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Risk Management

09:02 AM
Cristina McEachern
Cristina McEachern
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Barra Releases Enhanced Risk System for Fund Managers

Barra's latest Cosmos release is updated with new credit models for EMU, U.K. and U.S. markets.

Responding to the changing European economic market and portfolio needs, Barra has released the latest version of its Cosmos System for fixed-income risk management. Cosmos version 3.0 offers access to Barra's latest credit model, which includes new EMU, U.K. and U.S. credit-spread risk models and specific risk models, as well as Barra's emerging-market risk model and new credit indices.

"The driver behind the enhancement is primarily the market changes in Europe," explains Michael Bishopp, vice president of product management at Barra. "With the currency dimension going away, one European sovereign or government bond looks much like another, so what's happening is the fund managers have been forced to move out of those bonds and into corporate bonds and other issuers of lower credit quality to gain yield within their portfolio."

Bishopp says that with the introduction of the Euro and the single currency, a higher portfolio yield now calls for more corporate ownership within the portfolio and, therefore, the credit dimension to support that area has become increasingly important. "Not that everyone was just in government before, but there were more opportunities in that sector given the currency dimensions."

Bishopp adds that the latest version of Cosmos features "much more granular" credit-risk models for the EMU, U.K. and U.S. markets in order to help fund managers with risk control in those areas, as well as with decision support when managing portfolios. "As an application with underlying risk models, Cosmos also aids with the construction of portfolios in the fixed-income environment," says Bishopp.

Cosmos version 3.0 also has increased automation capabilities, allowing users to create multiple reports more efficiently. Cosmos also offers scenario analysis to view return breakdowns relative to multiple scenarios and global-optimization capabilities for optimal portfolios according to risk/return tradeoffs, institutional constraints or other end-user parameters. Existing Cosmos users will automatically receive the 3.0 version for upgrade.

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