The upheaval of 2008 may be in the rearview mirror, but for multi-manager investors, the need to keep up with manager redemption terms and avoid exposing their fund to a liquidity mismatch is as critical as ever. Their investors have come to expect it, for one thing, and it’s a key part of the operational diligence that makes for sleepful nights.

That’s all very well. But gathering the information needed for a liquidity schedule that accurately reflects redemption possibilities is a challenge—especially given their ever-changing nature. To pull it off, an investor into hedge funds needs to take a multipronged approach to record keeping:

• Track tranches for each subscription
• Track transfers and assignments for side pockets
• Track monthly appreciation of each tranche
• Accurately model each manager’s liquidity terms
• Match internal records of redeemed tranches with the managers’ records

 In an ideal world this information would be captured in a centralized hedge fund exchange — a prime broker for fund of funds — making liquidity easy to track. The reality is different.

Problem: Insufficient information. Hedge-fund investors rarely receive monthly valuations for each tranche, for example. Nor do they get tranche-level details on a side-pocket action.

Problem: Time-consuming process. With every redemption, a big chunk of time is spent reconciling the tranche being redeemed and the amount available with the hedge-fund manager, taking into account appreciation, gates, lock-ups, fees, and side pockets.

So, how does a hedge-fund investor overcome these roadblocks and untie the knot? The answer is to combine operational rigor, technology, and best practices. Look for:

  √ Accurate subscription, rebalancing, and redemption record keeping

  √ A reasonable methodology, and corresponding tools, to allocate appreciation to tranches

  √ Sophisticated liquidity modeling

  √ An operational workflow, and corresponding tools, that provides the ability to make adjustments to tranche balances, redemptions, and liquidity dates

This isn't just theoretical advice -- It comes from experience. Through our experience working with our clients, Cogency has developed one of the industry’s most comprehensive solutions to the liquidity problem for multi-manager investors. We use advanced technology and our in-depth understanding of accounting to provide accurate liquidity tracking for our clients, saving them time and giving them greater clarity for strategic decisions. To find out how we can do the same for you, contact This e-mail address is being protected from spambots. You need JavaScript enabled to view it .