With the Alternative Investment Fund Managers Directive to be implemented this July, the Funds Europe survey of some of the leading providers in third-party risk management services has a focus on alternative investments.
Company history: Calypso was founded in 1997 in San Francisco. The Java-based trading and risk management platform is especially applicable for treasury and derivative products. It counts over 30 buy-side institutions as clients.
Product name: Calypso (buy-side solution).
Product description: The Calypso buy-side solution provides buy-side institutions with a single cross-asset platform that performs a full range of risk management functions including what-if analysis, scenario analysis, stress testing, back testing, and value-at-risk. It covers all asset classes, enabling accurate risk measures against cross-asset profit & loss, net asset value (NAV), liquidity, position and risk. Capabilities include launching new funds with minimum time to market; analytics for all products available out-of-the-box plus ability to plug in proprietary analytics; price validation of multiple sources (prime brokers, administrators, counterparties, brokers); standard interfaces to market data providers, prime brokers, utilities and funds; and collateral management across all counterparties and prime brokers.
Risk types covered: Market; liquidity; counterparty; credit; collateral management.
Alternative fund types covered: Hedge funds, hedge funds of funds, qualifying investor funds (QIFs), specialised investment funds (SIFs). Calypso is primarily designed to manage assets and instruments whose underlying price and valuation variables are marked to market. This enables other low liquidity and low volume alternative investments such as private equity and venture capital to be captured and managed to support enterprise-wide and fund-wide analysis. However, investment management functionality for such investment types is limited.
Sample clients: State Street Global Advisors ($2 trillion); BlueCrest Capital ($33 billion).
Company history: Quantifi was founded in 2002 by Rohan Douglas, who is chief executive. Quantifi Risk was launched in 2005. A London office was opened in 2006 and a New York office was opened in 2009. Moment Analytics, a risk management software vendor, was acquired in 2009 and it has established strategic alliances with a number of data vendors, including Thomson Reuters and Markit.
Product name: Quantifi Risk.
Product description: Quantifi Risk is a turn-key trading and risk management solution that provides next generation valuation, trade processing, risk management, and interactive reporting. Buy-side clients use Quantifi Risk for valuation and aggregated risk reporting at the business unit level. Quantifi Risk provides an open and scalable system that automates the day-to-day valuation and risk management process for even the most complex portfolios. Quantifi Risk is built on Quantifi Toolkit, an extensive, open library of market tested and validated models. This provides an open platform that allows clients to build their own proprietary models and easily integrate with existing models or data.
Risk types covered: Market; credit; and counterparty.
Alternative fund types covered: Hedge funds; proprietary trading.
Sample clients: Varden Pacific (US); Oracle Capital (Hong Kong); Tiden Capital (US); OFI Asset Management (France – €52.5 billion); Pine River Capital (US); Channel Capital (UK – $10 billion).
Company history: Misys, a risk management vendor primarily focused on the banking sector, acquired Sophis (and its Sophis Value product) in 2011, thereby expanding the company’s portfolio of risk products to include the asset management industry.
Product name: Sophis VALUE.
Product description: Sophis VALUE offers a wide range of functionality for hedge funds and asset managers covering risk analysis, modelling, stress testing and reporting. An extensive pricing library supports a range of risk scenarios from linear risk matrices and key rate analysis, to non-linear stress tests and value at risk (VaR). Flexible portfolio models can be built in the system. Indexes, hybrids, synthetic and custom models are also supported. In addition, Sophis VALUE enables automatic portfolio rebalancing to model portfolios. A range of stress tests are also available for one or multiple parameters including stock prices, interest rates, credit rates, FX rates, dividends, volatilities and correlations by any slice and dice attribute. Time-structured stress tests are also supported. A reporting module can be used for any risk scenario and includes a variety of standardised PDF reports and third-party systems such as Crystal Reports or Open XML.
Risk types covered: Market; credit; market liquidity; fund liquidity; counterparty.
Alternative fund types covered: All hedge fund strategies, real estate funds, Ucits funds, QIFs, SIFs.
Sample clients: BTG Pactual (US – €3.5 billion); Elliot Advisors (UK); Assenagnon (Germany); Lombard Odier (US); Jabre Capital Partners (Switzerland); UBS GAM (Switzerland); Groupama
Asset Management (AM); Axa IM, BNP Paribas IP; CCR AM (France); Anthos AM (Holland).
Company history: Imagine Software was formed in 1993 in New York and released the Imagine Trading System in the same year. In 2000, it launched Derivatives.com, an application service provider product.
Product name: Imagine Trading System.
Product description: The Imagine Trading System is a real-time portfolio and risk management system that provides a set of risk assessment and analytic capabilities for managing market risks in investment portfolios. It uses modelling, analytical and simulation methods to identify, quantify and monitor risk factors affecting investment returns, both within individual portfolios and across an organisation’s entire range of trading activities. Available functionality spans real-time greeks, stress testing and historical Monte Carlo, plus intra-day portfolio VaR. Imagine’s financial, investor and regulatory reporting capabilities provide standardised presentation-quality reports with an interactive ad hoc reporting tool based on objective real-time risk data and analyses. The Imagine Risk Aggregator helps firms investing across multiple funds and asset classes around the globe by independently sourcing, verifying, aggregating and normalising the fund level data that is typically not accessible by investors, then applying common sets of risk exposures and risk scenarios.
Risk types covered: Market; credit; liquidity ; counterparty.
Alternative fund types covered: Hedge funds, fund of funds.
