Small funds confront risk management spend decisions

We've been talking about risk management and hedge funds ever since the financial crisis got underway. The need is as palpable as ever, demanded by limited partners and perhaps, some day, by regulators.

In just one area, counterparty risk management, an Aite survey of senior IT executives found that they expect to spend $253 million this year, twice the $127 million spent in 2009. Vendors are certainly aware of the opportunity, and it seems they have made headway. The idea of outsourcing your risk management needs has gained a lot of ground as the quality of the risk management solutions available increased.

This trend is potentially profound for prime brokers, to whom small funds have been historically tethered. New vendors like Black Rock Solutions, RiskMetrics Group and SunGard have made it possible for small funds to decouple a bit. SunGard has made a splash with its APT software, short for Advanced Portfolio Technologies. SunGard bought APT in 2008, and has added it to its current suite. APT allows users "to avoid static combinations of pre-packaged risk factors and instead gives them the ability to select from hundreds of possible factors that might explain the risks a given portfolio is exposed to, facilitating a clearer understanding of the dynamics of risk and allowing for asset allocation, analyzing performance and breaking down risk for a broad array of asset classes," notes Information Management. 

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