Release 24.01 - Alternative Investments
Private debt enhancement
Streamline operation for a decrease of commitment with no participation from the user.
When the global commitment amount for your loan facility decreases on a contract, you can choose not to participate in this decrease.
In this case, you can create events and transactions that ensure your non-participation, so that while the global commitment amount decreases, your participation rate in the global commitment increases proportionally to your existing positions, and your commitment remains unchanged.
Benefits
- Full automation of the process
- Easy to integrate with third parties’ information
- Remove heavy workaround
Process Decrease commitment with no participation
Subscription based licensing
Development partnerships
Sales module dependency
Private Debt
Dev.Partner: Private Debt - Phase I
Enhanced document processing for alternative fund decomposition
With this enhancement, you can import alternative investment performance reports and automatically create schedules of investments in a seamless end-to-end workflow that uses artificial intelligence to extract data and create Decomposition events in the Alternative Investments Manager.
Benefits
- Automated extraction of decomposition events from Schedule of Investments for Alternative Funds
Decomposition event extracted from Schedule of Investments
Subscription based licensing
N/A
Sales module dependency
Intelligent Document Processing
Peer Group Benchmarking
Evaluate the performance of close ended private market funds with peer group benchmarking. Benchmark individual funds or a group funds in the same vintage to pre-defined private market benchmarks.
A ranking is provided based on the quartiles and optionally top 5% and bottom 5% performers of the benchmark. Furthermore, it is possible to drill down and compare e.g., IRR of a specific fund to the IRR quartiles of the benchmark to assess if the fund is close to fall into the quartile above or below.
Benchmarking is available for IRR, TVPI, DPI and direct alpha.
The solution is provider agnostic and supports private market benchmarks from Preqin, Cambridge Associates, Burgiss etc. and enables the use of benchmarks from several providers simultaneously.
Benefits
- Enable provider agnostic peer group benchmarking
- Optimize workflows by having standard performance analytics, public market benchmarking and private market benchmarking the same place
- Enable flexible definitions of rankings including top 5% and/or bottom5% performers
Rankings for IRR and TVPI are shown based on the Private Capital – All benchmark for a portfolio of funds.
The TVPI per vintage for a portfolio of funds is shown next to the 25th, 50th and 75th percentile from the Private Capital – All benchmark. For e.g., the 2012-vintage, we can see that we are in 2nd quartile but close to being in the 3rd quartile.
Subscription based licensing
Alternative Investments Manager
Sales module dependency
N/A
Stress scenarios for illiquid alternative fund cashflows
Investments in illiquid alternative assets are long-term oriented. To deal with unexpected developments, investment managers need to assess what happens if certain scenarios materialize. Stress scenarios are an indispensable part of portfolio management to test the effects of changing conditions on the portfolio’s behavior. For the alternative investment funds such changing mainly manifest in changes of cashflow patterns which can now be assessed within the Alternatives Strategy module.
Benefits
- Enables users to assess how a portfolio of funds will respond to future changes in market conditions and to identify factors that imperil the investment strategy’s success.
- Enables users to produce more robust forecasts as stress scenarios can reflect a wider variation of possible futures and situations that have not necessarily occurred in the past.
- Allows users to flexibly combine several types of cashflow-related stresses like, for illustration, the acceleration of capital calls plus a delay of repayments plus an extension of fund lifetimes and define the groups of funds to which these combined stresses can be applied.
The Alternatives Strategy module allows users to generate liquidity and capital risk related KPIs, such as a portfolio’s Cashflow-at-Risk (i.e., the net of contributions and distributions) and how it develops over time:
Applying a stress scenario that assumes an acceleration of contributions results in a situation where an investor needs to pay out money earlier than expected and, as several contributions are compressed within a shorter time frame, also result in higher aggregate amounts that are called:
The Alternatives Strategy module allows users to look at this in more detail, separately for contributions and distributions and also assess the impact on the portfolio’s overall valuation:
This image shows a combination of various stresses: an accelerated contribution schedule where investors have to provide funding quicker than usual. Consistent with a stressed market environment are longer lifetime for funds as fund managers attempt to ‘ride out’ crises and wait for a better exit environment for their portfolio companies. Therefore also delayed realizations are part of this stress scenario. Consistent with these cashflow patterns is a portfolio valuation that achieves its peak significantly later:
Subscription based licensing
Alternatives Strategy Analysis
Sales module dependency
Alternative Investments Manager
Cash-flow Forecasting for Illiquid Alternative Investment Funds
Previous releases
Release 23.10 - Alternative Investments
Private debt
Streamline operation for an increase of commitment with no participation from the client.