Sample clients: Millennium Management (US – $17.62 billion); Phalanx Capital Management (US – $93 million); Eton Park (US – $12 billion); Macquarie (Australia – A$3.4 billion); Guggenheim Investment Advisors (US – $50 billion); Parallax Investments (US – $75.2m); Arrowgrass Capital (UK – £2.6 billion); Wolverine Asset Management (US – $5.8 billion); Henderson Global Investors (UK – £63.6 billion); Asymmetric Asset Management (Oslo).
Company history: SIMCorp was founded in 1971 in Copenhagen and now has more than 1,100 employees across Europe, North America, Asia and the Middle East. It is listed on Nasdaq OMX Copenhagen.
Product name: SIMCorp Dimension.
Product description: SimCorp Dimension has a variety of different risk solutions: (a) a RiskMetrics-like “Internal” model where the user has full control and transparency into market data, pricing coverage of all instruments, reporting structure and risk model calibration; (b) a “plug-in” solution to Sungard APT’s Statistic Multi factor models which gives access to all important analytics from this risk model provider and (c) a credit default stress testing solution, which provide profit and loss calculations in case of default including all exposures to counterparties, underlying issuers and collateral.
Risk types covered: Market; credit; counterparty; liquidity.
Alternative fund types covered: All types of funds can be covered, so long as constituent data is available or so long as historical prices for the fund are available. The user applies the risk models to either the fund level or the constituent level.
Sample clients: Edmond de Rothschild Asset Management (Switzerland €12.8 billion); Diam Asset Management (Japan $124 billion); Genesis Investment Management (UK); Nordea Savings and Asset Management (Sweden €100 billion).
IBM RISK ANALYTICS (formerly Algorithmics)
Company history: IBM Risk Analytics was formerly known as Algorithmics, a risk management vendor that was founded in Toronto in 1989 and employs 850 people in 23 offices. It was acquired by Fitch Group for $175 million in 2005. In October 2011, Algorithmics was acquired by IBM for $387 million and combined with IBM OpenPages to form IBM Risk Analytics.
Product name: IBM Algo Risk Service on Cloud.
Product description: IBM Algo Risk Service on Cloud is a web-based portfolio construction, risk management and reporting service for buy-side organisations, trading desks and corporate treasuries. Hosted by IBM and delivered online, the service provides access to sophisticated risk management and investment support tools, without the data, personnel, and hardware costs of maintaining an in-house deployment. As a managed service, IBM Algo Risk Service On Cloud provides a dedicated data and production environment, delivered online, which is uniquely configured to address each client’s specific business requirements.
All data management, model configuration, and application support is provided by a dedicated IBM team of client engagement specialists. Functionality includes: generic risk measures: stress testing; exposures (gross, net, derivative); VaR; expected shortfall/tail measures; tracking error; volatility/ correlation; Sharpe, Sortino, and other ratios. Generic asset specific risk measures: fixed income, equities and derivatives; scenario-based simulation; what-if scenarios; valuation models.
Risk types covered: All risk types covered.
Alternative fund types covered: Hedge funds, private equity, real estate, QIFs, SIFs. All portfolio types and investment strategies can be modelled.
Sample clients: M&G Investments (UK).
Company history: SunGard was formed in 1983 and provides software and services to the education and public sector industries in addition to financial services. The company has grown through acquisitions including Infinity Financial Technology (1997), Front Capital Systems and Microhedge (1998). SunGard itself was acquired by a consortium of seven private equity firms in August 2005 for $11.5 billion.
Product name: Hedge360.
Product description: Across SunGard’s Asset Management business, there are a number of solutions that help with measuring and monitoring risk. The Hedge360 solution, launched in February 2012, is a hosted delivery platform for hedge funds and alternative institutions that utilises SunGard’s cross-asset portfolio management solution, Front Arena, to deliver market and credit risk as well as real-time position keeping, profit and loss, desk level risk, sensitivity analysis and reporting. Fully integrated with SunGard’s market risk solution, APT provides dedicated coverage of liquidity and credit risk as well as risk measurement, risk attribution, portfolio construction and reporting to ensure investment accuracy and transparency.
Risk types covered: Market; credit; liquidity.
Alternative fund types covered: Hedge funds
Sample clients: F&C Asset Management (UK – £100 billion); Southpaw Asset Management (US – $650 million).
Company history: Wolters Kluwer is a Netherlands-based information services and publishing company founded in 1836. It acquired Belgium-based FRS Global, a regulatory reporting and risk management service, in September 2010 from Carlyle Group and Kennet Partners. FRS Global was rebranded as Wolters Kluwer Financial Services in January 2013.
Product name: Wolters Kluwer Financial Services (formerly FRS Global).
Product description: Wolters Kluwer Financial Services uses its integrated finance, risk and compliance solutions for financial firms to help firms address the multiple and diverse challenges linked to the implementation of the AIFMD. The solutions use fully integrated position, liquidity risk, valuation, cash flow, risk, stress testing, accounting, ledger, International Financial Reporting Standards, compliance and reporting engines from one single technological platform to help firms comply with AIFMD. The modularity of the solution allows fund managers to select the individual elements of the solution that they are really looking for in their specific context, and especially for the specific type(s) of assets they invest in. For each type of assets, stress testing and scenario analysis provide the insight fund managers need to control each of the risk they face and monitor them compared to their internal and externally imposed limits.
Risk types covered: Market (including leverage); liquidity risk; credit; counterparty; collateral management.
Alternative fund types covered: Hedge funds, private equity, real estate, QIFs, SIFs.
Sample clients: None given.
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