case-study
Ashburton Investments: Improving LDI with FINCAD

HIGHLIGHTS

 

Client: Ashburton Investments

Ashburton_logo

 

Objectives:

Develop a robust fixed income valuation and risk toolkit across all investment processes

Requirements: 

  • Comprehensive OTC derivatives and fixed income coverage
  • Ability to integrate with trade management system
  • Limited key man dependancy on quant model development

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"With the holistic F3 solution in place, we offer enhanced credibility, better investment management, and ultimately better performance for our portfolios."

Paramesan Mathen, Institutional Solutions, Ashburton Investments

 


Background

Ashburton Investments, FirstRand Group’s investment management business, is an African-based investment manager which provides integrated investment solutions involving the construction and implementation of Liability Driven Investment (LDI) solutions for pension fund and insurance clients.

Challenge

Ashburton Investments identified a need for a quantitative analytics solution to develop its front office portfolio management toolkit for managing LDI mandates, including portfolio construction, implementation, and on-going risk management. This solution needed to analyze exposure to a wide range of risk factors related to LDI including interest rates, inflation, credit, equity, and liquidity.

Additionally, Ashburton needed an analytics solution that could effectively quantify the collateralization impact on their derivatives and aid their investment decision making when comparing cash and derivative-based hedging instruments.

Solution

Ashburton Investments chose FINCAD in an Excel® environment for the key building blocks to develop its front office portfolio management toolkit.

FINCAD's intuitive, flexible, and transparent object-oriented design resulted in a rapid implementation. Also, because FINCAD architecture segregates the concepts of products, models, and valuation methods, Ashburton’s quantitative analysts can ensure that their analytics are calibrated to local market conventions.

Results

FINCAD is the unified analytics solution Ashburton is using across the investment process of each LDI mandate. Results include: 

Optimizing LDI: Ashburton is able to efficiently construct investment portfolios to hedge liability cash flows and enhance portfolio yield. FINCAD enables Ashburton to quantify interest rate risk across both zero coupon and par yield curves in a single framework, saving time, resources and improving efficiency.

Credit Risk: Ashburton Investments utilizes credit investments for yield enhancement. They use FINCAD to accurately quantify their credit risks across all portfolios.

Analytic Risk: Ashburton uses FINCAD’s patented Universal Algorithmic Differentiation™ (UAD) to obtain optimized hedge proposals nearly instantaneously. UAD produces optimized hedge proposals on-the-fly with minimal resources. 

Consistency: With FINCAD, Ashburton is able to effectively quantify portfolio level risk, like Value-at-Risk, and performance measures, like P&L attribution, efficiently and consistently in a single context.

Expert Support: Ongoing access to FINCAD’s support team and comprehensive model documentation enabled a rapid time to market and a clear understanding of FINCAD analytics.

Looking Forward 

Going forward, Ashburton Investments is eager to further develop their portfolio management toolkit by leveraging additional FINCAD analytics features and coverage.