What are the top things to know as a fund accountant doing cash reconciliation for hedge funds?
Starting job as a fund accountant with a hedge fund administration firm in two weeks. Would really like to come in with a good sense of what is expected of me and a basis for learning cash reconciliation for hedge funds. Any resources that I can tap into?
July 2nd, 2010 at 10:48 pm
The most important thing that you need to understand is the role of a Prime Broker and how transactions with executing brokers work. A prime broker is the clearing broker for most trades for hedge funds. They also provide leverage to hedge funds. You’ll be getting information directly from the Prime Broker. Big hedge funds will have more than one prime broker.
All executing brokers “give up” their trades to the prime broker. The prime broker is typically involved in resolving trade discrepancies, “don’t know” trades, and other problems. They also collect and distribute all dividends, coupons, and other cash flows. They also handle “re-org” events like mergers, spinoffs, and tender offers.
Cash reconciliation typically is straight forward, except when you have “problem” transactions. So, you can see that most of the “problem” transactions will require you to interface with the prime broker. Strachman’s book has a good section on prime brokers.