Risk Management tools used in the Hedge Fund world
Institutional investors with more than $200 billion plus assets have invested in hedge funds and are using Risk Metrics’ to monitor the risks associated with their investments. These investors, including pension funds, sovereign wealth funds and fund of hedge funds, account for almost 20% of assets under management in the hedge fund industry.
These buy side investors can use Hedge platform community to access tailor made risk reports from Risk Metrics and aggregate position-based risk information across their hedge fund portfolios. Moreover, the hedge funds are invited to provide this information to Risk Metrics free of charge.
Brian Schmid, head of Risk Metrics Group’s alternative investments business strategy, told Hedge Funds Review over 1,000 hedge funds were eligible to provide information to HPC. He said more than 200 hedge funds representing over $350 billion in assets under management have already signed agreements to participate in HPC.
Risk transparency and reporting are rising up the agenda for institutional investors. According to a survey by EDHEC Risk and Asset Management Research Centre, 92% of investors believe the quality of hedge fund reporting is an important signal of a fund’s overall quality and pivotal for decisions about hedge fund investment.
Institutional investors can use HPC to generate a number of risk reports on their hedge fund investments, including Value at Risk and stress tests. Risk Metrics is working on including liquidity risk reports within the service. In the future, the company said counterparty risk reports could also be added to HPC.
