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Inventory Management: Collateral Systems – An Asset Management Perspective

Inventory Management: Collateral Systems – An Asset Management Perspective

Asset managers and hedge funds are realizing the benefits of inventory management with automated collateral systems.

Boston, MA, July 30, 2008 – A new report from Aite Group, LLC considers how third-party collateral systems provide asset managers and hedge funds with optimal solutions for inventory management. The report reviews three vendor solutions, and discusses alternative technology solutions providing collateral support, such as integrated suites and the option to outsource collateral management.

Third-party technology for stand alone collateral systems is just coming into its own. While the majority of the market for these solutions is comprised of investment banks and securities-servicing divisions of custodian banks, asset managers and hedge funds are increasingly benefiting from these offerings. Over the last five years, asset managers and hedge funds have gained access to improved trading systems and a variety of trade execution venues, as well as sophisticated platforms for risk analysis, valuation and derivatives processing. As investment strategies and instruments increase in complexity, the use of collateral management is proving increasingly important as a means of improving revenue and expense management.

"Collateral management has direct implications for profitable firm operations and technology, and vendors and service providers are rising to meet the needs of a growing pipeline of clients," says Denise Valentine, senior analyst with Aite Group and author of this report. "Aite Group anticipates that asset managers and hedge funds will more widely adopt collateral management technology over the next few years. However, most firms are most likely to utilize integrated suite vendors and third-party service providers over stand alone systems, particularly as these entities enhance functionality. Large firms or those with complex collateral needs will seek a stand alone system."

This 41-page Impact Report contains 11 figures and seven tables. The report reviews offerings from three stand alone collateral management system vendors: Algorithmics, Allustra and SunGard.

Clients of Aite Group's Institutional Securities & Investments service can download the report.