When the global commitment amount for your loan facility increases on a contract, you can choose not to participate in this increase.
In this case, you can create events and transactions that ensure your non-participation, so that while the global commitment amount increases, your participation rate in the global commitment decreases proportionally to your existing positions, and your commitment remains unchanged.
Benefits
- Full automation of the process
- Easy to integrate with third parties’ information
- Remove heavy workaround
Process Increase commitment with no participation
Subscription based licensing
Development partnerships
Sales module dependency
Private Debt
Dev.Partner: Private Debt - Phase I
Auxiliary Job type for reconciliation of payment details on transactions created through the Intelligent Document Processing workflow
Build trust in the machine-learning-powered processing of private market transaction notices, by adding a reconciliation check for the payment details.
You can now automatically ensure alignment between payment details provided by fund managers/GPs on transaction notices with settlement defaults stored in SimCorp Dimension. This new auxiliary job type allows you to trigger such a check in your transaction STP workflow.
Users will be alerted to transactions with discrepancies for further investigation. Thereby, you can rest assured that reconciled transactions have the correct payment details for further processing (e.g., SWIFT message generation).
Benefits
- Ensure accuracy of payment details
- Increase STP rate for Alternatives transactions
- Prevent fraud and manual errors in payments processing
- Focus your back office users’ attention on exceptions
Document processing reconciliation check auxiliary job
Subscription based licensing
Alternative Investments Manager
Sales module dependency
Intelligent Document Processing for Alternative Fund Transactions
Alternative Investments Manager
Release 23.07 - Alternative Investments
Colmore Integration – level 2 & 3
The Colmore level 2 & 3 integration enables automated creation of schedule of investments from fund performance reports (e.g. quarterly reports). This includes easy creation of new portfolio companies. For the portfolio companies, the solution also includes import of financial KPIs such as EBITDA.
The solution leverages SimCorp’s partnership with Colmore, a leading service provider in the private market space. The portfolio company and schedule of investment-data is retrieved from Colmore using dedicated APIs. The raw data is stored in SimCorp Dimension. Inside the Alternative Investment Manager, the status of the retrieval and import process can be monitored. Easy steps can be taken to resolve potential issues such as matching the fund between Colmore and SimCorp Dimension, when identifiers don’t match upfront.
Benefits:
- Enable automated import of schedule of investments including creation of portfolio company data
- Enable automated import of financial KPIs for portfolio companies
- Optimize workflows with overview of needed user interaction and easy steps to resolve potential issues
The schedule of investments is imported from the Colmore level 2-data and stored as a decomposition event in SimCorp Dimension. Portfolio companies are created with key information such as name, currency, geography and GICS-classification.
Subscription based licensing
Pilot
Sales module dependency
Alternative Investments Manager, Alternatives Fund Decomposition and Look-through
Release 23.04 - Alternative Investments
Stochastic model
The Alternatives Strategy offer is based on a cash-flow forecasting functionality for illiquid alternative investment funds (set up as closed ended, self-liquidating limited partnerships). It is provided as a simple foundation module and as an advanced module.
The advanced cash-flow forecasting module is using a stochastic cash-flow forecast that supports more sophisticated analysis. Whereas the foundation module only projects high level expected cashflows, the advanced module captures cash-flows in more details: capital calls, management fees, realizations, fixed returns (with defined volatility and frequency; annual, bi-annual, quarterly, monthly).
The advanced module works with detailed parameters, derived from up-to-date private market data (Burgiss, Cambridge Associates, Preqin, PitchBook, depending on what client subscribed to) and takes all relevant diversification dimensions (vintage years, management companies, strategies, geographies, industries) into account.
