Toronto-based Algorithmics and Morgan Stanley Prime Brokerage have launched AlgoLink, a joint application service provider (ASP) venture to deliver risk management services to hedge fund clients.
The companies say the service addresses both asset manager and asset owner requirements for effectively measuring and reporting on the risk of complex equity portfolios.
AlgoLink currently provides Morgan Stanley Prime Brokerage clients with risk exposures by industry, sector and index, value-at-risk (VaR) reports, as well as stress testing using historical and discrete scenarios. AlgoLink incorporates option analytics to properly evaluate and model derivative and complex instruments including options, convertible bonds and futures.
An enhanced and interactive version, AlgoLink Interactive, is currently under development and will allow clients to control the aggregation of position data from multiple custodians and to add and adjust positions and scenarios on an intraday basis. In addition, AlgoLink Interactive, powered by Algorithmics’ mark-to-future methodology, will enable users to design and maintain user-specified stress test libraries and customise the content and format of the risk reports.
"The Morgan Stanley-Algo partnership will provide the right framework for establishing industry transparency, appropriate benchmarking, and risk adjusted return metrics which will be critical to the ongoing success of the hedge fund industry," says Guru Ramakrishnan, managing director at Morgan Stanley.
Michael Zerbs, VP of research and product marketing, Algorithmics, says: "We are finding that the needs of hedge funds are surpassing the natural limitations of today’s simple risk measurement approaches. Building on mark-to future, AlgoLink provides forward-looking risk-return analysis, not just retrospective performance attribution."