CASE STUDY: Kew Capital LLP
We at Kew Capital feel Imagine’s powerful, customizable solution helped transform our business into a more effective and efficient operation. It provides a significant advantage by simplifying the reconciliation process through smooth interaction with external systems, whilst delivering live P&L and providing the essential data used in intra-day risk reports across our broad range of strategies.
Nolan Grills – Partner, Head of Operations, Kew Capital
About Kew Capital
Headquarters: London, UK
Additional User Group: Luxembourg
Implement an IT systems infrastructure to support a dynamic, fast growing investment advisor with an “unconstrained global”, multi-strategy mandate
Imagine Software’s cloud-based portfolio and risk management solution
Kew Capital LLP is a United Kingdom-based private investment advisor formed in March 2008. Kew Capital advises on a global portfolio of investments including bonds, listed and private equities, foreign exchange, listed and OTC derivatives, and real estate. The firm pursues a variety of trading strategies, including global macro, equity long/short, credit, and long equity in addition to private equity and real estate investments.
The Business Challenge
Prior to trading in any volume, Kew Capital wanted to implement a system for trade capture, position management, and risk and P&L reporting. Kew Capital expected that its requirements would expand on an on-going basis as the portfolio developed. Kew Capital evaluated a number of alternatives as part of its due diligence process, and Imagine was included because of its reputation as an industry-leading, cloud-based solution
Selecting A System
Following a thorough examination of the system options, Kew Capital selected Imagine because of its
- flexibility and customizability
- broad range of financial products supported
- ability to extract data for reconciliations and customized reports
- real-time position and P&L monitoring
- intra-day risk computation including historic, parametric, and Monte-Carlo VaR
- ASP service, obviating the need for an extensive IT infrastructure in-house with associated personnel requirements and business continuity planning
At the outset two global macro traders were in place, with orders and executions booked manually. At this stage, Imagine was used exclusively to satisfy front-office risk and P&L reporting requirements.
A New Business Challenge
Kew Capital’s business continued to expand, adding new active traders of liquid instruments. As volumes and complexity grew, Kew sought to increase the automation of its end-to-end processes. However, Kew did not want to implement and interface together a number of systems. Instead, it decided to put Imagine at the heart of its systems infrastructure and sought to maximize its use of the system’s capabilities.
Kew Capital identified its functional and interface requirements. They then worked very closely with an Imagine consultant on site to prioritize their requirements, design the solutions, and implement them.
During this time Kew implemented:
Automated trade feeds from multiple sources:
- Bloomberg – EMSX
- CSS Prime Trade
- Trading Screen
Data extracts to reconcile transactions with its:
- Prime Broker
- Custodian Banks
- Fund Administrator
Intra-day & daily extracts to a data warehousing system to drive a suite of operational, P&L, risk management, & investor reports including:
- Cash balances
- Flash P&L within 30 minutes of close of business
- Trade summaries
- Detailed risk reports at trade, book, and whole portfolio level
- FX funding and hedging requirements
- Exception and limit reports
- Weekly and monthly investor reports
According to Nolan Grills, “Imagine enabled us to implement a single system for trade capture, risk control, position and P&L monitoring, cash management, and other middle office functions. We grew very rapidly to around 150 orders and more than 10,000 executions a day, but were able to support this volume with only two operations personnel.”
By implementing Imagine, Kew Capital aimed to achieve greater efficiency through the establishment of one powerful portfolio and risk management system. With the new capabilities in place, Imagine enables Kew Capital to benefit from:
- Comprehensive management of real-time P&L, risk, and exposures across portfolios, broken down by strategy
- Elimination of errors and time requirements associated with manual equity and bond trade entries and the automation of highly labor-intensive trade reconciliation processes with its prime broker and fund administrator
- Easy extraction of vital data for inclusion in reports to senior management
“Time consuming and cumbersome exercise before Imagine”
Benefiting from a seamless flow of equity and bond trades and prices feeding automatically into the Imagine Trading System, individual portfolio managers at Kew Capital now save as much as an hour a day compared to the previous manual process. As one portfolio manager at Kew Capital said, “Physically entering prices was time-consuming and a cumbersome exercise under the previous setup. However, with Imagine’s live pricing, we now have real-time P&L and position monitoring. This is very useful.”
“Imagine is superb at enabling Kew Capital to extract live P&L information”
Although Kew Capital initially chose Imagine to satisfy front office requirements—primarily trading and risk management—the system now covers all of the firm’s middle office processes as well, including cash management. It has saved the firm considerable amounts of time in executing everyday processes and is, according to Nolan, “superb” at the traditionally difficult task of delivering live P&L data. Nolan also singled out the ease with which data can be extracted from the system, enabling Kew Capital to maintain a high confidence level that its reports to senior management are accurate and precise. “Having one system with controls and monitoring capabilities lessened our operational risk and gave our senior management more confidence in the daily processes,” he concluded.
Overall, Kew Capital cites comprehensive, integrated portfolio and risk management capabilities as the key benefit that differentiates Imagine’s offering from other vendor solutions. Top-level support and the ability to react to shifting priorities and market conditions with rapid customizations to the system are also important benefits. Lastly, the flexibility and scalability of Imagine’s cloud-based solution provide the benefit of accessibility anywhere, anytime, and satisfies Kew Capital’s essential disaster recovery requirements.
The results Kew Capital has garnered underscore Imagine’s core benefits of providing greater transparency in terms of risk analysis for the management team, while improving operational efficiencies (and lowering operational risk) through process automation.
Managing the risks inherent in their positions, including holding sufficient margin, is absolutely essential for prime brokers. The key question is whether or not they are measuring risks and managing margin effectively and proactively.
This summary is based on research conducted between February and March 2021 with 20 banks looking at current trends and priorities for Prime Brokers in the Margin, Collateral and Data areas.
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