating a continued high level of activity and demand for automation in this field: Richard Fleischman & Associates (RFA) announced the general release of eHarbor for data file and e-mail backup storage; and OpHedge Investment Services said that it has gone live with GoldenSource Corp.’s enterprise data management system as a standard reference data repository.
Lighthouse’s Swan said that his firm has been depending on a combination of Advent’s Axys system and manual processing for both its managed accounts and fund-of-hedge-fund operations. The entire managed accounts business will now be fully automated with Paladyne, an 18-month-old New York company built around a technology platform that was acquired from a multistrategy hedge fund, believed to be Alexandra Investment Management of New York. The more scalable Advent Geneva will replace Axys on a hosted basis for portfolio accounting.
“By integrating with their Advent Geneva system, we provide Lighthouse with the necessary tools to streamline and automate their processes and improve their business operations without expanding staff,” said Paladyne CEO Sameer Shalaby. Before co-founding Paladyne, Shalaby was CEO of San Mateo, Calif.-based Cogency Software, a hedge fund data aggregation and reporting software company.
Lighthouse is Paladyne’s 26th client; the company has fund manager, prime brokerage and fund administration customers. The firm’s managed accounts business will rely on Paladyne’s Portfolio Master for order management and allocation, portfolio management and performance tracking; Security Master, a repository and distribution engine with real-time updates and corporate action alerts; Price Master for the collection, storage and analysis of prices and market data from third-party sources; and Analytics Master, which provides portfolio analytics, data aggregation and custom reporting tools. Lighthouse’s fund-of-funds business will also replace Advent’s Axys system with Advent’s Geneva but not rely on Paladyne’s other products.
Separately managed accounts (SMAs) are marketed as an alternative to mutual funds. They differ from mutual funds in that securities in a portfolio are purchased on behalf of an individual investor, which creates operational complications that firms are looking to technology to resolve. Hedge fund managers are beginning to use this type of vehicle to run a multitude of investment strategies for their investors.
Assets in SMAs reached a total of $805.8 billion in the third quarter of 2006, according to the Washington, D.C.-based Money Management Institute. The institute has advocated the use of an XML (extensible markup language) protocol to automate and standardize communications between money managers and plan sponsors. Swan said that Lighthouse will continue to communicate with its sponsors in either paper or proprietary message formats--as designated by each sponsor--but hopes the sponsors will eventually agree to use Paladyne’s Portfolio Master. Still, sponsors can continue to rely on proprietary message formats. Paladyne’s Portfolio Master supports XML, FIX protocol versions 4.0, 4.2 and 4.4 and other standard file formats.
