Investor Analytics, a provider of risk analysis and risk management solutions to the hedge fund industry, has announced plans to offer advanced ana
Investor Analytics, a provider of risk analysis and risk management solutions to the hedge fund industry, has announced plans to offer advanced analytics based on research by Dr Andrew Lo, chief scientific officer of AlphaSimplex Group, an asset management firm specialising in alternative investments.
The product, known as the AlphaSimplex Analytics Array or A3, will be available in the first quarter of next year on the Investor Analytics platform alongside its existing suite of risk tools for the hedge fund industry, and comes at a time when many investment managers are focusing on better ways to analyse the risks in their alternatives portfolios and strategies.
Included in the A3 product suite are new measures of illiquidity exposure, econometric risk-budgeting tools, and return-based and position-based portfolio analytics for separating alpha and multiple betas, as well as enhanced loss statistics and performance metrics.
The theoretical underpinning of the A3 framework is the adaptive markets hypothesis, an evolutionary theory of market dynamics proposed by Lo (photo) to reconcile the efficient markets hypothesis with the many anomalies uncovered by studies in behavioural finance.
“Investor Analytics is very excited to be working with AlphaSimplex and Dr Lo in bringing this unique suite of tools to the market,” says chairman and chief executive Damian Handzy. “A3 addresses precisely those market-risk issues that have figured so prominently in the current crisis, namely illiquidity, unprecedented volatility and fat tails.”
Lo, who is also a professor at the MIT Sloan School of Management, says: “AlphaSimplex is delighted to bring these important innovations to the market, especially in times of severe market stress. We expect every hedge fund investor will want the unparalleled degree of risk transparency that A3 can provide.”
He says hedge funds and funds of hedge funds as well as traditional asset managers have increasingly been partnering with third-party specialists that provide independent assessment of their risk profile, in order better to safeguard investors’ capital. By generating multiple dynamic perspectives on a fund’s risk exposures, including liquidity risk, regime shifts and time-varying correlations, A3 will give managers and investors greater confidence that their risks are being measured and managed effectively.
Investor Analytics, headquartered in Berkeley Heights, New Jersey with offices in Manhattan and Ohio, has been providing portfolio and risk management services to the hedge fund industry since 1999.
AlphaSimplex Group, also founded in 1999, offers a suite of alpha-generation and beta-capture strategies, including hedge funds, hedge fund beta replication and global tactical asset allocation. Lo is an internationally recognised expert in the fields of quantitative and behavioural finance, risk management, alternative investments, and hedge fund beta replication. The firm was acquired in September last year by Natixis Global Asset Management, part of the French corporate and investment bank.
