Data and analytics are the main ingredients for managing a robust fixed income portfolio, but finding both can be a difficult proposition.
“Developing and managing fixed income analytics is a costly and time consuming process,” said Peyton Kay, global head of marketing, investors, at Thomson Reuters, a financial data vendor. “It requires deep domain expertise to build the proper models and investments in your risk systems to properly test and shock your portfolio, something not every fund manager can afford.”
Cost, both to buy and/or build systems, is one of the gating factors faced by institutional asset managers, hedge funds, banks, insurance companies, sovereign wealth funds, corporate treasuries and family offices in validating and managing their fixed income portfolios to mitigate portfolio risk.
Cost factors include the “ability to construct highly complex econometric models, access to expert staff including but not limited to quants, and a model that is broad enough to cover the vast amount of global fixed income securities that make up the instrument universe,” said Jayme Fagas, head of evaluated pricing, Americas, at Thomson Reuters.
Thomson Reuters and BlackRock Solutions, a risk management subsidiary of BlackRock, are offering “derived analytics” based on Thomson Reuters security indicative data and prices and BlackRock Solutions’ proprietary fixed income models.
These derived analytics will be made available to institutional clients via Thomson Reuters DataScope Select and Thomson Reuters DataScope Onsite.
BlackRock, as one of the largest asset managers in the world, is a very large consumer of Thomson Reuters data services.
BlackRock Solutions also leverages Thomson Reuters fixed income and equity data within its Aladdin enterprise investment and risk management platform, which is licensed by over 160 institutional clients globally.
“This new partnership is part of the natural evolution of this relationship,” said Kay. “It was formed to develop new ways to utilize the distinct and market leading capabilities of both firms to provide the financial community highly valued proprietary fixed income analytics.”
The globalization of investing is forcing fund managers to go “farther from home” seeking better yields. This means that they are investing in fixed income securities that are not as familiar to them nor can be valued as easily using their internal risk and performance systems.
“This expansion into new securities is putting fund managers under the scrutiny of regulators and their clients to demonstrate that they are effectively managing the risk of these new additions to their portfolio,” said Kay.
