The old saying “what you don’t know can hurt you” is true in most situations but financial markets reserve a certain type of pain for those who dare to tread without minding their risk.
The term “flexible data analytics” has been bandied about over the last decade by firms that offer solutions with pre-canned report capabilities.
Especially in a volatile market, you need a tool that allows you to apply powerful analytics and drill down and drill through vast amounts of moving data from the top-of-the-house down to the lowest level of granularity to enable secure decision-making.
To avoid blind spots when making decisions, hedge funds, now more than ever, need the ability to calculate, investigate and analyze large and complex sets of data. There’s hardly a day that goes by without a risk management report that could benefit from some kind of real-time data update. Every asset management firm needs to know where the risk/reward stands – i.e. where’s your Alpha generation coming from and which portfolio, is holding the biggest risk.
Fund investors want the security of knowing where their money, their future, stands.
A Risk Analytics Platform for Optimal Risk/Reward
A clear picture of risk/reward is contingent on the performance of your analytics solution. When making a decision with many systems, it can be difficult to do so without having the right information in front of you. This is because many systems either cannot process the large quantities of data required to make a clear and informed decision, or they do not provide an effective way to navigate that data. Without the necessary data and an effective way to navigate it, making a clear and informed decision becomes increasingly difficult.
The major challenge in data analytics for financial institutions has traditionally been a shortfall in solutions’ ability to combine the speed of calculation and analysis with navigation across multi-dimensional data. Naturally, the ability to analyze on-the-fly complex metrics on streaming data such as VaR, Greeks, and PnL, is reliant on a financial system that can do just that.
The key challenge for hedge fund managers has been the inability of many current risk monitoring systems to cope with this massive volume of data and the complexity of the calculations required. Very often hedge funds must rely on stale data and as a result, they underestimate the risks they face as well as the validity of their numbers.
For example:
- Reporting fund performance accurately by utilizing predictive analytics based on real-time data and metrics provides an advantage that could enhance your reputation.
- Running decades of historical data for stress testing or benchmarking requires a platform that scales with ease
- Identifying the primary sources of both risk and performance
- Monitoring regulatory risk is becoming an increasingly important task for the buy-side and creating reports based on real-time data can help cement compliance
One common requirement across fund management – be it a trader, risk analyst, portfolio manager, or chief investment officer – is the need for timeliness and accuracy in analyzing data, monitoring risk intraday, running ad hoc stress tests, and minding the overall health of the portfolio of funds. This resides primarily in calculating the risk figures but, most importantly, in interpreting and explaining the risk figures – without having to compromise on speed or accuracy.
ActiveViam has been supporting financial institutions in the United States, Europe, and Asia to identify and improve analysis through our sophisticated data aggregation and analytics platform, Atoti. Visit ActiveViam’s website for more information about our buy-side solutions.
