AFTAs 2016: Best Risk Management Initiative—JPMorgan Asset Management

Dynamic Risk was developed by JPMorgan’s Global Research Technology team with input from the firm’s multi-asset class portfolio team, which primarily uses the platform.

Global Research Technology managing director David Lin says the solution is designed to help funds that focus on total returns and multi-asset strategies calculate the extent of the returns being generated.

“The problem when dealing with managed assets of any type is that your strategy is very dynamic and versatile,” Lin says. “Portfolio managers never quite know how much each investment and allocation around particular themes are generating returns.”

He adds that portfolio managers who have intimate knowledge of each trade’s impact and their returns have a competitive advantage and can swing immediately to different assets if and when needed.

Dynamic Risk takes a whole picture of a trade by using a tagging feature that aligns positions with the current macro-economic environment. It provides a tagging framework for portfolio holdings; pricing, performance and risk models for different kinds of assets; performance analytics in order to track trades; real-time calculations of holdings; and automated risk reporting using historical and other methodologies.

Dynamic Risk takes a whole picture of a trade by using a tagging feature that aligns positions with the current macro-economic environment.

According to Lin, it took the development team around four-and-a-half months to complete Dynamic Risk’s development. Talib Shiek, management director and portfolio manager for JPMorgan Asset Management’s Multi-Asset Solutions team, says the platform provides traders and portfolio managers with more granularity into all the assets they are trading.

“When you run a total return fund, you want to combine real-time profit and loss with real-time risk analytics to see how the risk dynamics change,” he says. “The real power of Dynamic Risk is its ability to drill down into the separate components so that we can make sure we have maximized them. That’s a huge win for portfolio management.”

Lin says the Dynamic Risk Solution—which is now deployed in London—will soon be in use by teams in the US and Asia-Pacific.