Equalt, the alternative asset management subsidiary of Crédit Agricole Indosuez, has selected Riskdata's on-line, interactive risk management solution to actively monitor the risk profile of its fixed-income arbitrage fund.
Christophe Turpault, manager of the Equalt Fixed Income Arbitrage fund, said: "We seek return by implementing the best trading opportunities we detect. Before adding a new position, we accurately assess its impact on the portfolio's risk. This level of risk management ensures a continuous performance. We also need to constantly monitor the diversification level of the portfolio across many different criteria, inorder to avoid hidden or exaggerated risk concentration - one of the common pitfalls that sometimes result in spectacular hedge fund collapses."
Mr Turpault added : "We think risk management is much more than an ex-post mandatory reporting burden or a marketing gimmick : it is the very reason why institutional investors turn to hedge funds. Riskdata allows us to analyse existing and simulated risk all along our investment process, from the initial position design and sizing up to its real-time monitoring and management, and from the trade level to the fund level. It was remarkably simple and swift to implement though, taking less than a month to automate, in spite of the very large spectrum of interest rate instruments we trade".
Olivier Le Marois, CEO of Riskdata, said: "The alternative Investment community is today facing a major challenge: addressing the growing demand for risk transparency. 'But we believe that positional transparency is the wrong answer to a good question. Positional transparency is high cost, and involves disclosure of business sensitive information. It is in contradiction with active risk management along all the investment process, relying on ex-ante simulation prior to any decision. What is important is for clients to have an in-depth understanding of their fund risk profiles and to have the ability to explain it."
Mr Le Marois added: "Institutional Investors and Fund of funds growing demand for risk transparency is driven by two concerns:
* First, to aggregate, at a global level, the risk across all their different investments. The most effective way to address this demand is to issue risk reports adapted to each investor requirement. This requires an easy and flexible report design capability.
* Second, to reduce their risk exposure where the underlying fund defaults. A formal disclosure driven by marketing considerations is clearly not the solution: what is critical here is to ensure that a fund is capable of actively managing its risk profile."
Background Note: Equalt is the subsidiary of Crédit Agricole Indosuez specialised in alternative asset management. Equalt's corporate mission is to provide alternative investment solutions that combine superior risk adjusted returns with clear institutional risk control, focussing on both performance and capital preservation.
With 650m euros under management (as of 31/12/02), Equalt has a diversified investment range (with or without capital guarantee) trading Equities, Fixed Income and Quantitative strategies.
Relying on its extensive proprietary trading and risk management expertise, Equalt's parent company launched its first alternative fund in the US in 1994 and in Europe in 1998. Equalt has kept expanding its range of in-house alternative single and multi-strategy funds (registered in Ireland, France or the Cayman Islands), as well as a number of managed accounts in various alternative strategies, essentially for testing and pre-launch purposes
Riskdata's team include Investment Practitioners, Risk Management Experts and IT Specialists. Its aim is to offer to all money managers easy, interactive and intuitive access to a powerful unified risk framework. It is supported by leading figures, such as Professor Robert Mundell, a past winner of the Nobel Prize for Economics.
It is the first service offering a daily updated view on all market classes: equities, bonds, listed and OTC derivatives. As an interactive system, rather than classic ASP model, there is no exporting of clients' positions while deployment is quick and simple.
Riskdata offers a comprehensive suite of solutions for Alternative Management, adapted to all investment styles: E.g. Fund of Funds, Long Short Equity, Fixed Income Arbitrage, Convertible and Volatility Arbitrage etc.
Riskdata offfers a number solutions for hedge funds and funds of funds:
* RiskdataHF(r) offers an immediately operational, cost-effective risk solution specifically designed for hedge funds, who want to actively manage their risks, with no exporting of a fund's positions.
* RiskdataSD(r) strategy designer allows the user to design strategies and funds risk profiles and run them on a daily basis, according to risk objectives and based on the comprehensive factor set adapted to each investment style.
* Riskdata FOF(r) allows Funds of Funds to aggregate risk and allocate assets consistently while accepting different levels of transparency from their underlying Hedge Funds.
* Extracting all the quantitative information contained in NAVs series
* Leveraging the information contained in periodic risk reports issued by the Hedge Fund (Sector, country, currency, maturity buckets, decompositions)
* Providing positions for managed accounts or fully transparent Hedge Funds (including credit and volatility arbitrage styles).