turbocharge your valuation & risk technology
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© FINCAD
Turbocharge Your Valuation & Risk Technology
November 28, 2017
11:00 am (ET) | 8:00 am (PT) | 4:00 pm (GMT) | 12:00 am (HKT)
© FINCAD2
Thank you for joining our webinar.
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• Chat window on lower right
• Please adjust your audio
• For best results, maximize screen
• For best results, use high speed internet
• Q&A and survey at the end
Institutional Investors Are Diversifying;
Asset Managers Are Adapting
Webinar
April 2017
Greenwich Associates
Presenter
4
Kevin McPartland, ModeratorManaging Director,
Market Structure and Technology Research
Greenwich Associates
About Greenwich Associates
Greenwich Associates
We provide unique market information, insights and advice to help
clients:
• Improve their business performance
• Drive product strategy & development
• Increase sales effectiveness
• Gain a significant competitive advantage
• Enhance operational performance
• Optimize development initiatives
• Transform their business to improve every aspect of customer experience
Firm Facts:• Founded in 1972
• Privately held
• Headquartered in Stamford, CT, with regional offices in
Pleasanton, CA, Toronto, London, Singapore, and Tokyo
Greenwich Associates is the leading provider of global market intelligence
and advisory services to the financial services industry
About Greenwich Associates
6
By the numbers:
260+ Sell-Side Clientsin the financial services industry
350 Employeesthroughout the United States,
Canada, Europe, Asia, and Japan
60,000 Annual Interviewswith buyers of financial services
150 Executive Interviewersgather data in 70 countries in 14
languages
310,000 Universe of Expertsunique buy-side contacts
Research Findings
Greenwich Associates
Business is tough despite the rising market
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• The equity market is rising, but
that’s where the positive news
ends for institutional investors.
• Low rates, volume and
volatility are all a drag on the
market
• The reduced role of dealers as
market makers has hurt the
ability to execute on strategies
• Fee pressures are hitting asset
managers hard, particularly
those with active strategies
Credit
Crisis“Taper
Tantrum”
Greenwich Associates
Investors are looking to tech partners for help
9
• Utilizing third-party software on
the trading desk is encouraged,
and will only grow
• Fixed income markets are
behind, but are the biggest focus
today
• Data and analytics are often the
biggest differentiators
• Technology is only as good as
the integration, which is a top
buy side ask of tech providers
Greenwich Associates
Integration is critical, and in demand
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Source: Greenwich Associates 2016 Trading Desk Optimization Research Study. Based on 144 respondents in 2015 and152 in 2016. *Speed of response, run-time/up-time. **Including derivatives.
5%
13%
16%
16%
16%
18%
26%
30%
33%
37%
39%
43%
51%
54%
Other
Access to algorithms
Predictive analytics
Control over order routing
Access to liquidity venues
Product scalability
Venue Analysis
Multi-asset-class trading**
Compliance functionality
Post-trade TCA
Pre-trade TCA
Reliability*
Customization
Ease of integration with other tools
What elements of your OMS are most in need of improvement?
Greenwich Associates
Investors also look to the banks for help
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• The banks continue to act as
important counterparts for
institutional investors
• Traditional services still drive
counterparty selection, but
advice and tools related to
risk are increasingly important
• Bank provided data and
analytics are also on the rise,
but again integration with
third-party technology is key
Derivatives Service*, 41%
Lending Relationships,
36%
Debt Capital Market
Transactions, 13%
Advice on Strategic
Enterprise-Wide Risk
Management, 9%
M&A Advisory Services, 2%
*Day-to-day coverage, trading, research and back office.
**Margins, collateral, CSAs
Based on responses from 292 Global - Top Tier interest rate derivatives users in 2016 and 327 in 2015.
Source: 2016 Global Treasury Services Facility
Average Proportion of Derivatives Volume Allocated
to Dealer as a Result of:
Greenwich Associates
Challenges RiskTech providers are overcoming
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• Financial services firms will pay up for customized/unique models and risk
management tools, however many risk models have become commoditized (i.e. VAR)
in the past decade.
• Cloud deployment has increased the profitability of the business, allowing users to
access the large amount of compute power needed to run complex risk models without
the capital expense of operating a data center.
• RiskTech providers need to manage there own risk: a small error in a model could
create huge losses for a customer. Furthermore, managing risks in the future can never
be a perfect science, with even informed assumptions sometimes proven wrong by
market activity.
• Quantitative models at the heart of these offerings are complex in their simplest form,
and creating something new and differentiating requires particularly deep knowledge of
and practical experience in the space. However, access to compute power via the
cloud has lower one major barrier to entry.
