RiskFirst has taken its PFaroe product and expanded it to include an attribution service for asset managers. Matthew Bale (pictured), chief strategy officer, explains that the PFaroe platform services USD1.5 trillion in assets across 3,000 defined benefit (DB) pension plans, helping them better manage their risk.
“We have been going for a decade focused on DB pension plans,” Bale says. “We help the largest pension plans bring more control in house and better manage risk and also provide our product to consultancies and asset managers to help mid and small size pension plans do the same. That is the heritage of this business.”
Founded in the UK, the business has grown successfully in the US. “What we are moving to focus on now is more traditional asset management technology,” Bale says. “Through our pensions technology which is heavily used by the biggest asset managers globally, who like what we do in the pensions space, we have been asked to tackle more traditional asset and wealth management technology needs.”
RiskFirst’s clients include firms such as Vanguard, Manulife and Northern Trust. The DB business stems from the legacy of DB pension schemes established for employees many years ago which have become a huge liability for companies to manage in more recent years.
“Companies have old obligations and realistically they will be around for up to 100 years as the members still exist,” Bale explains.
He feels that the RiskFirst pension tool has been successful at taking a difficult concept and making it easy to understand – something that can be replicated in the asset management space.
“There is a particular problem with attribution analysis,” he says. “It’s quite a difficult puzzle to identify factors that drive performance and communicate this effectively to clients.”
PFaroe Attribution is designed to solve that puzzle. “Asset managers are always being examined by big pension plans and consultants who put them under the microscope and the manager has to do that to themselves as well to understand where they are doing well or badly. It’s a corner stone of being a good manager. It’s all being currently done but not being done particularly well and in disparate systems.”
Bale says that often the client reporting tool may not be detailed enough for the portfolio manager so he or she then builds an additional spreadsheet which means there are two disparate systems which no one can reconcile.
“We are creating one unified platform that can be used by the end client and manager, bringing the asset owner and the fund manager together through technology,” he says. “Anyone who invests money with an asset manager can use this system as part of their good governance.”