Introduction
A top pension fund in North America embarked on a strategic asset reallocation journey, shifting investments to alternative classes such as real estate and private equity. However, they encountered challenges in evaluating these assets within their risk analytics software due to a lack of coverage. It impacted the accuracy of risk statistics for alternative assets and overall risk reporting, necessitating a solution to address these issues and align risk numbers with expectations.
Analyzing the Problem
- The pension fund's shift to alternative assets required accurate evaluation within the risk analytics software to assess risk exposure effectively.
- The existing risk analytics software lacked coverage for alternative asset classes, leading to inaccuracies in risk statistics and aggregation impacts.
- The pension fund sought a solution to ensure the correctness of risk numbers and align them with their investment strategies and objectives.
Initial Challenges
- The absence of coverage for alternative assets in the risk analytics software posed challenges in evaluating risk exposure accurately.
- Mapping the diverse range of underlying data for alternative assets to risk models requires extensive effort and expertise.
- Automating the mapping exercise to streamline the process and ensure consistency was essential for efficiency and accuracy.
Our Solution
- The Managed Services team collaborated with the analytics product management team to address the coverage gap for alternative assets in the risk analytics software.
- They also did extensive work to map the underlying data for alternative assets to specific risk factors and exposures, ensuring alignment with risk models.
- Once mapping rules were finalized, the team worked with the implementation team to automate the mapping exercise, enhancing efficiency and consistency.
- Integration with leading alternative data providers such as Burgiss facilitated access to relevant data sources for comprehensive risk assessment.
Benefit/Impact
- The solution enabled accurate evaluation of alternative assets within the risk analytics software, enhancing risk assessment capabilities and aligning risk numbers with client expectations.
- Addressing the client-specific challenge of alternative asset data mapping contributed to continuous improvement in client experience and satisfaction.
- Automation of the mapping exercise streamlined processes, improving efficiency and consistency in risk assessment for alternative assets.
Conclusion
By addressing the coverage gap for alternative assets in the risk analytics software, the top pension fund in North America successfully enhanced its risk assessment capabilities and aligned risk numbers with its investment strategies. The collaborative approach, coupled with automation and integration with data vendors, facilitated accurate evaluation and improved client experience, highlighting the effectiveness of strategic partnerships in addressing complex challenges.