• The more third-party technology on the trading desk, the more integration between
platforms is critical and complex
Stamford | London | Singapore | Tokyo | Toronto | Pleasanton, CA
© 2017 Greenwich Associates, LLC. Javelin Strategy & Research is a division of Greenwich Associates. All rights reserved. No portion of these materials may be copied, reproduced, distributed or transmitted,
electronically or otherwise, to external parties or publicly without the permission of Greenwich Associates, LLC. Greenwich Associates®, Competitive Challenges®, Greenwich Quality Index®, Greenwich ACCESSTM,
Greenwich AIMTM, and Greenwich Reports® are registered marks of Greenwich Associates, LLC. Greenwich Associates may also have rights in certain other marks used in these materials.
13
Kevin McPartlandManaging DirectorGreenwich Associates
Direct: +1 203.625.4302Email: Kevin.McPartland@greenwich.com
@kmcpartland
© FINCAD4
James ChurchVP, Products and R&D
FINCAD
James Church joined FINCAD in 2011. He has over 15 years of experience in the software industry. Before joining FINCAD James was Vice President of OLAP Product Management at Business Objects, and prior to that was Director of OLAP Product Management at Crystal Decisions. He studied Computer Science at North Staffordshire University in the UK.
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Agenda
Introduction1
Technology Challenges2
Turbocharging Valuation and Risk Technology3
Conclusion4
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Agenda
Introduction1
Technology Challenges2
Turbocharging Valuation and Risk Technology3
Conclusion4
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Portfolio Management SystemsInvestment Drivers
Source: Aite - Portfolio Management Systems: The Next-Gen Tech Arms Race? November 2017
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Portfolio Management and RiskSystems landscape
Front Office
Middle Office
Back Office Operations, Accounts, Fund Admin. Management, Investor, Regulatory Reporting
Front Office Trading Engine - OMS, EMS, Broker Matching
Integratio
nM
arket Data, R
eference D
ata, Trade D
ata
Oth
er Systems
e.g. regulato
ry Rep
ortin
g, Investo
r Rep
ortin
g
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Portfolio Management and RiskSystems landscape
Front Office
Middle Office
Back Office Operations, Accounts, Fund Admin. Management, Investor, Regulatory Reporting
Front Office Trading Engine - OMS, EMS, Broker Matching
Integratio
nM
arket Data, R
eference D
ata, Trade D
ata
Oth
er Systems
e.g. regulato
ry Rep
ortin
g, Investo
r Rep
ortin
g
Structured products
Portfolio Optimization
Backtesting
Margin & Collateral
Risk Reporting
Regulatory Reporting
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© 2017 - Proprietary and Confidential Information of FINCAD
a patchwork
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Portfolio Management and RiskSystems landscape
Front Office
Middle Office
Back Office Operations, Accounts, Fund Admin. Management, Investor, Regulatory Reporting
Front Office Trading Engine - OMS, EMS, Broker Matching
Integratio
nM
arket Data, R
eference D
ata, Trade D
ata
Oth
er Systems
e.g. regulato
ry Rep
ortin
g, Investo
r Rep
ortin
g
Structured products
Portfolio Optimization
Backtesting
Margin & Collateral
Risk Reporting
Regulatory Reporting
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Manual Processes An Increasing Concern
Source: Confluence - Asset Management Trend Survey Report Q4 2017
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Agenda
Introduction1
Technology Challenges2
Turbocharging Valuation and Risk Technology3
Conclusion4
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Tina:CTO
Rachel:CRO
Ian:CIO
In-house System
Alan:Portfolio Mgr
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Ian:CIO
I have approval to look at launching new funds in Emerging Markets;
FX / Equity / Rate hybridNeed systems in place to support
this.
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Tina:CTO
I need to work with Alan on EM support. It is challenging for the developers to re-implement the
Excel prototypes we get.
We need to do a lot of research to support these new markets.
Alan:Portfolio Mgr
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I also need to work on backtesting the new investments strategy
I can use python, but I’m going to need to use my own
database for market data
Alan:Portfolio Mgr
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Hmm – some of the trades we’re looking into are quite
complex too.
I can’t see any way to deal with them other building some
Excel workbooks
Alan:Portfolio Mgr
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Tina:CTO
Rachel:CRO
Ian:CIO
≠ ≠
Alan:Portfolio Mgr
In-house System
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© 2017 - Proprietary and Confidential Information of FINCAD
In the stone age
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© 2017 - Proprietary and Confidential Information of FINCAD
key person risk
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© 2017 - Proprietary and Confidential Information of FINCAD
unable to scale the business
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Agenda
Introduction1
Technology Challenges2
Turbocharging Valuation and Risk Technology3
Conclusion4
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beyond reach.
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Tina:CTO
Alan:Portfolio Mgr
Alan - it looks like getting you started on the new trading strategy is the
highest priority.
