Treasury management has become a strategic priority for hedge funds; not just a back-office function to keep the wheels turning, but a core driver of performance, stability and investor confidence.

The landscape is dominated by large multi-manager firms that run highly efficient operations that helped attract long-term institutional capital.

But while not every hedge fund has the scale or resources of these giants, many of their best practices can be adopted by multi-strategy firms, lean multi-manager platforms and even single-manager funds. By strengthening treasury processes, improving transparency and optimising financing, funds can meaningfully improve their return on capital and create more resilient portfolios.

The Hedge Fund Landscape

In recent years, the balance of power has shifted even further towards large multi-manager platforms. Their operating model; multi-PM pods, centralised risk oversight, and robust treasury and financing infrastructure; has consistently delivered strong, predictable performance, even in volatile markets.

A few themes underpin their continued dominance:

Stable, Uncorrelated Returns

Large multi-manager firms emphasise lower volatility and disciplined portfolio construction. By carefully balancing risk, return, cost and capital usage across strategies, they create smoother return profiles that appeal to institutional allocators.

Centralised risk and financing

These firms tightly control the flow of capital to each PM or strategy, allocating based on live risk metrics, volatility forecasts, cost of capital, and historical performance. This internal market for capital means that PMs operate efficiently, as well as being incentivised to generate the highest risk-adjusted returns.

Operational leverage

Scale brings efficiencies, including better prime brokerage terms, more favourable financing rates, and the ability to invest heavily in technology. This reduces friction, simplifies the allocation of capital, and supports dynamic leverage management.

These advantages mean the largest firms can:

• Improve operational efficiency
• Lower their cost base
• Optimise investor capital
• Strengthen relationships with prime brokers

However, while few firms can replicate the full scale or infrastructure of the top multi-managers, many of the underlying treasury principles can be adopted at any size.

For lean multi-manager setups, multi-strategy funds and single-manager firms, embedding these capabilities into daily workflows can meaningfully enhance performance and capital efficiency.

Considerations For Optimal Treasury Functions

Treasury sits at the intersection of risk, financing, liquidity and portfolio management. When structured effectively, it enhances oversight, reduces costs and frees up capital. Below are the core pillars of an optimal treasury function, and how firms can adopt them, regardless of size.

Transparency into financing, margin and capital usage is the foundation of an efficient treasury function.

Many funds still rely solely on daily statements from their prime brokers. While these are essential, they don’t offer a complete picture, and can leave firms dependent on the assumptions, methodologies and pricing models of their financing counterparties.

By independently calculating margin, financing charges and capital consumption, firms can get:

• A clear, internal view of their cost drivers
• Insight into which strategies benefit from netting and margin offsets
• Awareness of where portfolios are dragging on firm capital

This independence is a critical shift. Instead of reacting to PB statements, treasury teams can proactively manage leverage, financing and capital allocation using their own models and data.

With independent calculations comes better governance. Treasury teams can validate PB charges, dispute discrepancies early, and run a tighter, more controlled financing function. They gain a consolidated, real-time view of:

• Margin and collateral obligations
• Liquidity buffers
• Leverage availability
• Capital usage across strategies and PMs

This visibility strengthens risk management and creates a more professional and accountable relationship with financing partners.

Even well-run hedge funds often inherit legacy financing structures; certain strategies placed with certain PBs simply because that’s how it has always been done.

• The level of free capital needed to trade safely

This means funds maintain adequate liquidity buffers to withstand stress, meet collateral calls and continue operating without disruption.

Understanding capital usage at a granular level enables better internal capital allocation.

By attributing capital costs to individual PMs or strategies, treasury teams can incorporate these metrics into performance reviews and allocation decisions.

When volatility, returns and capital usage are assessed together, CIOs can:

• Allocate capital to strategies with the best risk-adjusted returns
• Encourage PMs to operate more efficiently
• Reduce hidden costs that eat into investor performance

This internal market for capital mirrors the model used by leading multi-manager platforms, and can significantly enhance investor outcomes even in smaller firms.

While most funds monitor market risk closely, fewer rigorously test how financing requirements may evolve under stress. Financing reacts differently under extreme conditions, and failing to plan for this can lead to costly liquidity squeezes.

By simulating worst-case market events, treasury teams can understand:

• How margin requirements may spike
• The impact on available liquidity
• Potential increases in borrow costs
• The level of free capital needed to trade safely

This means funds maintain adequate liquidity buffers to withstand stress, meet collateral calls and continue operating without disruption.

Key outcomes include:

• Better control across trading and financing activities
• Lower financing costs, driven by PB optimisation and accurate internal models
• Improved capital efficiency, allowing firms to generate more return per unit of capital
• Stronger negotiating power with PBs, backed by real, comparable data
• Cross-financing opportunities, where strategies support each other internally
• Consistency and stability, supporting long-term investor confidence

Ultimately, these improvements compound. Funds with disciplined treasury processes weather volatility better, allocate capital more intelligently and deliver more attractive, predictable returns.

Through independent, real-time calculations and actionable insights, Cassini helps firms to build a robust, efficient treasury function, without requiring the scale of a multi-billion-dollar multi-manager platform.

• Gain transparency into margin, financing and capital usage
• Optimise prime broker allocations
• Reduce financing drag
• Run stress tests to set appropriate liquidity buffers
• Allocate capital internally with greater precision
• Improve governance and prepare for PB reviews with data-driven evidence

Our platform acts as the central hub for financing intelligence, giving CIOs, COOs, CROs and treasury teams the information they need to access leverage efficiently, control financing costs and enhance investor returns.