The cash management process at hedge funds is critical to their overall operations. Distressed debt hedge funds especially, count on efficient cash management to ensure that they can fund their deals within the tight timeframes that inevitably come from the often frantic nature of their work.

The client, a special opportunities hedge fund processed approximately 100 payments on a daily basis and trying to manage the physical documents among fifteen managers was burdensome and involved too much operational risk. Because of the nature of the client’s business each deal was very document intensive and the client required the ability to pass all the critical deal related documents electronically to various business managers for approval. In addition they required procedures and controls over the initiation, approval and distribution of funds that were being wired in relation to their loan and hedge fund businesses.

In a previous project FinServ had led a document management vendor selection for the client leading to selecting EMC’s Documentum product as it is a robust document management system. Based on this particular project document intensive requirement it made logical sense to leverage the client’s investment to support the controlled workflows required for the approval process.

FinServ led the creation of a wire transfer form that the client used to initiate each payment request. The form facilitated the linking of any supporting documentation in an automated fashion. Each approver in the workflow had the ability to review the wire request form and supporting documents electronically and either approve or reject the payment request. Once payment requests were fully approved internally they were forwarded electronically to the bank for payment through a seamless link with the fund’s online banking system.

The success of this project spurred the client to continue to rollout the cash management system throughout the firm. All business units in the firm were able to leverage the system to process payment requests based on their business needs, including different workflows and the ability to instruct payments to multiple banks and prime brokers.

One of the largest benefits to the client was the ability to now identify the status of each payment in real time through a simple lookup function built into the application. This system not only provided the operational efficiencies the fund required but also provided a complete audit trail of the approval process and the authorizations in the approval workflow that auditors and regulators were looking for.