If I can use my python tools with our clean data
and flexible analytics, that would be awesome!
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Phase 1 – Integrated Platform and Python
Integrated Analytics Platform
We have chosen an integrated analytics platform and now we
can integrate it with the required data feeds.
Input Data• Portfolios• Reference data• Market data
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I can get started with my favorite python tools for
backtesting and other kinds of portfolio analysis
And setting up new markets is easy with the reference data and curves included in the
platform
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Phase 1 – Integrated Platform and Python
Integrated Analytics Platform
Input Data• Portfolios• Reference data• Market data
Analytics Data• Market models• Scenarios• Curves, Surfaces etc.
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Phase 2 – Pre-Trade Decision Support
Integrated Analytics Platform
Input Data• Portfolios• Reference data• Market data
Analytics Data• Market models• Scenarios• Curves, Surfaces etc.
Next we can get the standard trades set up in the vendor’s GUI, including risk reporting
Derived Data• MTM, Risk, Cash Flows, P&L• Time series
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Phase 2 – Pre-Trade Decision Support
Integrated Analytics Platform
I can use Excel to create tools for the more complex products we will be trading, all driven by the data and portfolios in the
common platform
Input Data• Portfolios• Reference data• Market data
Analytics Data• Market models• Scenarios• Curves, Surfaces etc.
Derived Data• MTM, Risk, Cash Flows, P&L• Time series
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Phase 2 – Trading
Integrated Analytics Platform
Input Data• Portfolios• Reference data• Market data
Analytics Data• Market models• Scenarios• Curves, Surfaces etc.
I can see risk on demand for all the standard and structured trades, and without needing
spreadsheets!
Derived Data• MTM, Risk, Cash Flows, P&L• Time series
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Future Phases
Tina:CTO
We can use the integrated analytics platform to
supply valuation and risk results to other front ends
We can bring the risk reporting for the other
teams into the same solution.
And integrate with our regulatory reporting
system, removing some more manual processes.
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An Integrated SolutionFor multi-asset portfolio and risk management
Input Data• Portfolios• Reference data• Market data
Analytics Data• Market models• Scenarios• Curves, Surfaces etc.
Derived Data• MTM, Risk, Cash Flows, P&L• Time series
Integrated Analytics Platform
Python Portfolio and Risk Excel Other Systems
© FINCAD43
An Integrated SolutionThat fits with existing technology ecosystem
Front Office
Middle Office
Back Office Operations, Accounts, Fund Admin. Management, Investor, Regulatory Reporting
Front Office Trading Engine - OMS, EMS, Broker Matching
Integratio
nM
arket Data, R
eference D
ata, Trade D
ata
Oth
er Systems
e.g. regulato
ry Rep
ortin
g, Investo
r Rep
ortin
g
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© 2017 - Proprietary and Confidential Information of FINCAD
“If a key software platform in your stack is not able to integrate with multiple external and internal systems, or if you don’t have a fairly open API set that permits integration and interconnectivity, then you’re setting yourself up for challenges”
Phil Dundas, Head of Information Technology, Americas at Schroders
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© 2017 - Proprietary and Confidential Information of FINCAD
from a patchwork
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© 2017 - Proprietary and Confidential Information of FINCAD
to integrated portfolio management and risk
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Collaboration
Data quality and integrity
Operational risk
Reconciliation issues
Manual processes
Business Efficiency
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Benefits
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Agenda
Introduction1
Technology Challenges2
Turbocharging Valuation and Risk Technology3
Conclusion4
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Summary
• Many firms are struggling with a patchwork of portfolio management and risk systems
• The right technology is a key enabler for business success
• Reducing risk, and increasing efficiency
• Empowering you to grow your business
• Staged implementation builds success in manageable projects
© FINCAD
Kevin McPartlandManaging Director, Market Structure and Technology
Greenwich Associates
Kevin McPartland has nearly 20 years of capital markets experience with deep expertise in market structure, regulation and technology impacting the fixed income, FX, and equity markets.
Prior to joining Greenwich Associates, Kevin was Director in the Electronic Trading and Market Structure group at BlackRock, and Principal at TABB Group. Kevin also spent time at JPMorgan, UBS and Deutsche Bank in varying capacities. He has a BS in Computer Science from Rensselaer Polytechnic Institute.
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© FINCAD
FINCAD is the leading provider of integrated analytics for multi-asset portfolio and risk management. An industry standard since 1990, our advanced analytics, flexible architecture and patented technology enable global financial firms to improve returns, manage risk and comply with regulations. Clients include leading asset managers, hedge funds, insurance companies, pension funds, banks and auditors. For more information, visit www.fincad.com.
For more information:
North America 1 800 304 0702
www.fincad.cominfo@fincad.com
Europe00.800.304.07020
Request a demo today.
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