EFSI’s Post

🏦…”One of the major challenges in hedge fund risk management is the lack of real-time risk measurement. Official Risk calculations are often calculated in batches and not available until well into the next day, with limited granularity. This can lead to delays in responding to market events.” Read below 👇🏻 more insights on how Opensee is assisting not just hedge funds but asset managers in general in setting up modern data platforms to align with current market demands. #hedgefund #capitalmarkets #data #risk

Hedge funds need to up their game when it comes to risk management. While they tend to have modern portfolio management systems, many keep outdated risk management systems that don't provide real-time pre- and post-trade market risk analytics. In this article, Edouard Prêcheur highlights this gap and explains how early tech choices can evolve into significant data and technological debts. 👉 Check out the full article to see why upgrading your risk management system isn't just an upgrade—it's a necessity: https://lnkd.in/enGF6phN #HedgeFunds #RiskManagement #MarketRisk #TradedRisk #DataManagement #DataAnalytics

The ETF universe expansion and shift to “top-down” investment processes present significant operational hurdles for asset allocators. Does it make funds-of-ETFs a new risk management conundrum? Find out here: https://lnkd.in/enhZvAfh

Is Trading a Very Good Way to Lose Money? Between November 2019 and June 2021, retail traders lost $5bn in options trading alone whilst at the same time the S&P500 rose more than 40% (1). And it’s not just the retail traders, hedge funds are pretty bad at it too: in 2021 the S&P500 returned 26.9% for the year whilst hedge funds reported an average of 10.4% (2). So why is everyone so bad at trading? Let’s start with hedge funds. Big budgets, big teams, why the underperformance? First, the top 50 hedge funds in the world do tend to outperform the S&P500 by more than 3% (3). Hedge funds will also trade performance for a lower risk to preserve their reputation and provide their clients with steadier revenues in case of crisis. Finally, there is a question of incentive since hedge funds make most of their money on the AuM based fees they charge their clients, rather than the performance of the fund. This is where MantaRisk’s portfolio construction methodologies and tactical risk management come in to ensure every ounce of performance is extracted. What about retail traders then? The truth here is that 95% of the retail population would be better off investing in an index rather than playing the stock market casino. In my previous post’s pension example, if that same person would have put his money in the S&P500 instead of a run of the mill pension, his retirement pot would have moved from $773k to a whopping $9.4m… Yes guys, it’s not too late. Still ~5% of retail traders have a positive PnL, which is a much higher probability than winning the lotto. But there is no magic formula / algo / AI. It takes effort, patience and, above all else, risk management. You cannot learn trading if you lose it all in one trade and the biggest enemy of trading is emotion. There is a reason why financial institutions have entire departments and advanced tools dedicated to risk management. And when these controls are circumvented: SocGen lost EUR 4.9bn at the hands of a single rogue trader (4). Today MantaRisk offers the only commercial grade risk platform for retail traders. It’s in beta, there is still much to be done, but even in this form it will help you avoid the big mistakes. Join us, help us develop the platform and support the trading community. It’s free. www.mantarisk.com Sources (1)   https://lnkd.in/eJ7nhPZ9 (2)   https://lnkd.in/ezjjxxKZ (3)   https://lnkd.in/egYd9kN3 (4)   https://lnkd.in/e3c-cU9g

Is Trading a Very Good Way to Lose Money? Between November 2019 and June 2021, retail traders lost $5bn in options trading alone whilst at the same time the S&P500 rose more than 40% (1). And it’s not just the retail traders, hedge funds are pretty bad at it too: in 2021 the S&P500 returned 26.9% for the year whilst hedge funds reported an average of 10.4% (2). So why is everyone so bad at trading? Let’s start with hedge funds. Big budgets, big teams, why the underperformance? First, the top 50 hedge funds in the world do tend to outperform the S&P500 by more than 3% (3). Hedge funds will also trade performance for a lower risk to preserve their reputation and provide their clients with steadier revenues in case of crisis. Finally, there is a question of incentive since hedge funds make most of their money on the AuM based fees they charge their clients, rather than the performance of the fund. This is where MantaRisk’s portfolio construction methodologies and tactical risk management come in to ensure every ounce of performance is extracted. What about retail traders then? The truth here is that 95% of the retail population would be better off investing in an index rather than playing the stock market casino. In my previous post’s pension example, if that same person would have put his money in the S&P500 instead of a run of the mill pension, his retirement pot would have moved from $773k to a whopping $9.4m… Yes guys, it’s not too late. Still ~5% of retail traders have a positive PnL, which is a much higher probability than winning the lotto. The truth is there is no magic formula / algo / AI. It takes effort, patience and, above all else, risk management. You cannot learn trading if you lose it all in one trade and the biggest enemy of trading is emotion. There is a reason why financial institutions have entire departments and advanced tools dedicated to risk management. And when these controls are circumvented: SocGen lost EUR 4.9bn at the hands of a single rogue trader (4). Today MantaRisk offers the only commercial grade risk platform for retail traders. It’s in beta, there is still much to be done, but even in this form it will help you avoid the big mistakes. Join us, help us develop the platform and support the trading community. It’s free. www.mantarisk.com Sources (1)   https://lnkd.in/eJ7nhPZ9 (2)   https://lnkd.in/ezjjxxKZ (3)   https://lnkd.in/egYd9kN3 (4)   https://lnkd.in/e3c-cU9g

Active risk management is critical to help clients achieve their goals.

