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Investment process modernization for small funds

Client Background

As the former #1 Institutional Investor (II) ranked Chief Investment Officer at Morgan Stanley, Steve Galbraith made his career espousing the value of combining quantitative and fundamental philosophies. But when he left Maverick Capital to create Herring Creek Capital, he left behind one of the most efficient, effective, expensive and technologically rich environments on Wall Street. Replicating its significant competitive advantages, especially the powerful data analytics platform, shortly after to be evolved into the EDS platform, was an enormous challenge. With this software, he was able to leverage best-in-class technology to create a holistic environment that matched best practices in the industry – helping ensure that his firm could compete at the highest levels possible and all within a budget that was a fraction of the cost of custom solutions.

The Challenge

In today’s competitive financial markets, integrating and understanding the increasing volume of data is critical to making sound investment decisions. The answer is to include a robust data-analytics platform, but capable commercial solutions don’t exist and Herring Creek didn’t have the resources to build a custom platform. Without one, however, trying to monitor and act on all relevant information, as well as enhancing processes across the firm was challenging and performance suffered.

The Solution

EDS is cost-effective, quick to deploy and powerful. Once on the platform, Herring Creek’s team had access to the same dynamic data analysis as internal platforms, but highly customized to their philosophy – they processed more information, generated more ideas, and improved forecast precision. Portfolio management too was enhanced as risky traits, such as macro and factor exposures were identified, and minimized – Herring Creek now had a holistic platform for continuous learning, evaluation, and improvement that helped them perform at the highest levels possible. Clients also noticed the improved process and assets increased.

The Result

Since we implemented some quantitative changes in tracking expectations around quarterly earnings reports in 2013 (we now look at options pricing, crowding and price momentum, among other things), cumulatively we have added almost 800 basis points of alpha in our short security selection.

Since we implemented some quantitative changes in tracking expectations around quarterly earnings, cumulatively we have added almost 800 basis points of alpha in our short security selection.

No question. EDS has helped us create increased alpha and stronger discipline.

– Steve Galbraith, Chief Investment Officer (CIO), Herring Creek / Kindred Capital

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