Investment Operations
Behind every fund sits machinery clients never see, and this category documents it.
The explainers cover separately and unified managed accounts, direct indexing, GIPS performance standards, NAV calculation, fund accounting, and the fair-value hierarchy, then add KYC and AML basics, prime-brokerage capital introduction, and hedge fund gates and side pockets.
The throughline from IWP Concepts is how a trade becomes a booked position, how performance is reported in a way you can actually trust, and how operational risk gets contained.
These functions stay invisible to investors and indispensable to the firms running their money.
They are the infrastructure, compliance, and accounting that quietly hold every strategy together.
Behind every share you own sits a bookkeeper you never see. Transfer agency is the function that keeps the official…
A Separately Managed Account is a portfolio of individual securities held directly in your name and managed by a…
A Unified Managed Account is a single custody account that holds multiple investment strategies side by side, each in…
Direct indexing is the practice of owning the individual stocks that make up an index, rather than buying a fund that…
GIPS is a voluntary set of rules, maintained by CFA Institute, that tells investment firms how to calculate and present…
Know Your Customer (KYC) and Anti-Money Laundering (AML) are the two overlapping rule sets that require financial firms…
Capital introduction, often shortened to "cap intro," is a service that prime brokers offer their hedge fund clients:…
A global custodian and a sub-custodian sit on the same chain of safekeeping, but they play different roles. One is the…
A separately managed account and a commingled fund can hold the exact same stocks and bonds, yet they differ in one…
A tri-party repo is a repurchase agreement in which a third agent, a clearing bank, sits between the cash lender and…
A prime-of-prime broker sells wholesale access to the plumbing of institutional markets. It holds a direct relationship…
Every pooled fund reports one number that investors actually transact on: the net asset value per unit. Fund…
Subscription and redemption are the two doors of an open-end fund: subscription creates new shares when money comes in,…
Not every asset makes acceptable collateral. A counterparty that lends against a portfolio wants something it can seize…
In the repo market, cash is borrowed against bonds. When any acceptable bond will do, the loan prices at the general…
Net asset value (NAV) is the per-unit price at which investors buy, sell, and value a pooled fund. The calculation…
Fund accounting is the specialized bookkeeping discipline that tracks the assets, liabilities, income, expenses, and…
The fair value hierarchy is a three-tier ranking of the inputs used to value financial instruments, from directly…
Gates and side pockets are two liquidity management tools written into hedge fund offering documents. They let a fund…
A high water mark (HWM) is the highest NAV an investor's interest in a hedge fund has ever reached at a prior…
A shadow NAV is a parallel net asset value produced by the investment manager (or a third-party shadow administrator)…
A prime brokerage relationship is the operational and contractual link between a hedge fund (or similar active manager)…
The Global Investment Performance Standards (GIPS) are a voluntary code that governs how investment firms calculate and…
Brinson attribution is the standard method for decomposing a portfolio's active return against its benchmark into…
Fama-French factor attribution decomposes a portfolio's return into exposures to systematic risk factors (market, size,…
Tracking error measures how closely a portfolio's returns follow its benchmark. It is the standard deviation of the…
A benchmark is the reference portfolio used to evaluate a manager's performance, risk, and positioning. Choosing the…
Custody risk is the risk that a client loses securities or cash held at a custodian, either through the custodian's…
A sub-custodian network is the chain of local-market banks that a global custodian appoints to hold securities and…
The ISDA Master Agreement is the industry-standard legal contract that governs over-the-counter (OTC) derivative trades…
The Credit Support Annex (CSA) is the ISDA document that governs how collateral is posted between OTC derivative…
A give-up trade is a transaction executed by one broker and cleared at a different broker, typically the client's prime…
Both a prime broker and a custodian "hold" a fund's assets, so the two are easily confused. The difference is what they…
Rehypothecation is the practice of a broker or lender reusing collateral a client has already pledged, putting those…
In the repo market, most trades are financed at one broad rate. But when everyone wants to borrow the same specific…