Russell/Mellon Analytical Services and Measurisk.com have formed an alliance to offer institutional investors integrated risk analysis and performance reporting. Measurisk.com, which launched in January, is looking to tap into Russell/Mellon's 1,400 clients with a combination of services tailored for the needs of the institutional community.
The collaboration will bring together Measurisk.com's Value at Risk reporting and portfolio stress testing services with Russell/Mellon's performance, analytical and attribution decision support tools. "Most institutional clients traditionally have done a lot of work with performance measurement and looking historically at how portfolios have performed," says Andrew Lapkin, COO of Measurisk.com. "Our risk framework is much more forward looking, so it allows clients to better understand where their portfolio is today and how it might perform moving forward under different market conditions."
While the two services will currently be reported separately and performed by the respective providers, in the near future Russell/Mellon and Meausrisk.com will be looking to integrate the risk and performance analysis and reporting. "In the next year we will begin to integrate the two pieces," explains Lapkin. "It's a function of setting up the necessary data feed links between their systems and ours and have the data move in both directions. So we'll be able to receive portfolio information and performance information and they'll be able to receive the risk information." Lapkin expects that Russell/Mellon will be enhancing some of their systems in order to view risk information while Measurisk.com will be addressing ways to capture the appropriate portfolio and performance information for online reporting.
"The risk infrastructure requires a lot of market data, security data, a huge amount of analytics and modeling as well as the computing power to make it all work. A major bank can afford to invest in the kind of resources to put that together, but for most institutional investors it doesnt make sense. We're able to provide it at a much more reasonable cost to the institutional investor that can't necessarily afford to do it on their own," explains Lapkind. He adds that the institutional side also has different needs in terms of risk and reporting, which is what the integrated service aims to address. He says institutions are interested in a longer time horizon to match up with the way they are measuring performance. There is also more of a focus on "relative risk" or comparing risk against a benchmark and "marginal risk" or looking at the contribution of risk to portfolios when constructing multi-manager portfolios.