A “look-through” approach for ETF holdings helps provide critical insights into directional biases, style factor tilts and issuer exposures across the debt seniority ladder. The high granularity it requires, however, may raise the processing bar to thousands of input data points and millions of new numerical outputs. Expanding portfolio construction capabilities may be necessary —please read Patrick Braun’s analysis on Funds of ETF

"DON'T PRODUCE A DYNAMITE UNLESS YOU ARE A DYNAMITE EXPERT." In the realm of investing, the allure of high returns often blinds investors to the fundamental importance of risk management. It's akin to producing dynamite without the expertise to handle its explosive potential. Just as a novice handling dynamite risks catastrophic consequences, an investor fixated solely on returns, without due consideration of risk, is sailing on treacherous waters. While returns are undeniably a crucial metric, they must be viewed through the lens of risk. After all, what good is a high return if it comes at the expense of a substantial risk of loss? This discrepancy between nominal returns and risk-adjusted returns has long been a focal point of seasoned investors, yet it continues to be overlooked by many. At Tropea Asset Management, we recognize the paramount importance of aligning returns with risk. We advocate for a comprehensive approach to investment analysis that considers not only the potential upside but also the potential downside. This philosophy is embodied in our internal risk model, RPUR (Risk-Adjusted Performance Understanding and Reporting). RPUR serves as our compass in navigating the complexities of the financial markets. It is not merely a tool for quantifying risk but a framework for understanding, evaluating, and ultimately mitigating it. By incorporating a wide array of risk factors – from market volatility to credit risk to liquidity concerns – RPUR provides a holistic view of the risk landscape, enabling investors to make informed decisions. If you want to sign up to our publications, Follow: https://lnkd.in/dQd8qWT5 Link: https://lnkd.in/dsttij2y

Funds of ETFs – A New Risk Management Conundrum? Funds-of-ETFs are not new to the world of finance. The breadth of the ETF universe is a more recent market evolution. The moves of model portfolio or advisory teams towards clear “top-down” investment processes reflect this new investment landscape. Patrick Braun, Director, Buy-Side Product Management for SS&C Technologies, writes the data volumes these functional expert teams need to manage with efficiency remain an operational burden to many. Does it make funds-of-ETFs a new risk management conundrum per se? #etfs #passiveinvesting #indexing #operationalefficiency https://lnkd.in/dq_p7JC3

S&P500 Emini – Friday, April 19, 2024 Achieving High Daily Revenue with Disciplined Risk Management In the realm of S&P500 Emini trading on April 18, 2024, a strategic blend of meticulous analysis and disciplined risk management paved the way for significant daily revenue. This discourse unravels the precision entry setups that not only reversed prevailing trends but also amplified profitability for astute hedge funds and traders. Let's delve into the tactical maneuvers and market dynamics that propelled lucrative gains in today's trading session. The market's initial inclination towards lower values at open quickly shifted gears with the emergence of a substantial bull bar at bar 8, decisively closing at its peak and wresting control in favor of the bulls. Bar 12 marked a pivotal moment by surging to a new daily high and closing above the opening price, establishing a high-probability long entry setup that materialized into approximately 10 points of profit, amplifying gains for adept traders. A notable reversal transpired at bar 24, characterized by a significant downturn from the day's peak, validated by the subsequent bearish confirmation at bar 25. This pivotal juncture heralded a prime opportunity for a short entry, targeting the vicinity of the 20-EMA and securing around 5 points of profitability, showcasing the efficacy of tactical short-term strategies. Bar 31's pronounced upper wick underscored the prevailing bearish sentiment, projecting further weakness and substantiating a short entry strategy, with the day's open serving as an initial target and yielding nearly 10 points in profits, exemplifying the potency of timely market insights and actionable decision-making. During the range-bound phase from bars 48 to 81, astute traders capitalized on fading breakouts, leveraging historical trends to navigate market nuances effectively, thereby showcasing the symbiosis of technical acumen and strategic risk management. The trading narrative in the S&P500 Emini on April 18, 2024, epitomizes the art of precision trading, where disciplined risk management intertwines with astute market analysis to unlock substantial revenue streams. Tactical long and short entry setups, complemented by a nuanced understanding of market dynamics and key support/resistance levels, propelled profitability for discerning hedge funds and traders. Key Support/Resistance Levels for Today: Yesterday's High, Low, and Close: 5095.25, 5038.50, 5049.25. Overnight High and Low (as of writing): 5051.50, 4963.50 Warning: I do not solicit business through direct messages. Disclaimer: This analysis is provided solely for educational purposes and should not be construed as financial advice. It is imperative to conduct comprehensive research and analysis before making any investment decisions. #financialservices #hedgefunds #stocks