BNY Mellon launches side pocket accounting feature

Hedge fund administrator BNY Mellon
Alternative Investment Services has introduced new accounting and reporting
functionality for side pocket accounts and special purpose vehicles.

The new service offers hedge fund
managers more flexibility in structuring their funds and managing illiquid or
long-term assets, the administrator said in a press release.

The new tool, delivered through BNY
Mellon’s proprietary fund accounting platform Praeeo, is said to deliver more
options to manage capital flows between main and side pocket holdings.

Praeeo allows fund managers to
segregate illiquid investments.

Capital and/or earned income, along
with applicable profit-carry forward, can be automatically moved from the side
pocket to the main or “trading” portfolio, giving fund managers more ways to manage
realised events within the side pocket. 
In addition, flexible investor statement options allow hedge fund
managers to offer greater transparency to their investors across both liquid
and side-pocketed holdings.

“Hedge fund clients utilise side
pockets and SPV structures in a variety of ways,” said Rick Stanley, head of
product management for BNY Mellon AIS. 
“Some use them to support share classes invested in long-term assets as
an investor option, while others might segregate illiquid investments as part
of a fund restructuring due to market conditions.  Whatever the need, this new service offers
clients more options and improved operational efficiency in managing capital
flows between their main and side pocket holdings.”

The enhanced functionality is
supported in both share- and capital-based hedge fund structures.  More than 50 funds with special purpose
vehicles and side pockets are currently using the
new service.