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Risk Management

11:57 AM
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New Hedge Fund Protocol For Risk Aggregation Is Launched

The open protocol was developed by an independent working group of 16 firms, including investors, prime brokers, fund administrators and hedge funds.

Thomson Reuters and Albourne Partners Limited announced the launch of Open Protocol Enabling Risk Aggregation (OPERA), a new protocol that standardizes how hedge funds collect, collate, and convey risk information.

The new protocol will help hedge fund investors aggregate and integrate their exposures, reduce the proliferation of investor-specific risk formats that hedge funds have to manage and provide regulators with a detailed technical approach, forged by practitioners, to identify systemic risk.

Developed by an independent Working Group of 16 firms, including investors, prime brokers, fund administrators and hedge funds, the Open Protocol is based on a holistic approach to understanding risk and was developed because the level of transparency available to investors varies from fund to fund and from strategy to strategy.

Since intentions of the initiative were announced earlier this year, regulators and industry bodies have been kept informed and invited to observe the development and refining of the protocol including a period of public consultation that ended on 15 July, 2011. Adoption of the Protocol has been designed with no commercial agenda, and is open to all at no commercial cost.

To coincide with the New York launch, Andrew Baker, CEO of AIMA observed: "AIMA supports efforts to improve harmonisation of risk reporting to investors. Open Protocol Enabling Risk Aggregation was born out of dialogue between a range of market practitioners and we support this open, voluntary and inclusive approach."

Henry Knapman, a managing director at UBS, who was seconded to the FSA in 2009/2010 as a Senior Advisor on hedge fund policy observes: "This initiative could not be more timely. As the industry prepares to respond to the ESMA consultation exercise, let us hope that investors, funds, and trade organisations can all rally around this thoughtful solution."

Gilbert Grosjean, representing CITCO at the London launch event confirmed: "CITCO strongly supports the Open Protocol initiative. It is an important undertaking that will increase investor transparency, thus facilitating a better informed asset allocation to hedge funds. As an early committed provider of transparency, CITCO has taken an active role in the formation of the standard and will keep supporting it by providing Open Protocol reports to its client base."

Finally, Simon Ruddick and Gerard Buggy, representing the co-chairs of the Working Group, Albourne Partners Limited and Thomson Reuters added: "We just want to thank everyone involved for their free-spirited contribution of time, thought, and effort. The Open Protocol is an idea whose time has come. There'll be no applause for late adopters."

Melanie Rodier has worked as a print and broadcast journalist for over 10 years, covering business and finance, general news, and film trade news. Prior to joining Wall Street & Technology in April 2007, Melanie lived in Paris, where she worked for the International Herald ... View Full Bio

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