Carlyleâs U.S. Leveraged Finance Group wanted to implement a risk management system that could model every investment in its high yield portfolio, incorporating all of the key risk drivers including probability of default, loss given default, and concentrations and correlations. Carlyle plans to use this system to help determine optimal leverage amounts for the groupâs funds, to help create and manage risk-adjusted performance incentives, and to help create and monitor risk-based investment limits by industry and issuer.
To help achieve these goals, Carlyle chose SunGardâs BancWare ERisk based on its experience of measuring risk within the banking sector and for its rigorous quantitative models. BancWare will help Carlyle to measure credit and interest rate risk for each fund and help it receive analytic outputs for use in capital adequacy analysis and strategic planning through a Web-services application â helping virtually eliminate the need for in-house technical support. Another factor in Carlyleâs choice was BancWareâs ability to implement its model quickly, allowing Carlyle to use its results in less than three months.
Brannan Johnston, vice president of Carlyleâs U.S. Leveraged Finance Group, said, âWe wanted to employ best-practice risk and capital management tools that are already used by BancWareâs banking customers, but are not yet common practice among investment managers. Having this type of portfolio modeling system will help further our goal of investing in assets with positive risk-adjusted value which will ultimately be a benefit for our investors.â
David Samuels, chief operating officer at SunGardâs BancWare business unit, said, âWith BancWare ERisk, Carlyle will be among the first in the investment management sector to adopt the types of credit capital measurement and management practices that have been embraced by banks over the past decade. We are pleased to implement this system to help deliver increased transparency, efficiencies and decision support.â