case-study
Modus: Improving Valuation Efficiency with FINCAD

 HIGHLIGHTS

 

Client: Modus Asset Management 

Modus_Logo

Objectives

Quickly and accurately price securities and break them down into their components

Requirements

  • Incorporate the current term structure of interest rates, volatility and credit spreads in valuations
  • Sync a new pricing library with market data, software, spreadsheets and curves built in Excel

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"FINCAD Analytics Suite is a much better solution than I`ve used in the past. It's fast, efficient, and most importantly, it's accurate."

Craig Kasap, Managing Member, Modus Asset Management 

Background

Modus Asset Management is a fixed income advisor specializing in the municipal bond market. Modus employs a unique strategy that exploits inefficiencies in this complex marketplace to generate excess returns through meticulous analyses and selection of securities.

Challenge 

Modus needed the ability to quickly and accurately price securities and break them down into their components. But with several disparate systems in place, the task of valuing a single bond was labor-intensive. Modus therefore needed a robust solution for pricing fixed income instruments that would allow them to:

  • efficiently disassemble bonds into their components for valuation,
  • incorporate the current term structure of interest rates, volatility and credit spreads in their valuations, and 
  • easily sync an extensive pricing library with market data, portfolio management software, and spreadsheets and curves already built in Excel.

Solution 

Modus Asset Management selected FINCAD's market-leading analytics with Excel compatibility to enable the accurate pricing and selection of the most attractive securities in the market, through a robust platform capable of integrating with the systems they already had in place.

Results 

Reduce Valuation Time: While once it took several minutes to value a single bond, now Modus uses their proprietary spreadsheets in FINCAD to value each bond within a couple of keystrokes. Given that they can value up to 100 bonds a day, speeding up this process can save them several hours daily.

Leverage Excel: Previously, it was difficult for Modus to gain access to their proprietary analytics from within a robust third-party analytics library. Since FINCAD is Excel based, they can now easily access, for example, a yield matrix consisting of 1.3 million trades that they have built to derive credit spreads.

Gain Competitive Advantage: Modus has a unique investment method that capitalizes on inefficiencies in the market to generate returns. FINCAD is becoming critical to this process, helping the firm derive where a security should be, given its embedded options and historical and current credit spreads.

Improve Transparency: FINCAD documentation provides a detailed explanation of the math behind every valuation, which not only provides clarity to users, but to Modus' clients who may like to know how a security was valued.

Easy to Implement: After purchasing FINCAD, it only took about a month to get up and running. Prebuilt workbooks, the ability to paste examples, and FINCAD Client Services all helped users familiarize themselves quickly with the software.

Looking Forward

Modus Asset Management may incorporate FINCAD into their risk management strategy in the future in terms of hedging or calculating risk numbers for particular bonds or portfolios.


"With FINCAD, I can show a client how I`d value a bond fairly quickly. Instead of having to explain the steps taken and why, it's nice to be able to show someone in a way that I can just click on a description of exactly what's being done."

Craig Kasap, Managing Member, Modus Asset Management