ADIG Investment, a German mutual fund company and member of Commerzbank-Group, has recently gone live with BARRA's TotalRisk system to manage and control risk across its organization.
ADIG, which manages more than 150 funds and more than EUR 30 billion in assets, selected the BARRA system to process positions in its Frankfurt, Munich and Luxembourg offices. Previously, ADIG was using Excel spreadsheets for risk management calculation and needed a system to integrate with its front-office system to measure risk on a daily basis, says Axel Riedel, risk controller and project manager for the TotalRisk implementation.
ADIG's objectives for installing an enterprise-wide system focused on raising the awareness of risk issues throughout the firm, fulfilling regulatory requirements, providing added value to clients, as well as limiting risk exposure. One way ADIG looks to extend the TotalRisk advantages to clients is via the Internet, letting them view risk information online. "Through the extensive reporting capabilities, we see a major advantage to our clients," says Riedel. "We're looking at how we can provide this information to our customers via the Internet."
The TotalRisk system was also selected because of its multi-factor modeling capabilities, which are broadly accepted in the asset management arena, to quantify absolute and relative market risk, notes Riedel. "We are looking mainly at returns and risk within the industry, which are defined by risk factors and sensitivities to those factors," explains Riedel. He adds that BARRA's multi-factor models address these factors and sensitivities in order to calculate risk on a daily basis.
TotalRisk also allows ADIG to drill down and look at risk based on investment style, industry, country, currency and rating, as well as cross-asset classes through its risk decompositions, exposure analysis and portfolio browser modules. Other TotalRisk modules used by ADIG include the risk summary module for reporting, the alert browser for monitoring risk online and reporting limit violations, as well as the administration and system modules.
ADIG has rolled out approximately 47 TotalRisk installations across the firm, not only for use by its risk department, but also for the board of directors, portfolio managers, marketing department and fund administration areas, and plans to continue with additional installations in the future. The firm currently processes about 70,000 positions from the three offices, as well as its Polish subsidiary, on a daily basis. Although he would not specify which other systems ADIG evaluated, Riedel says the firm looked at several other risk systems before settling on TotalRisk.