A staggering 100 plus independent application providers covering market, credit, energy and commodity risk management have been identified through research being conducted by Carbon360.
"This large pool of applications offers the alternative investment managers many more options, and many more questions about the appropriate applications, than just a few years ago," said Brian Shapiro, President of Carbon360.
Buoyed by a huge inflow of private equity and venture capital dollars, software vendors â large and small â have found themselves flush with cash. According to estimates, $265 million flowed into the sector in 2004, most notably a $120 million dollar investment in RiskMetrics Group by a consortium consisting of Spectrum Equity Investors, General Atlantic Partners and Technology Crossover Ventures.
The resulting surge in research and development has led to a host of improvements, allowing hedge fund and fund of fund managers to automate such complex functions such as VaR, correlation, and attribution analysis, as well as other key activities such as hedging, leverage choices, and management of event-risk through efficient stress-testing.
However, despite the inflow of capital and resultant surge in development, challenges remain, primarily an ever increasingly diverse universe of securities. Hedge funds often use significantly more complex instruments that traditional risk factor systems will be challenged to support these complex securities.
Carbon360 believes that with enterprise-wide risk systems costing greater then $200,000, purchasers will demand complete instrument coverage.