Since 2008, institutional allocators have started to view risk and exposures in a new way. Deriving comfort from managers’ historical returns, relying on an intricate web of spreadsheets to calculate portfolio exposures, and attempting to focus on one single number to articulate all risk proved to be materially flawed approaches.
Technology partners, including Caissa, LLC, responded by offering more robust and holistic portfolio management software, arming institutional allocators with tools to be better prepared in an increasingly complex investment landscape.
Before 2008, there were a number of issues that financial risk management software simply couldn’t solve. Asset allocators relied on managers’ historical performance to assess risk of total portfolio and followed a “bottom up” approach to manager selection.
Risk managers often spent weeks trying to estimate a portfolio’s exposure to a specific region or asset class, while spending months preparing client or board meeting reports.
Complicated liquidity terms and poorly functioning portfolio liquidity software resulted in missed notice dates for hedge fund redemptions.
Portfolio management software only gauged a manager’s pedigree and previous experience to understand where they are skilled, without considering their current holdings, and strategy buckets functioned as the primary means of diversifying a portfolio.
And last of all, style drift was often only detected through quarterly conversations with managers.
The team at Caissa, LLC, made up of institutional allocators and exceptional developers, has come together to offer the Caissa Platform, a portfolio and risk management application used by institutional allocators and collectively representing over $1.7T in AUM.
Unlike the times prior to 2008, Caissa solves many of the issues that vexed asset allocators and risk managers in the past.
Now portfolio managers can aggregate managers’ exposures to conduct holdings-based stress tests and leverage user-friendly technology to seamlessly create reports.
Liquidity opportunities are rarely missed through automated alerts days in advance of hedge fund notice dates, while exposures are determined, sliced and diced in any manner, with only a click of a button.
The Caissa Platform allows asset allocators to rely on actual performance attribution, easily determining where portfolio managers are skilled. Diversification can now be based on actual investment attributes as well, like asset class and regional exposure, to view overlap across buckets.
Finally, style drift is no longer based on anecdotal conversations, as the Caissa Platform allows asset allocators to receive alerts when managers’ breach mandates, while using data visualization to display outliers.
