Cloud Rains Risk Products07.17.2013
Leveraging cloud computing, start-up PrairieSmarts has launched the first in a planned series of risk tools for investors, advisors, money managers, and institutions.
A way to properly assess market risk was lacking in the marketplace for retail investors and their advisors, and institutional risk management products do not have the metrics and cost balance that could be leveraged across these channels, according to Chris Nagy, strategist for PrairieSmarts and head of KOR Trading, an advocacy and consulting firm.
“We built software in the cloud to give (retail investors) a look at what real and overnight risk is in their investments, and put it all together for them,” Nagy said, likening the presentation to a CarFax vehicle history report.
Unlike the comparatively rudimentary tools that give a risk score of high, medium, or low, PrairieSmarts’ information is meant to more practically assess overall risk by identifying problem areas and estimating the cost of fixes, Nagy said.
Scalability helps bring down the costs of the company’s risk products, and the cloud-based infrastructure model “is very up to date and takes in true risk in the marketplace,” Nagy said. “It can capture tail events.”
PrairieSmarts announced delivery of its first product, the Risk Insight Portfolio, earlier this week. Next will be the rollout of the Portfolio Defense platform for traders and advisors, expected in the next few months, Nagy said.
Within a year, PrairieSmarts intends to launch an institutional risk-management product that will bring mathematics and computation from the cloud at a cost far below what institutional investors typically allocate for risk models, Nagy said.
No other cloud-based product calculates the range of motion on an entire portfolio in 0.3 seconds, Nagy said. “If you’ve got thousands of securities and need a lot of data points, the model looks back to 2006 at every security and factors all of this in, including volatility,” Nagy said.
The metrics are culled to show value and risk in dollars, with range of motion, exposure, ‘point of ruin’ and number of ruin days, along with how the portfolio holdings would have performed historically.
PrairieSmarts’ new products are not necessarily in response to regulatory actions, but the increased attention on risk management has heated demand for real-time assessments of risk for entire portfolios, the company said.
“The environment is tense, increasingly volatile, and there is a changing rule set,” Nagy said. “The demand for risk reports is huge.”