Qontigo, a global leader in risk analytics and index solutions, has partnered with CEPRES, the leader in private market investment technology and data, to develop a suite of private market factor risk models for unique insights into private capital fund risk in multi-asset class portfolios.
The private market factor models will provide broad coverage of the private asset space in Qontigo’s enterprise risk management system, Axioma RiskTM. Through the combination of CEPRES’s verified private fund cash flow data and Qontigo’s industry-leading Axioma Factor Risk Models, asset managers and asset owners will receive deep insights across both public and private assets for risk analysis, portfolio construction and asset allocation.
The core of the methodology rests on using verified fund cash flows instead of subjective and overly stable fund net asset valuations to derive historical returns by fund category. The exposures of the private returns to public equity market risk factors such as size and value are then estimated to create a unified risk model that covers private and public assets.
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“As the private markets become an increasingly important asset class for investors, it is critical to widen the private investment aperture through new methodologies that allow investors to manage private markets within existing widely distributed risk-management frameworks that are linked to the public markets. Working with Qontigo allows us to provide additional risk insight into how those investments relate to the total portfolio and help unleash private markets’ true potential,” remarked Alka Banerjee — Global Head of Product, Market Data — who joined CEPRES earlier this year.
“Risk modeling for private assets is difficult due to lack of regular, standardized reporting and independent market valuation. CEPRES is the gold standard of private equity data and has over 20 years of experience obtaining verified private fund cash flow, valuation and investment data directly from fund managers. This partnership enables us to expand our coverage in Axioma Risk so clients can view their portfolio risk for private and public market assets on a unified platform,” said Chris Sturhahn, Chief Product Officer for Analytics at Qontigo.
The Axioma North America Buyout Factor Risk Model (NA Buyout Model) is the first of the suite to be released and is available for testing with select clients. A broader suite of Axioma Private Market Factor Risk Models is planned for delivery later this year.
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