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130/30 Managers: Don't Let Operational Risk Turn Collateral Management into Collateral Damage

August 20, 2008

Investor interest in 130/30 funds remains strong despite volatile equity markets. However, as asset allocators continue to closely monitor the performance and investment strategies of 130/30 fund managers, 130/30 investment managers have renewed their focus on operational risk and the role it plays in the overall risk management of their long-short strategies.

Operational risk is a critical issue for 130/30 investment managers because it relates to the way in which transactions are processed. In fact, many managers of these funds may not realize the unnecessary operational risks they assume from a clearance, custody, or fund administration standpoint when working with a prime broker that is separate from their custodian. For example, if a prime broker and a custodian are on different technology platforms, complications can often arise, increasing operational risk. It is vital for a prime broker and a custodian to communicate efficiently, effectively, and accurately, in order for transactions to be properly reconciled.

Pershing and The Bank of New York Mellon help 130/30 investment managers reduce these operational risks with a unique, industry-leading 130/30 solution. The Bank of New York Mellon's asset servicing, administration, and collateral management groups, combined with Pershing Prime Services, deliver an integrated platform that brings together all of the servicing and financing functions needed to manage eligible 130/30 funds, including limited partnerships, 40 Act funds, hedge funds, and separately managed accounts.

I encourage you to visit the Prime Brokerage Solutions section of this website to learn more about the comprehensive array of services and capabilities we provide to hedge fund managers, financial organizations, investment professionals, and registered investment advisors. We are confident that our unconflicted approach, global resources, and team of dedicated industry experts will help you grow Your Business Without Limits™.