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Riskdata’s AlphaRisk Screener meets investors’ new needs for advanced selection of hedge fund and mutual fund style risks

January 15, 2008

Riskdata, the leading provider of risk management solutions to the worldwide alternative investment marketplace, announced today that it has launched AlphaRisk Screener, a powerful new screening tool that will form part of the upgraded FOFiX® 3.0, its flagship risk management system for investors in external funds. The advanced screening tool will enable investors to rank and select external funds not only by their risk appetite, but to match precise portfolio ‘risk style’ targets, jointly with performance objectives. Institutional investors, in particular pension funds and endowments whose requirements for low beta investments (hedge funds and 130/30 funds) increased considerably, have an urgent need for ‘risk style’ and alpha-based screening. It can help with queries such as finding out which manager can be selected to minimize the credit risk of a portfolio, while maintaining the overall expected performance; or in the event when a preferred fund is closed, which other managers offer a similar risk/return profile.

According to Olivier Le Marois, CEO of Riskdata “it is now more inadequate than ever for investors to rely only on risk-return based screening for their fund screening process. Simply answering the question ‘which manager has the best Sharpe Ratio in a strategy’ is not sufficient, because the static classification of fund ‘strategies’ is often a poor reflector of actual risk drivers. Selection is perhaps the single most important element of the investment process, and with AlphaRisk Screener in place, the enhanced version of FOFiX now provides the most advanced tool to support selection from beginning to end - from manager selection monitoring, through portfolio construction to risk control and reporting.”  

Riskdata’s AlphaRisk Screener allows investors to:

• Select funds and eliminate a specific unwanted risk type, while still maximizing expected performance;
• Select funds that display a targeted non-linearity, thereby boosting a specific performance driver, with minimal risks;
• Support portfolio rebalancing decisions related to evolving risk/return profile targets;
• Select a market instrument to add to a fund portfolio to create hedges.
• Visualize risk style change over time across the entire investment universe or by peer groups.

Numerous recent best practice surveys have highlighted the increased demand of institutional investors for advanced screening and selection tools that reflect multiple risk types and identify alpha. Portfolio optimization is no longer the focus today; risk styles, sources of risk/returns, stress testing and detailed inclusion of risk in reporting have become top priorities for investors.

“Risk cannot be reduced to a single number any more than medicine can be reduced to a thermometer reading,” commented Ingmar Adlerberg, Chairman and Product Manager of Riskdata. “Most other similar products have screening capabilities based on basic statistics, but none of them allow you to conduct a portfolio construction screening and searching for specific risk types with outperformance indicators. Potential clients are now comparing AlphaRisk Screener with these other services and its strengths and advantages are being quickly grasped”.

AlphaRisk Screener’s key features include:

• Setting a precise risk/return target across over 170 “risk types,” including risks specific to the alternative industry, such as correlation risks.
• Creating targets from an existing fund or benchmark, or from scratch.
•  Screening through thousands of funds: the tool has been fine-tuned for mass treatment of fund histories to enable fast and dynamic usage.
• Inverting a target by one click to fund a hedge against unwanted risk.

Multiple criteria rankings include:

•  Risk Exposures
• Non-Linear Beta Exposures Allowing a Focus on Extreme Risks.
• Alpha and Alternative Beta
• Classical risk measures such as Sortino, Sharpe ratio, Peak2Valley
• Static Strategy Classifications
• Multi-stage screening process: an efficient way to eliminate or focus on subgroups to achieve a final selection through multiple stages of selection.
• Creation of candidate lists: for easy use in the portfolio construction, or due diligence process.

With AlphaRisk Screener in place, FOFiX 3.0 now offers a highly advanced and practical tool to support the entire investment process, from manager selection and monitoring to portfolio construction and risk control and reporting. FOFiX 3.0 is capable of dealing with mixed portfolios, including sophisticated hedge-fund strategies, traditional long-only mutual funds, and instruments like derivatives.

About FOFiX®

Specifically developed for funds of hedge funds and investors, Riskdata's FOFiX is a complete performance and risk profiling and a risk based portfolio construction tool. It enables funds of hedge funds to structure and apply a risk budgeting approach consistently through out the entire investment process. FOFiX uses methodologies that account for long-term, short-term, non-linear and extreme behavior of hedge funds strategies.

About Riskdata

Headquartered in Paris with offices in New York and London, Riskdata is the leading provider of risk management solutions for the global fund and asset management community. Riskdata’s significant experience with the alternative markets quantitative modeling and IT development makes it an authoritative provider of state-of-the-art risk solutions. Riskdata has more than 150 clients across North America, Europe and Asia.

For further information:

Press:
Fishburn Hedges
Andrew Marshall
Florencia Panizza
Tel: +44 20 7839 4321
andrew.marshall@fishburn-hedges.co.uk
florencia.panizza@fishburn-hedges.co.uk

Sales: info@riskdata.com

Riskdata Europe
Marc Gross
15 Stratton Street
London
Tel: + 44 20 7659 0433

Riskdata North America
Finn Christensen
10 E 40th St
New York
Tel: + 1 212 931 57 94

“The challenge for us was to get an aggregated view of the fund risk profile while tracking the specific risk of each underlying strategy. We think Riskdata is able to address both of these issues simultaneously. Moreover, we can monitor the impact of any portfolio allocation on the fund risk profile.”

Philippe Uzan,
CDC IXIS Multi-Strategy Fund