Without capturing the stochastic characteristics of cash-flows the liquidity risk inherent in illiquid alternative investment funds is underestimated. The stochastic model is needed to determine important Key Performance Indicators, notably Cashflow-at-Risk and Capital-Call-at-Risk.
The parameters define the management fee schedule, and the volatility and frequency for contributions and distributions.
Subscription based licensing
Alternatives Strategy
Sales module dependency
Alternative Investments Manager
Dedicated Preqin-import functionality
This release includes an import functionality to easily download the newest data, using Preqin’s API.
The stochastic model requires real and up-date benchmarking data, for this release from Preqin. Clients need support to easily upload the latest data
Preqin data import function with inputting of credentials
Subscription based licensing
Alternatives Strategy
Sales module dependency
Alternative Investments Manager
Mapping dictionary
The new mapping dictionary assures that, depending on a fund’s specific classification the best fitting piece of data is provided for the model.
The benchmark data provider’s (for this release Preqin) uses a different classification scheme (for strategies, geographies, industries, vintages) than clients want for the Alternative Investments Manager and the Alternatives Strategy offer and reflected in the SCD.
Map SCD onto Preqin classifications and vice versa
Mapping dictionary, matching scores enable a ‘fuzzy match’ as in practice a crisp one-to-one match is not possible.
Subscription based licensing
Alternatives Strategy
Sales module dependency
Alternative Investments Manager
Running the simulations as a service
Users can run several Monte-Carlo Simulations (MCS) for the stochastic model in the background while continuing the work with the Alternative Investments Manager. To avoid that the various simulations lock the client session for a long time, they are executed asynchronously and not on the client session.
Launching a MCS instantly gives a message that the calculation is queued and that the user will be notified when the calculation is finished. Selecting a calculation provides the same user experience as a locally calculated one.
MCSs are complex, resource intensive, and come with high waiting times that are unacceptable for working inactively with Alternative Investments Manager.
Calling of the service. When the calculation is done, it is available to the user as a list of calculations done for that fund model.
Subscription based licensing
Alternatives Strategy
Sales module dependency
Alternative Investments Manager
Analyzing outcome profile
The probability distribution of return outcomes (TVPIs) can be visualized in the form of histograms, that are also the basis for further analysis.
Horizon return plus return profile at a given point in time (assumption that the investments are terminated at this point)
Risk profile, Sorting ratio, expected returns, variance of returns, skewness, and kurtosis of the PDF
This helps the user to compare various investment strategies, assess the impact of draft commitments.
Histogram of a TVPI at a given point intime plus its risk profile.
Subscription based licensing
Alternatives Strategy
Sales module dependency
Alternative Investments Manager
Cash-Flow-at-Risk, Capital-Call-at-Risk
This solution covers:
- Liquidity risk
- Capital-Call-at-Risk for each period, which is very important during the ramp period for improving the management of treasury assets.
- Cash-Flow-at-Risk for each period, which becomes increasingly important when the portfolio is in its mid-life and investors want to know when money will be coming back.
Users find it very difficult to run the analysis for complex portfolios, taking the existing / future portfolio and realistic up-to-date return figures into account
Displaying CFaR and CCaR for given time interval
CCaR and CFaR for a given time interval with alpha-numeric information on these measures for various confidence levels.
Subscription based licensing
Alternatives Strategy
Sales module dependency
Alternative Investments Manager
Cash-flow-Consistent NAV
Capital risk can be measured in various ways, such as Value-at-Risk. The private equity industry has proposed specific measures, such as invested-Capital-at-Risk.
The distribution of the cash flow-consistent NAV per period that helps investors to plan for the balance sheet impact.
As a user you want to forecast for every period the NAV that is consistent with the fund's cash-flows forecasted from this period onwards, to understand how future exposures will develop and as basis for measuring these capital risks.
No NAV exists for illiquid assets, a marking to model complements other valuation techniques.
Various confidence levels how the Cash-flow-consistent NAV develops over time and within which bands it is projected to vary.
