We continue to invest heavily in the evolution of PFaroe across the UK and US, for both DB pensions and endowments and foundations. Enhancements are released monthly across the entire platform; however, some are of particular note. This year we’ve evolved the asset modelling capabilities to cover complex alternative asset classes and illiquid assets – such as hedge funds, multi-asset strategies and liability insurance contracts. This allows a more complete picture of risk to be aggregated across the entire portfolio, enhancing consistency, efficiency, decision making, and clarity. For liability modelling, we have completely revamped and upgraded users’ ability to create analytics from cashflow information. We’ve also added a user-customisable daily analytics module into PFaroe, which both allows monitoring of a vast range of different metrics, and provides flexible, automated support for trigger strategies.

Validating our commitment and substantiating our position in the market, we have seen a number of our clients expand their usage of PFaroe and renew their licences for longer terms this year. We now have over 1800 plans with over US$750bn in assets modelled on our technology.

But even that isn’t enough to satisfy us. So, we’ve set our sights on developing a set of cutting-edge solutions for the asset management community that will transform the way in which asset managers incorporate risk and attribution into the investment process.

We have been consulting with the market for 18 months; understanding the various needs of performance monitoring teams, front office portfolio managers and the asset owners themselves. It is clear that existing solutions are typically legacy systems, built on an overnight batch process, that only address the requirements of the performance team. To solve this, we are building a next generation risk and attribution solution focusing on:

1. Leveraging modern technology to deliver a live, interactive suite of analytics designed to assist the front office in making more effective investment decisions. The flexibility to align analytics to each portfolio manager’s investment process is a cornerstone of the new product;
2. Delivering tools that link back to the objectives of the asset owner, promoting a closer and more collaborative relationship between asset owners and portfolio managers.

The first phase of development is focused on an attribution tool. Attribution typically sits at the end of the investment process – if it is indeed part of the investment process at all. Our solution seeks to embed attribution firmly into portfolio managers’ strategies and pre-trade process; providing the ability to make decisions and allocate asset owner capital based on attribution trends from the decisions they have made over time. 

Both asset owner and portfolio managers are therefore provided greater transparency and understanding of whether decisions paid off, and at what cost in terms of risk. Is too much risk being taken or too little risk for return on capital received? What opportunities were missed? Further, translating this analysis into terms that the asset owners understand is critical.

Our new solution is set to launch in H2 2018. For more information, contact us at info@riskfirst.com.

Natixis adopted PFaroe in 2015 in order to support the pensions solutions business – predominantly buy-ins/buyouts or risk-transfer – offered by its growing Corporate Solutions group. The business case for adoption was clear from the outset: PFaroe would help enhance Natixis’ understanding – at a detailed level – of its clients’ pension liabilities, across numerous pension plans, in order to craft more effective solutions.

Richard Ratcliffe, part of the Global Structured Credit Solutions Group at Natixis, explains: “Everything we do is focused on driving the best solution for our clients. PFaroe allows us to value the risks that a corporate faces – such as longevity, interest rate, and inflation risk – and how this may affect assets and liabilities. We can then more accurately put this in the broader context of the impact on the corporate balance sheet.”

Natixis uses PFaroe’s rigorously designed and tested actuarial toolkit to lever its expertise in designing solutions for its clients. This granularity of analysis is crucial for Natixis when it comes to looking at moving some of the risk of a pension plan off a corporate’s balance sheet – either through a partial buy-in or full buyout transaction, or, in the case of US plans, terminated vested lump sum payouts.

Read the full case study here

Punter Southall became the first pensions consultancy to adopt PFaroe in early 2012. Since then, the consultancy has not only rolled the platform out to all existing clients in the UK, it has also trialled its use in several innovative applications to improve client service.  

As part of this innovation, Punter Southall uses the valuation system of PFaroe as a tool to collaborate with insurers to increase efficiency in the production of indicative buy-in or buyout pricing for pension plans. This works by providing insurers with access to clients’ plan information modelled on PFaroe, allowing them to input their own assumptions and then run valuations to produce a quotation – saving time and resources for all parties.

Colette Christiansen, Head of De-Risking Solutions at Punter Southall, says: “PFaroe’s detailed valuation tool – and the flexibility of it – means we can now provide fast and high-quality indicative buyout pricing to clients upon which they can have the confidence to base decisions. Already we have seen this process pay dividends, enabling some plans to purchase bulk annuities which would have been out of their price range had timescales for the standard indicative pricing process applied. Elsewhere, we have allowed plans which may be interested, yet uncertain, about executing a buyout to check pricing in a way they would have been unable or unwilling to do previously.”

Read more on this here

SLI has selected PFaroe to help grow its LDI business for pension funds. RiskFirst’s risk analytics platform will allow the global investment manager to work collaboratively with clients and consultants to build effective investment solutions that consider the impact on the risk/reward characteristics of portfolios. Institutional Asset Manager covers the story.

Cardinal Investment Advisors has adopted PFaroe to enhance its liability and risk forecasting analysis and reporting. The consultancy will use the platform to optimize its clients’ complex portfolios in a liability-aware fashion, informing, in particular, long-term strategies around glide paths, required cash contributions and the maintenance of credit balances. Visit Plan Adviser for more on this story.

Pam Devling, Vice President and Consulting Actuary at Lockton, says: “Pension plan sponsors have been underserved when it comes to sophisticated risk analysis, especially mid-market plans. But PFaroe’s efficiency and ease of use is helping to change that. We are glad to now be able to offer our clients such powerful and innovative capabilities.” Read more at PLANSPONSOR.

Cartwright will use PFaroe, to perform asset-liability modelling, monitor funding levels and investment risk, and track triggers for asset switches, enabling the consultancy to design and implement holistic real-time client-focused solutions better suited to a more dynamic world. The news is covered in more depth by bobsguide.

Alex Wiggins, Associate Vice President, Treasury, Rush University Medical Center, comments: “Previously, Rush and NEPC were operating separate models and spending time reconciling numbers; now our data sets and analysis are in sync and available on-demand, which drives efficiency and a more aligned approach to risk management.” Read more at Fintech Finance.