Following her appointment to the London-based risk team of Kinetic Partners two months ago, Isabelle Tykoczinski has been focused on adding new modules to the vendor’s Risk and Valuation Services (RVS) platform. Due for launch in the first half of next year, the new modules focus on extending the platform’s services and reporting tools, such as for UCITS III reporting and counterparty risk assessment.
“We are building a range of bespoke offerings tailored to different markets and different market participants in order to speed up the onboarding process,” she explains. These new modules are being built around the vendor’s core risk engine and they include new interfaces to improve the data exchange between the vendor and its clients.
Phase one of the upgrade project is due to be completed by the end of this year and then phase two will begin, adding a new interface to the database. The vendor is currently running the project with around five members of its own staff and five of its partner’s staff in the risk engine joint venture.
Tykoczinski has been putting her recent experience as head of Europe for Measurisk’s risk transparency and risk measurement service and her previously garnered skills in developing structured products for derivatives desks at banks like JPMorgan to good use in her development of this new functionality. “I was hired, along with a number of other members of Kinetic Partners, to bring my system and practitioner expertise to the table,” she explains. “We are aiming to fill the knowledge gap in the market around risk management and my focus is primarily on the funds industry.”
To this end, the vendor’s risk engine is an outsourced option for these funds to allow them to concentrate on their core business rather than being held back by operating requirements. Kinetic Partners decided to go with the outsourced service model rather than an application service provider (ASP) or software as a service (SaaS) model, in order to tailor the functionality to individual clients.
“There is much more of a focus on outsourcing now within the funds industry, as most firms have under-invested in risk management up until now and there is a dawning realisation that is it not cost effective to keep the function in-house,” contends Tykoczinski. The platform’s appeal is therefore to do with cost efficiencies, reliability and economies of scale, according to the vendor.
She notes that hedge funds in particular have rarely had chief risk officers (CROs) in place but, as a result of the intense scrutiny of the risk management sector by regulators and clients, this is gradually changing. There is a need for greater transparency to foster trust and confidence in the market and risk management and valuations are a key part of this, says Tykoczinski.
Regulatory risk is a key focus for the vendor at the moment, in light of the number of changes going on across the globe. Functionality such as stress testing, liquidity risk measurement and regulatory risk monitoring are therefore on the vendor’s list of new and improved functionality. With regards to liquidity risk in particular, she notes that there is a general lack of understanding in the market at the moment about how to tackle this outside of equities, and this is where the vendor is seeking to differentiate itself based on its staff’s expertise.
The vendor is not currently planning on adding independent pricing to its remit of services, currently the valuation functionality is closely tied to the risk calculation function, but Tykoczinski indicates the vendor may contemplate working with a suitable partner in the space in the future. She notes that there are already a lot of vendors in this space and it would be easier to partner with one of these than use Kinetic Partners’ own resources to this end.
As a result of the work going on behind the scenes to add new modules to the platform, Kinetic Partners has held off on heavily promoting it, although it is business as usual for the firms already using the platform. However, once the new functionality is up and running, the vendor will step up its approach to market and promoting the platform.
The client universe for the vendor’s consulting business is around 1,000 firms and it is therefore hoping that some of these will be keen to roll out some of the new modules on offer next year.
On the radar going forward are UCITS IV and the Alternative Investment Fund Managers Directive (AIFMD), which the consulting side of Kinetic’s business is closely monitoring, says Tykoczinski.