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How Cognivo Re-Engineered the Risk & Portfolio Management Systems of a Global Long-Short Investment Manager

The Client

A large global long-short investment manager with over $4Billion in Assets Under Management.

New York, NY

The Challenge

The global long-short investment manager, with positions in multiple asset classes in various currencies, needed to replace its in-house legacy risk and portfolio management system that was built over many years by integrating multiple systems in an ad hoc fashion.

The Chief Operating Officer (COO) wanted to build a more planned and structured centralized risk and portfolio management system that could generate a multitude of reports including various settlement, reconciliation, risk, exposure, allocations, and benchmark comparison reports, soon after market close.

The technical requirements of the project included support for multiple asset classes and multiple currencies. The solution also needed to be highly efficient, cost-effective, and most importantly, scalable over time as the requirements evolved as a result of diversification of investment strategies, development of new markets, and new regulations such as Dodd-Frank Wall Street Reform and Consumer Protection Act.

The Solution

During the discovery and project planning phase, the Cognivo team, with extensive knowledge and experience in the capital markets, reverse engineered the current legacy system to design the architecture of the new custom fund risk and portfolio management solution.

The team started small by building a proof of concept to port over non-critical risk and portfolio management functions to the new system first. Once, the client was able to see the value derived from the proof of concept upgrades, Cognivo, and the investment manager’s internal investment management started porting more important functions to the new, customized data warehouse and system architecture built utilizing the latest programming languages and technologies. This highly customized risk solution had support for custom functions like variance-covariance value-at-risk calculations with over 99% confidence level, in-house stress test scenarios, and backtesting of models.

New York, NY

The Result

The new system met the client’s goals, as described in the Challenge above. Cognivo’s extensive knowledge and experience in the investment management industry allowed for a reverse engineer of the legacy system in a short period. Prior understanding of financial risk reporting and portfolio management models allowed the team to start small and perform rigorous testing and validation of the new reports against independently built Microsoft Excel workbooks and models in conjunction with current reports being used in production.

Major Benefits

Automated, Timely, Customized & Accurate Reporting. The automated aggregation and centralization of critical operations data, allowed the entire reporting process and the reports to be more predictable and reliable. The daily reports and older archives became available through a centralized dashboard to the management team without having to manually search for them or ask the operations team when needed. The biggest achievement however was the accuracy of the reports being generated, which improved by over 90 percent. In addition, Cognivo added various automated error (reconciliation) checks on the input data as well as the generated reports.

Exceptional return on investment. The investment management and the operations team no longer need to gather data manually from various sources, and then reconcile the data after generating the reports. According to the Chief Operating Officer, the biggest advantage of this new solution is that this allowed them to better utilize their small team of analysts, who were able use their time performing more meaningful tasks for the fund

Exceptional Return on Investment. According to the Chief Operating Officer, the man hours saved by automation allowed at least one full time role to be dedicated to other functions within the company. A full-time role saved them anywhere from $75,000 – $90,000 per year. This amounts to around $900,000 in savings over a ten-year period.