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Alternative Market Briefing

For fiscal cliff wary asset managers, Investor Analytics offers stress tests

Wednesday, November 28, 2012

Bailey McCann, Opalesque New York: Asset managers and owners have a new weapon in understanding and preparing for the fiscal cliff, such that it happens in the US. Investor Analytics LLC (IA), a global leader in risk management solutions, has developed stress tests for asset managers and owners to navigate through any "fiscal cliff" outcome. IA estimates that balanced funds comprising US equities and bonds may suffer losses in the range of 10% to 21% from the fallout of fiscal cliff negotiations. IA’s stress tests are designed to help managers prevent catastrophic loss by stressing portfolios against the gamut of potential market reactions.

"Fiscal Cliff" has become the catch-all term for the package of across-the-board budget cuts included as part of last year's deal to raise the US federal debt ceiling, that ultimately resulted in the first ever credit downgrade of the US. The budget cuts will begin on January 1, 2013 and span the remainder of the year if no deal is reached on broader debt restructuring before then. Many have described the cuts as apocalyptic, although they essentially bring US spending back in line with 2007 levels.

Congress is expected to deal with the fiscal cliff and at a minimum get to some temporary deal in the lame duck session, although Senate Majority Leader Harry Reid (D-NV) said today in a press conference with reporters that "little progress," had been made causing US equities to tick ......................

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