SEI Upgrades Processing System For Side Pocket Investments

Vanessa Doctor

8 April 2010

SEI has expanded its capabilities related to the processing and accounting of side pocket investments for fund managers.

The upgrade of the functionality is intended to boost processing control, efficiency, and risk reduction capabilities for managers, the company said in a release. The change was triggered by the fact that the use of side pockets, a type of account used by hedge funds to separate illiquid assets from more liquid investments, has risen. The use of these accounts took on particular relevance over the past two years as some worried investors sought to pull out of loss-making funds, forcing a number of funds to restrict redemptions.

Side pocket investments have, over the past years, been prevalent among hedge funds amid liquidity issues, thereby calling for greater scrutiny over the asset class. The processing of side pocket investments is commonly performed manually due to its complexity. The upgraded and automated capabilities are expected to improve methodologies and improve cost management, SEI said.

"We are always looking for new ways to reduce risk and expand our operational outsourcing capabilities to support our clients – side pockets is an area where there was a clear opportunity to make an impact," said Phil McCabe, the senior vice president and solution head of SEI's investment manager services unit.

SEI has partnered with SunGard's InvesTier platform for this project.