Active Risk Budgeting in Alternative Investment: Equalt Fixed Income Arbitrage Fund selects Riskdata

Equalt's fixed-income arbitrage fund has selected the Riskdata's on-line, interactive risk management solution to actively monitor its risk profile.

Christophe Turpault, manager of the Equalt Fixed Income Arbitrage fund comments : "We of course 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, in order to avoid hidden or exaggerated risk concentration - one of the common pitfalls that sometimes result in spectacular hedge fund collapses."

Turpault adds : "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 analyze 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".

"The alternative Investment community is today facing a major challenge: addressing the growing demand for risk transparency.' said Olivier Le Marois, CEO of Riskdata. '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."

Le Marois added: "Institutional Investors and Fund of funds growing demand for risk transparency is driven by two concerns:
- Firstly, 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.

- Secondly, 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."

Press Release Contact:
Andrew Marshall
Fishburn Hedges
Tel: +44 20 7544 3000

Florencia Panizza
Fishburn Hedges
Tel: +44 20 7544 3115

Become a bobsguide member to access the following

1. Unrestricted access to bobsguide
2. Send a proposal request
3. Insights delivered daily to your inbox
4. Career development