CHICAGO -
A Northern Trust survey of institutional investors and investment managers finds an increasing demand for information and analytics to support risk management, and a need to improve their organizations’ ability to successfully implement risk models in the investment process.
Nine in 10 respondents to the survey, taken earlier this year, rate risk as an “important” or “primary” consideration in their decision making. However, roughly the same percentage feel they need additional skills and experience to effectively model, interpret and utilize the results from sophisticated risk models.
The survey also highlights the changing sources of portfolio risk. While market volatility remains the greatest source of risk, liquidity risk emerged as a leading concern following last year’s credit market crisis: 17 percent of respondents felt liquidity was the greatest source of risk for investment programs in 2009, compared to just 2 percent who thought that was the case in early 2008. Nearly 45 percent of the participants said valuation and risk models could have performed better in predicting the impact of liquidity risk over the last 12 months.
Northern Trust’s survey cites the views of top investment and operations executives from 50 global organizations. More than half of the survey respondents are from institutions or managers with over US$1 billion in assets under management, and 20 percent have more than US$5 billion under management. Major findings from the survey include:
- 93 percent of organizations generally believe risk models provide useful information but more than half (55 percent) do not have a risk measurement system today. - 87 percent of organizations feel their organizations need additional skills and experience to effectively model, interpret and utilize the results from sophisticated risk models. - When it comes to purchasing a risk measurement system, nearly four in 10 said the level of experience on staff to manage the system would be an inhibitor. - More than half (51 percent) feel their organizations need to improve their efforts regarding due diligence on the valuation process for their portfolios.
“Institutional investors and investment managers are telling us they want valuation model transparency and they appreciate practical experience in using risk models,” said Paul d’Ouville, head of Northern Trust’s C & IS Global Product Management Group. “There is a new reality in the security pricing arena, where complexity has increased and transparency is expected. With their resource challenges, organizations are increasingly seeking expertise from outside firms that can demonstrate practical solutions and help them benefit from the information provided by quantitative risk models.”
As a part of its client-focus philosophy, Northern Trust has provided risk and performance services for over three decades. Northern Trust’s Investment Risk & Analytical Services capabilities include risk monitoring and measurement, performance measurement and analysis, comprehensive private equity analytics and other specialty services, with continuing investment in research and client-focused product development.
For more information and to participate in an online survey on managing risk, please visit www.northerntrust.com/managingrisk.
About Northern Trust
Northern Trust Corporation (Nasdaq: NTRS) is a leading provider of investment management, asset and fund administration, fiduciary and banking solutions for corporations, institutions and affluent individuals worldwide. Northern Trust, a financial holding company based in Chicago, has offices in 18 U.S. states and 15 international locations in North America, Europe, the Middle East and the Asia-Pacific region. As of March 31, 2009, Northern Trust had assets under custody of US$2.8 trillion, and assets under investment management of US$522.3 billion. Northern Trust, founded in 1889, has earned distinction as an industry leader in combining exceptional service and expertise with innovative products and technology. For more information, visit www.northerntrust.com.
Northern Trust Corporation, Head Office: 50 South La Salle Street, Chicago, Illinois 60603 U.S.A, incorporated with limited liability in the U.S.
The Northern Trust Company, London Branch (reg. no. BR001960), Northern Trust Global Investments Limited (reg. no. 03929218) and Northern Trust Global Services Limited (reg. no. 04795756) are authorised and regulated by the Financial Services Authority.
The material within and any linked material accessed via this communication is directed to eligible counterparties and professional clients only and should not be distributed to or relied upon by retail investors. For Asia Pacific markets, it is directed to institutional investors, expert investors and professional investors only and should not be relied upon by retail investors.
- Northern Trust (Guernsey) Limited, Northern Trust Fiduciary Services (Guernsey) Limited, Northern Trust Fiduciary Company (Guernsey) Limited and Northern Trust International Fund Administration Services (Guernsey) Limited are licensed by the Guernsey Financial Services Commission. - Northern Trust International Fund Administrators (Jersey) Limited and Northern Trust Fiduciary Services (Jersey) Limited are regulated by the Jersey Financial Services Commission. - Northern Trust International Fund Administration Services (Ireland) Limited and Northern Trust Fiduciary Services (Ireland) Limited are regulated by the Financial Regulator. - Northern Trust Global Services Limited has a Netherlands Branch which is authorised and regulated in the Netherlands by De Nederlandsche Bank. - Northern Trust Global Services Limited has a Luxembourg Branch which is authorised and regulated by the Commission de Surveillance du Secteur Financier (CSSF). - Northern Trust Luxembourg Management Company S.A. is regulated by the Commission de Surveillance du Secteur Financier (CSSF). - Northern Trust Global Services Limited operates in Abu Dhabi as a Representative Office, Licence number 13/238/2008 which is authorised and regulated by the Central Bank of the United Arab Emirates. - The Northern Trust Company operates in Canada as The Northern Trust Company, Canada Branch which is an authorized foreign bank branch under the Bank Act (Canada). Trustee related services in Canada are provided by the wholly owned subsidiary The Northern Trust Company, Canada, an authorized trust company under the Trust & Loans Companies Act (Canada). Deposits with The Northern Trust Company and its affiliates and subsidiaries are not insured by the Canada Deposit Insurance Corporation. - The Northern Trust Company operates in Australia as a foreign authorised deposit-taking institution (foreign ADI) and is regulated by the Australian Prudential Regulation Authority. - The Northern Trust Company o of Hong Kong Limited is a securities company regulated by the Securities and Futures Commission. - The Northern Trust Company has a Singapore Branch which is a foreign wholesale bank regulated by the Monetary Authority of Singapore. - The Northern Trust Company operates in China as a Representative Office and is regulated by the China Banking Regulatory Commission. - Northern Trust Global Investments Japan, K.K. is regulated by the Japan Financial Services Agency.
IRS CIRCULAR 230 NOTICE: To the extent that this message or any attachment concerns tax matters, it is not intended to be used and cannot be used by a taxpayer for the purpose of avoiding penalties that may be imposed by law. For more information about this notice, see www.northerntrust.com/circular230.
Source: Northern Trust Corporation
EMEA Contact: Camilla Greene, +44(0)20-7982-2176, cg81 at ntrs.com; US, Canada & APAC Contact:, Doug Holt, +1-312-557-1571, dh124 at ntrs.com, or Kathleen Fitzgerald, +1-312-444-3094, kdf2 at ntrs.com, all of Northern Trust Corporation
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