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Alternative Market Briefing

Modern investor tools (6): Hedge Funds Rating aims to anticipate the next banking crisis

Monday, October 30, 2017

Oilid Ben Mezzo
Benedicte Gravrand, Opalesque Geneva:

Hedge Funds Rating is an independent rating platform for hedge fund investments and management companies, headquartered in Luxembourg and soon with offices in New York. The firm creates manager and market insights through a combination of non-traditional financial and regulatory data - allowing users to make more informed investment decisions. Co-founder and quantitative analyst Oilid Ben Yezza, who has a banking background, talks to Opalesque about his research process.

Oilid Ben Yezza: The idea of our rating is to anticipate the next Lehman or Bear Stearns.

As you know, custodian banks represent the sum of all assets of their institutional clients and small part of their own capital.

Logically, the more institutional clients of banks gamble - clients without market timing ability and high risk (high leverage, loss which exceeds the VaR threshold…) - the greater the risk for the custodian bank to go bankrupt.

  The biggest crisis came from speculative funds (Amaranth, LTCM, Bear Stearns, Parvest for BNP…). So we need to know exactly who the clients of the banks are. If you know who they are and if you are able to rate them, you are able to rate the banks.

Currently, regulation does not take enough into account OTC products, which are a big part of speculative funds' investments, nor do they take enough into account risk rati......................

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