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Vidrio Blog

2 min read

Allocators Face New Obstacles in Pandemic While Redeeming from Funds

In the current pandemic environment, while some of the funds that asset allocators are invested with are finding ways to profit, many funds are performing poorly. Some will close as a result. Across the board, we see allocators needing to redeem and reallocate as turbulent market conditions persist. 

Investors are asking, "If we have to redeem from half of our managers right now, how long will it take to be fully reallocated?"

In a non-COVID-19 crisis, it was possible to perform the due diligence required to allocate to new funds, including on-site meetings and ODD reviews. Now, because of social distancing, non-essential workplace closures, and work from home guidelines, allocators may not be able to complete due diligence on new funds to replace the ones they are redeeming from for some time. The due diligence process cannot, at this time, occur entirely remotely. As a result, managers are forced to "shop their closet" - allocating to managers they have previously approved for investment but had not yet allocated to.

Due to generally favorable liquidity constraints, allocators who invest via managed accounts may have an advantage when compared to allocators who invest primarily via commingled investments that tend to have more restrictive terms. For commingled fund investors, funds coming out of portfolios will need to be replaced by funds with previously completed due diligence and approval processes. 

Allocators will need to 1) replace funds they exit, and 2) make sure their portfolios are optimally allocated to benefit from the recovery that will take place post-COVID-19. In both cases, They will need to allocate to "new" funds. Hence the need for all allocators to keep an extensive bench of approved funds for the unexpected and rarely anticipated events that majorly impact the markets.

For many allocation firms, tracking the liquidity and terms of their funds is a monumental task. A task made doubly hard when managed by a spreadsheet system or patchwork of software and services.

Due Diligence During COVID-19

Alleviating this burden is where Vidrio comes in. Our monitoring services enable clients to keep track of a large number of funds that are approved but not yet invested. Beyond that sanity saver, our processes and workflows allow allocators to perform due diligence more efficiently and arguably faster than those without it. Vidrio also offers the most comprehensive liquidity monitoring and forecasting functions in the industry.

Let Vidrio help you build and monitor the critical bench of reserve managers  through Technology Enabled Services supported by seasoned experts who understand your business.

Gygmy Gonnot
Written by Gygmy Gonnot

Gygmy joined in 2011 and heads the Vidrio Research team responsible for monitoring the complete lifecycle of information on all funds on the Vidrio Platform, encompassing hedge fund performance measurement and document management, terms and corporate actions, exposure and attribution aggregation, plus liquidity risk monitoring. Before Vidrio, Gygmy was a managing director and senior portfolio manager at Focus Investment Group, responsible for selection, due diligence, certification, and monitoring of managers across all hedge fund strategies, along with quantitative research and liquidity risk monitoring. Prior to Focus Investment Group, Gygmy was an analyst at Liability Solutions Limited (UK). He holds a finance degree from the IDRAC Business School in Lyon, France (2001). Gygmy is an Adjunct Professor of Finance at New York University’s Stern School of Business.

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