Tracking Liquidity with Backstop

Backstop software applications allow users to track liquidity at the individual transaction, or tranche level, and report on aggregate liquidity at the portfolio, or fund level.

Backstop: Investor Liquidity

Backstop enables hedge fund clients to manage investor liquidity at the individual investment, or tranche, level. For each investment/subscription an investor makes in one of your products, you can enter the terms of the subscription agreement, which are stored as "Liquidity Terms" in Backstop.

Liquidity terms can include lockup, notification period, redemption fee, and redemption period (e.g. annual, quarterly, etc.). In addition, an interactive liquidity calendar can be used to apply different liquidity terms to different periods, allowing users to track gates, holdbacks, and other complex terms.

Once the Liquidity Terms have been entered for investor transactions, the investor's contact card will display the next available redemption date, along with the redeemable amount. Additionally, there are several reports for viewing account liquidity in aggregate:

• Assets by Notice Date report can show investor liquidity, in aggregate, for each of your products or funds.
• Liquidity Scenarios This report offers an overview of account liquidity. It is useful for understanding when investor accounts will become liquid. For fund of funds managers, this report can also be used to understand when portfolio investments will become liquid (see below).

Backstop PM: Investor Liquidity and Fund of Funds Portfolio Liquidity

Backstop PM includes all of the investor liquidity tracking functionality featured in Backstop (see above). In addition, Backstop PM enables fund of funds managers to track portfolio liquidity at the individual investment level. For each investment your portfolio makes in a hedge fund, you can enter the terms of the subscription agreement, which are stored as "Liquidity Terms".

Liquidity terms can include lockup, notification period, redemption fee, and redemption period (e.g. annual, quarterly, etc.). In addition, an interactive liquidity calendar can be used to apply different liquidity terms to different periods, allowing users to track gates, holdbacks, and other complex terms.

Once Liquidity Terms have been entered for portfolio transactions, you will be able to view the earliest possible redemption date for each investment, both with fees and without fees, if applicable. Redemption notice dates can also be displayed on a user's Backstop calendar. Additionally, there are a several reports for viewing aggregate liquidity at the portfolio level:

• Liquidity Scenarios report enables you to compare the liquidity of your investor accounts against the liquidity of your portfolio holdings, and can be configured to show different liquidity considerations, including redemption fees, gates and side pockets.
• Holding Liquidity report offers a long-term view of your portfolio liquidity, and features a useful graphical representation of the data.
• Liquidity Opportunities report is useful for understanding when you can liquidate each of your investments, and, if necessary, how you could unwind the entire portfolio. It shows earliest possible redemption for each holding or individual transaction, and can be configured to show different liquidity considerations, including redemption fees, gates and side pockets.
• Upcoming Liquidity report offers an at-a-glance view of notice dates. It can be used to ensure that a notice date doesn't pass you by, and to give you the opportunity to reevaluate an investment before the notice date.

The Bottom Line

Whether you manage a hedge fund or a fund of funds, the more successful you are at tracking liquidity, the better prepared you will be for the inevitable challenges that face every investment manager. Backstop and Backstop PM can help you to track liquidity more accurately, and with less effort.

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