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Alternative Market Briefing

Funds look to analytics for risk management, compliance

Friday, June 22, 2012

David Merrill
Bailey McCann, Opalesque, New York:

As hedge funds look for ways to meet increasing regulatory and investor demand for more information, many are going to firms offering data analytics solutions. More than traditional risk reporting, analytics firms offer multi-model risk and portfolio testing and reporting - an approach that is beneficial to both investors and managers looking to understand performance, tail-risk and overall portfolio risk.

"Dodd-Frank is forcing more funds to come on board," explains David Merrill, CEO, FinAnalytica, a US-based predictive performance analytics firm in an interview with Opalesque. He notes that even while more are clients are asking about analytics, some firms are coming in looking for a report they can hand over to regulators. "When someone comes in asking about price first, that's a red flag for us, they are usually looking for something to hand off to a regulator. But from our perspective, if you are paying for the product, you should understand what is there and how to use it."

FinAnalytica led the way in creating multi-asset class predictive performance analytics for financial services. Zari Rachev, the firm's chief scientist spent over 10 years on the math powering their products - research which is still being awarded patents. The firm received a patent for its dynamic correlation solution this week. In essence, the process moves away from reliance on historical correlations and provides a fram......................

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