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Opportunities and Challenges for Hedge Funds in the Coming Era of Optimization
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more options for the asset owner to utilize the totality
of their supply, thus encouraging cross-selling and
allowing clients to more easily demonstrate their
enterprise value.
A similar goal of being able to more fully utilize their
entire pool of assets is also encouraging some asset
owners with a broad set of traditional and alternative
products to insource their entire suite of cash
management and lending services to create a single
liquidity management unit. This team is able to re-
aggregate the cash, HQLA and other securities pools
that are currently divided out across multiple parts
of the asset owner’s organization and instead look
holistically to determine the best cross-organizational
use of this supply. Some organizations pursuing
this model have set the liquidity management team
up as its own P&L and others view the function as a
firm-wide utility. There are numerous organizational
and operational challenges in moving to this model,
however, and as a result, this approach is likely to be
suitable for only a subset of asset owners with the
required scale.
Determining the right approach to enhancing the use
of an organization’s supply is one that will vary based
on the client’s size, portfolio and risk appetite. The key
message of this paper is that the number of options
to consider is expanding and that in all instances,
the client organization itself is becoming a more
active participant in these programs. Citi’s Business
Advisory Services and the Supply Optimization teams
being built out in our Investor Services organization
are able to provide more insight and tailored advice
about this changing landscape as a value-add service
for our client base. To engage these resources, please
reach out to your Citi relationship manager or sales
coverage to request more information, or if you have
any questions in regard to this report, please contact
us at Prime.Advisory@Citi.com.