SD-05.9 — Alternative-Strategy Management

Business Domain: BD-05 Portfolio Management (Front office) · Applies: PUB

Purpose

Runs the portfolio mechanics of long/short and other liquid-alternative strategies — the hedge-fund way of running a book. Where SD-05.1 constructs a long-only portfolio, an alternative strategy runs a portfolio with mechanics a long-only manager never touches: a short book, leverage, financing, prime-brokerage relationships, and investor-side gates and lock-ups. This Service Domain owns those mechanics. It is the signature capability of the hedge fund; for every other archetype it is dormant.

The tag is PUB, following E-09’s hedge-fund-class markets = Public classification — reviewed against the allocator-alternatives view and external taxonomy practice and held (see the Taxonomy note on the E-09 hedge-fund class entry). The gates, lock-ups and side pockets this Service Domain administers are a feature of the fund vehicle’s investor-facing liquidity terms, not of the underlying book: the axis this tag tracks is the tradability of the instruments the strategy trades (long/short listed and OTC equities, financing, derivatives), which is orthogonal to the vehicle’s distribution terms. The vehicle-liquidity view is carried separately, on the form-of-holding axis — the asset-class × form-of-holding matrix routes a hedge-fund-of-funds exposure through the private-markets closed-end-fund-vehicle form regardless of this class’s Public tag.

Service Operations

Manage the long/short book — run the long and short positions and the gross and net exposure they produce.
Manage the short book — locate and borrow stock, manage the short positions, and manage buy-in and recall risk.
Manage leverage and financing — run the portfolio’s leverage, its financing arrangements and its margin.
Manage the prime-brokerage relationship — the prime-broker arrangements that finance and clear the strategy.
Run strategy-specific exposure management — manage the directional, market-neutral or absolute-return exposure profile the strategy targets.
Administer gates and lock-ups — the investor-side liquidity terms — gates, lock-ups, side pockets — the strategy operates under.

Inputs and outputs

Inputs: the strategy mandate and its gross, net and leverage limits; the risk-capital allocation from SD-01.9 (for a multi-strategy platform); market and financing data.
Outputs: the strategy’s positions and its exposure, leverage and financing reports — feeding BD-06, BD-07 and the operations domains.

Entities

Consumes: Portfolio / Mandate (E-03), Holding / Position (E-04, book = ibor), Instrument / Asset (E-02); the derivatives and financing entities where the strategy uses them; the SD-01.9 risk-capital allocation.
Owns: none — the strategy book is recorded as holdings (E-04).

Standards

No external standard governs alternative-strategy management. Short-selling, leverage and prime-brokerage practice are market conventions; the gate and lock-up terms are set in the fund’s offering documents.

Open extensions

The boundary with SD-01.9 Risk-Capital & Strategy Allocation — SD-01.9 allocates risk capital across a platform’s pods and strategies; SD-05.9 runs the book of an individual strategy.
The boundary with BD-11 on the financing and collateral the strategy’s leverage consumes.