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Investcorp International Manages Investment Risk Using Reveleus Analytics

Published
  • July 01 2005, 1:00am EDT
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Reveleus AnalyticsREVIEWER: Deepak Gurnani, managing director for Investcorp.

BACKGROUND: Investcorp is a global investment group, which acts as a principal and an intermediary in investment transactions on both sides of the Atlantic. Since its establishment in 1982, Investcorp has completed transactions with an aggregate value of nearly $25 billion. The implementation of Reveleus was for the global asset management business.

PLATFORMS: Windows 2000/SQL Server 2000 as the database.

PROBLEM SOLVED: The investment funds of Investcorp are held and invested at the discretion of the fund managers with the firm holding minimal day-to-day control over the activities of the fund managers. Given the agency relationship between the managers and Investcorp, there is a degree of potential risk in the manner in which funds are managed on behalf of Investcorp. A comprehensive solution to the problem meant that Investcorp went beyond the normal practice of setting investment guidelines to conducting a full-fledged quality assurance check on fund manager activities. The quality assurance (QA) group folds under the asset management division and holds the dual responsibility of preventing investment risk inherent in the business of discretionary funds management and evaluating in-depth the performance of the fund portfolios. When we approached Reveleus for a solution to support our QA activities, we already had a system in place, which measured the market risks assumed. The additional requirement was for a robust system that would independently validate the integrity of the data supplied by the managers (used subsequently in risk monitoring) and further supplement it with detailed performance analysis. The challenge was to identify a system that would gather data in different formats, frequencies and levels of granularity from more than 12 prime brokers and the public domain.

PRODUCT FUNCTIONALITY: Today, the QA system allows for better economies of scale in performing the critical activity of reducing investment risk in fund management, thereby freeing executive time to analyze information and make well-informed decisions. The system achieves this by integrating data from multiple sources, allowing for automatic validation of information and by ensuring adherence to stipulated investment guidelines. The QA system also allows for the creation of a data-centric analytical application that acts as a single repository of clean, reliable data for use in different sections of our asset management business.

STRENGTHS: The solution has a very strong data quality infrastructure that is a combination of data quality rules and comprehensive business logic. Set rules allow managers to monitor the adherence to investment guidelines set by the bank. The rules are parameterized, and the user can tailor the rules without the need for additional programming. This solution can perform detailed portfolio analysis of our relative value and directional strategies using a wide range of analytic approaches including performance measurement and attribution.

WEAKNESSES: This solution is based on a data warehouse technology, so its ability to cater to changes in workflow requirement for some of the operational needs is limited. The choice of a warehouse-based core solution has led to a lot of otherwise operational requirements being retrofitted into a warehouse-based approach. The parameter-based approach to building the solution slows down some processes that could be optimized using specific handwritten code.

SELECTION CRITERIA: The Reveleus Framework already had the capability to extract process and analyze the data as required by us. We could build our solution around this framework more efficiently than in any other considered alternative.

DELIVERABLES: Reveleus' IPM (Investment Performance Management) solution has addressed a number of important business objectives including reconciliation of positions and NAV components, rate-reasonableness checking, investment guidelines monitoring, performance attribution and exposure analysis. It also provides validated data to the in-house risk management system. The Investcorp QA System was implemented as an operational data store and an Investment Performance Measurement Data Mart.

VENDOR SUPPORT: Vendor support was excellent at all times during the implementation.

DOCUMENTATION: A detailed product manual is available for reference.


Reveleus Analytics
Reveleus
510 Thornall Street
Suite 375
Edison, NJ 08837
646-619-5300
www.reveleus.com


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