Riskdata, the leading provider of risk management solutions to the worldwide alternative investment marketplace, announced today that it has launched AlphaRisk Screener, a powerful new screening tool that will form part of the upgraded FOFiX 3.0, its flagship risk management system for investors in external funds.
The advanced screening tool will enable investors to rank and select external funds not only by their risk appetite, but to match precise portfolio 'risk style' targets, jointly with performance objectives.
Institutional investors, in particular pension funds and endowments whose requirements for low beta investments (hedge funds and 130/30 funds) have risen considerably, have an urgent need for 'risk style' and alpha-based screening. It can help with queries such as finding out which manager can be selected to minimise the credit risk of a portfolio, while maintaining the overall expected performance; or if a preferred fund is closed, which other managers offer a similar risk/return profile.
Olivier Le Marois, CEO of Riskdata said: "It is now more inadequate than ever for investors to rely only on risk-return based screening for their fund screening process - simply answering the question 'which manager has the best Sharpe Ratio in a strategy' is not sufficient. In particular this is because the static classification of fund 'strategies' is often a poor reflector of actual risk drivers. Selection is perhaps the single most important element of the investment process, and with AlphaRisk Screener in place, the enhanced version of FOFiX now provides the most advanced tool to support it from beginning to end, from manager selection monitoring through portfolio construction to risk control and reporting."
Riskdata's AlphaRisk Screener allows investors to:
- Select funds and eliminate a specific unwanted risk type, while still maximising expected performance;
- Select funds that display a targeted non-linearity, thereby boosting a specific performance driver, with minimal risks;
- Support portfolio rebalancing decisions to evolving risk/return profile targets;
- Select a market instrument to be added to a fund portfolio to create hedges.
- Visualise changes in risk style over time across the entire investment universe or by peer groups.
Numerouus recent best practice surveys have highlighted the increased demand of institutional investors for advanced screening and selection tools that reflect multiple risk types, together with alpha identification. Portfolio optimisation is now no longer the focus, but risk styles, sources of risk/returns, stress testing and detailed inclusion of risk in reporting have become top priorities for investors.
"Risk cannot be reduced to a single number any more than medicine can be reduced to a thermometer reading," said Ingmar Adlerberg, Chairman and Product Manager of Riskdata. Although some apparently similar products exist, Adlerberg added: "Most other similar products have screening capabilities based on basic statistics, but none of them allow you to do a portfolio construction oriented screening, searching for specific risk types with outperformance indicators. Potential clients are now comparing and contrasting AlphaRisk Screener with these other services and its strengths are being quickly grasped."
AlphaRisk Screener's key features include:
- Setting a precise risk/return target across over 170 "risk types," including risks specific to the alternative industry such as correlation risks.
- Creating targets from an existing fund or benchmark or from scratch.
- Screening through thousands of funds: The tool has been fine-tuned for mass treatment of fund histories to enable fast and dynamic usage.
- Inverting a target by one click to find a hedge against unwanted risk.
- Multiple criteria rankings including ones on:
- Risk Exposures
- Non-Linear Beta Exposures Allowing a Focus on Extreme Risks.
- Alpha and Alternative Beta
- Classical Risk Measures such as (Sortino, Sharpe ratio, Peak2Valley)
- Static Strategy Classifications
- Multi-stage screening process: A convenient way, to eliminate or focus on sub groups to achieve a final selection, through several stages of selection.
- Creation of candidate lists: for easy use in the portfolio construction, or due diligence process.
With AlphaRisk Screener in place, FOFiX 3.0 now offers a very advanced and practical tool to support the entire investment process, from manager selection and monitoring to portfolio construction and risk control and reporting. It is capable of dealing with mixed portfolios, including sophisticated hedge-fund strategies, traditional long-only mutual funds, and instruments such as derivatives.