Asset Liability Management (ALM) focuses on managing the risks that arise due to mismatches between assets and liabilities. It involves aligning assets and liabilities to minimize risk and exposure and maximize profits. ALM is quite commonly seen in insurance and pension funds with long-term obligation horizons. With longer life expectancies for beneficiaries in most of these types of firms and boomer retirement on the rise, concern to meet obligations over an extended horizon has grown since the turn of the century. With triggered pressure for longer payout periods without the guarantee of cash inflows to match those liabilities, the path to sustainable rates of return (ROR) on existing assets to meet these longer retirement payout needs is a priority. The panacea for higher ROR has increasingly been seen as private investments. With this focus and growth, the ability to do consolidated exposure analysis across public and the ever increasing private assets has proven more elusive than firms consider comfortable for risk mitigation.
As the asset allocation pie shifts to greater exposure to alternative assets so does the demand for asset agnostic consolidation tools and analytics akin to what the industry has seen for equities, fixed income and other traded securities for many years. Consolidated exposure across public and private investments and adequate data/presentation of data for private investments is top of mind for most large buy-side firms, especially those with ALM obligations but also for firms incorporating private investments into glide paths of target-date funds. Technology for alternatives is not keeping pace with exposure and sophistication being demanded for evaluating asset allocation and investment risk/exposure.
Rimes’ asset-agnostic portfolio construction platform for asset allocation, rebalancing and exposure analysis is attractive to firms with growing private asset mixture exposure to consolidate views of public and private assets. In addition to being asset neutral, Rimes’ capability to do fund-of-fund-of-fund look throughs provides agility to see exposure to asset classes, individual holdings, currencies and countries/regions in an agile fashion. The capabilities that are attractive to firms with strong public/private holdings and also includes portfolio-level compliance with the ability to set up warnings and failures and for those listed securities, create trade baskets to send downstream for execution on an OMS. While Rimes does not support ALM obligation exposure, it does the heavy lifting at the investment and portfolio decision making once the asset vs liability numbers are determined.
Many of our clients for our portfolio construction suite of offerings started as data clients and so they were keen to marry sophisticated functionality with clean, timely and granular index and other reference data to run analytics on their holdings for day-to-day monitoring in addition to the heavy lifting associated with portfolio recalibration. As the asset allocation pie continues to have a growing slice of private investments and they are producing the attractive ROR the industry is seeing, Rimes anticipates demand for agile asset agnostic portfolio construction tools to increase.
