Clients React to Axioma’s Multi-Asset Class Risk Platform

Inaugural clients and prospects have now been using Axioma’s multi-asset class risk platform — Axioma Risk — for three months.

Axioma Risk is a unified risk-management platform for risk control officers and portfolio managers. Built to meet the rigorous demands of both, Axioma Risk delivers unparalleled risk reporting, risk analysis, and decision support for multi-asset class portfolios.

Axioma Advisor spoke with Ian Webster, Managing Director – Europe, to find out how things are going.

Advisor: So what’s the reaction to Axioma Risk’s first 90 days in office?

Webster: “The reception has been excellent. From a conceptual perspective, when we walk into a client and start to take them through Axioma Risk, it’s like these light bulbs start going off. We did a full day session last week where the client kicked off the meeting with some observations about what he wanted from a risk system. I have to tell you that as I sat there and listened, I couldn’t help but smile, because what he said could have been taken from our marketing material.”

Advisor: What specifically makes Axioma Risk attractive?

Webster: “Here’s the crux of it. In firms today, you have the risk-control people producing a set of numbers for regulatory, management, and client reporting. But when those numbers hit the desks of portfolio managers, there’s almost nothing there that the pm’s can decompose in a way that helps them understand where the risk is coming from, or use to help determine what they can do about it.”

“What Axioma Risk does is to provide a set of numbers that can be used, not only from a reporting and regulatory perspective, but numbers that can be decomposed around specific factors.”

Advisor: And this resonates with clients?

Webster: “Absolutely. The ability to have fundamental factor decomposition across asset classes allows the portfolio managers to better understand the risks they’ve taken and consequently hedge their positions. At the same time, Axioma Risk gives them a set of analytics specific to fixed income, plus, of course, the numbers that the risk control folks need.

“It’s a lot. As one client said, ‘You’ve given us some tough choices on how we should model our portfolios. Our current system gives us a single answer so it’s easy. But, of course, that single answer doesn’t take into account the complexity in many of the portfolios, so the single answer is simply incorrect.'”

Advisor: Any other features that seem to get them excited?

Webster: “The second big thing, I think, is the flexibility. Axioma is all about flexibility and Axioma Risk is no exception. Most of the risk systems out there today are batch-based and reports are run overnight. But if you suddenly decide you want to change a number, or look at a portfolio in a slightly different way, or test out some buys or sells … well, you’re looking at another overnighter. Axioma Risk lets you do it all on the fly — recalculate, change numbers, try out different hedges, you name it. Change what you want and see the results immediately. There’s no waiting.”

Advisor: How user-configurable is the system?

Webster: “Configurability is another big advantage. There are two pieces here. First, Axioma Risk allows you look at the calculations around any part of your strategy and to make changes to the assumptions behind your strategy. The difference is that most other platforms out there will say, ‘Here’s the number you were looking for and here’s how it was calculated.’ But if you want to make changes, it takes a lot work. Axioma Risk let’s you make changes easily and across many dimensions.

“The second bit of configurability involves groupings. Say your portfolio is grouped by country but you want to change the grouping to something else, such as sectors, asset types or strategies. You can either select from a whole set of Axioma-provided groupings or import a custom grouping of your own. And you can do it all on the fly.

“You can also tag portfolios with particular strategies or positions to particular portfolio managers and create reports based on those tags. So, for example, we were demoing Axioma Risk to a client whose portfolio was grouped by asset type, one of which was money markets. He said he views money market accounts as cash. We were able to instantly make that change and he totally was taken aback. He just said, ‘wow, I don’t even know how I would have done that in my system.'”

Advisor: OK, let’s get tough. Any weaknesses?

Webster: “Well, I wouldn’t call it a weakness, per se, it’s more of a reality, which is that changing your risk system is a major undertaking and no one should underestimate that. On the other hand, it helps tremendously if you’ve got a capable group of people that is going to help you through the transition. And that’s where Axioma’s client services team makes a huge difference.”

Advisor: And to sum up?

Webster: “I suppose we shouldn’t be surprised at the reaction we’re getting to this product, because Axioma Risk was created by working hand-in-hand with test clients. It’s a direct expression of what clients want. But somehow when you experience that response first hand and in real life, so to speak, it makes an impression. It feels good to bring a product to market that clients value. And we are already working together to make Axioma Risk even better.”

To learn more about Axioma Risk, click here.