BNP Paribas Securities Services Launches Pension Fund Risk Monitoring Tool

BNP Paribas Securities Services reports the launch of a market risk monitoring tool for pension funds, enabling trustees to see a complete view of the market risk to their entire portfolio. 



It says that by calculating the market risk against each individual security in a fund’s portfolio, the tool determines the market risk across the entire portfolio with higher accuracy than when calculated based on individual reports from disparate external sources. 



Pension portfolios typically consist of several funds invested into multiple asset classes, and schemes will usually enlist one or more fund manager per asset class, it very helpfully reminds us. Each of those managers is responsible for reporting the risk to those assets and schemes to date have relied heavily on external parties to gather data and calculate portfolio-wide risk. 



The bank, which services more than 100 pension funds across Europe and Asia-Pacific, says it can now enable scheme trustees to make better risk-informed decisions around asset allocation. The tool enables them to delegate investment on the basis of risk-budgets as well as performance. It also removes pension funds’ requirements to take on full-time risk measurement specialists. 



Dietmar Roessler, head of client segment asset owners at BNP Paribas Securities Services said: “Ongoing instability in the financial markets combined with increased regulation is causing a fundamental culture shift in pension funds’ approach to risk. “The need to monitor performance independently of a scheme’s external advisors is growing in importance and funds are now taking a more active approach to risk-based governance,” he continued. “This tool helps funds identify the investments that have the most marginal volatility, which then gives them the basis to diversify their investments based on a calculation of their risk. We expect to see a lot more risk-weighted delegation and this tool will be a key enabler of that,” he concluded. Implemented in as little as four weeks, the tool is delivered via a web-based interface, and provides pension funds with a two-page report that can be published in every major European language. It is part of BNP Paribas Securities Services’ MasterSuite for pension funds, built around asset protection, investment control and optimisation of returns.