PerTrac Financial Solutions, the leading provider of analytic and workflow solutions, announced the release today of PerTrac RiskPlus, a new returns-based risk analysis solution.
The new product is a collaboration with FinAnalytica, the leading provider of real world portfolio risk solutions for multi-manager funds, hedge funds and asset management firms.
"PerTrac RiskPlus is a breakthrough for hedge fund investors seeking more sophisticated risk monitoring for their portfolios," said Gerry Mintz, PerTrac President and Chief Executive Officer. "Using state-of-the-art statistics based on fat-tailed distributions, dynamic correlations and multi-factor models, PerTrac RiskPlus sheds light on opaque portfolios at a price far less than more traditional or position-based risk systems. It offers large and small investors tools previously available only with the purchase of a software platform costing almost ten times as much."
PerTrac RiskPlus examines portfolio risk based on the monthly returns of each fund in the portfolio rather than each fund's holdings, information which is either unavailable or impractical to acquire from hedge fund managers on a timely basis, and is expensive to analyze. RiskPlus is a powerful solution for essentially any hedge fund strategy, providing investors an insightful view of the risks to which they may be exposed.
"Our work with PerTrac will bring advanced risk analysis to a wider market," said Dave Merrill, CEO of FinAnalytica. "RiskPlus puts our sophisticated, academically proven fat-tailed risk modeling into a scalable, easy-to-use tool that provides practical and actionable risk assessment."
"We're excited to work with FinAnalytica on this product," noted Mintz. "The reports generated by PerTrac RiskPlus arm investors with information helpful in their due diligence and ongoing monitoring. They provide critical information that supports investment decisions including which managers may deserve greater allocations, which ones are problematic, and the questions you should ask managers, as well as how your portfolio can be expected to perform in market downturns."
Highlights of PerTrac RiskPlus include:
- Fat-tailed risk statistics (as opposed to traditional risk statistics which assume a normal distribution) that show which funds contribute most to portfolio risk and which are the best risk diversifiers. Unlike traditional risk statistics that focus on general volatility, advanced statistics such as fat-tailed VaR, fat-tailed ETL, STARR, and Rachev Ratio separate downside risk from upside potential.
- Risk budgeting that compares the "implied" returns that funds should be earning based on their tail risk profile versus their actual returns. See which funds are underperformers relative to their risk level and which funds may deserve increased allocations.
- Factor contribution analysis which reveals how much various market factors (e.g. Asian convertibles, British pound sterling, U.S. large & mid caps, etc.) account for portfolio risk and how much risk is specific to the underlying funds.
- A Copula function that considers dynamically changing correlations among funds, e.g. weaker correlations in up months and strong correlations in down months, known as tail-dependence.
- Stress tests that show how a portfolio and its underlying managers could be expected to perform in 11 different historical market stress scenarios, including Black Monday, the Asian Crisis, the World Trade Center Attack, and the Crash of 2008.
- Sensitivity stress test exposures to seven different risk categories including equities, bonds, ABS/MBS, commodities and FX.
- Each fund's beta and p-value relative to 23 different market factors, providing insight into the true underlying portfolio exposures.
- Comparison of classical monthly correlation values between funds versus robust correlation values that de-emphasize outliers to help understand their impact on the relationship between the funds.
- Generates risk reports from return streams and portfolio weightings already stored in PerTrac Analytical Platform.
- Pricing based on usage, so smaller investors who require less frequent reports find the product highly affordable, while larger investors with more managers or bigger reporting demands can scale up as required.
PerTrac RiskPlus is an optional module integrated into the latest version of the PerTrac Analytical Platform application, the world's leading investment analysis and asset allocation software. PerTrac RiskPlus is aimed at funds of funds, pension funds, sovereign wealth funds, endowments, foundations, family offices, and other hedge fund investors searching for a cost-effective solution for sophisticated portfolio risk monitoring and management.