Subscription based licensing
Alternatives Strategy
Sales module dependency
Alternative Investments Manager
Foreign exchange stress scenarios
This solution analyses the impact of FX stresses on forecasted exposure or performance in portfolio and reporting currency.
Investment managers and risk managers need to consider the impact of FX changes on forecasted exposure and performance in reporting and portfolio currency.
For consistency with the Strategy Manager, Market Data Stress Test (and possibly Market Data Forecasts) must be used.
To assess different investment strategies, FX stresses need to be calculated in the same way for drafts and existing investments.
;Defining the FX stress and displaying the impact. The images illustrate the impact of an FX scenario on the NAV at a given point in time.
Subscription based licensing
Alternatives Strategy
Sales module dependency
Alternative Investments Manager
Cash-flow stress scenarios
The Alternatives Strategy offer allows users to stress cash-flow patterns and to assess the resulting impact on portfolio. if e.g. the funds calls capital faster than expected.
Cash-flow related stresses supported by this release are: (1) Extension of fund lifetimes, typical during economic crises, (2) acceleration of cash-flows, e.g., for capital calls during economic crises when fund managers have less access to other forms of financing, and (3) deceleration of realizations can lead to liquidity shortfalls.
Forecasted cash-flows are taken and the set stress (type, severity) is applied. In this release the same type of stress to the entire portfolio of funds.
Investment managers and risk managers can navigate the uncertainty inherent in illiquid asset classes by frequently assessing stress scenarios and providing transparency on the impact of their assumptions regarding future developments.
For funds, stresses on cash-flow patterns give a realistic picture of liquidity risk and exposure risk.
Defining the FX stress and displaying the impact. The images illustrate the impact of an FX scenario on the NAV at a given point in time.
Subscription based licensing
Alternatives Strategy
Sales module dependency
Alternative Investments Manager
Release 22.07 - Alternative Investments
Default similarities if no diversification set-up
With this enhancement the cash-flow forecasting for illiquid alternative investment funds (set up as closed ended, self-liquidating limited partnerships) will be provided as a simple foundation module and as an advanced module. The advanced cash-flow forecasting module takes all relevant diversification dimensions (vintage years, management companies, strategies, geographies, industries) into account while the simple foundation module only supports vintage years and management companies, i.e. those diversification dimensions that do not require a specific standard platform set-up. However, to avoid misleading the users of the simple foundation module regarding the portfolio of funds’ diversification efficiency, it is necessary to set default distances for strategies, geographies, and industries.
What problem(s) does it solve:
- Without the default settings, the portfolio’s commitment efficiency will be artificially high because all funds in the portfolio are considered independent with respect to the strategy, geography and industry dimensions.
- The default settings assure that the user gets a conservative but realistic view on diversification based on vintage and management company only.
- The user also gets an understanding that additional diversification dimensions matter and encourage the adoption of the advanced cash-flow forecasting module.
Caption: This image illustrates the setting of the defaults. First time the user opens the Portfolio Strategy (or perhaps saves a setup) and no similarity default has been specified for strategies, geographies, and industries the popup appears. The user is informed that defaults are needed and that they will automatically be populated.
Subscription based licensing
Cash-flow forecasting for illiquid alternative investment funds
Sales module dependency
Alternative Investments Manager
Inputting draft commitments without an asset
This enhancement allows users to input future investments as drafts in Strategy and Analysis without needing to create the fitting assets first. Thus, users can input drafts, where the characteristics of the investment are specified and can be changed on the fly for this draft.
What problem(s) does it solve:
- Previously the UX for the future strategy plans were unsatisfactory. The forced use of pre-defined assets as drafts, without no means to change on the fly, made the old solution highly inflexible.
Caption: This image illustrates the input as draft commitment where no asset exists yet. If needed, the user can input further characteristics to describe the investment in greater detail.
Subscription based licensing
Cash-flow forecasting for illiquid alternative investment funds
Sales module dependency
Alternative Investments Manager
Wizard for creating draft commitments
Inputting a commitment pacing plan with many draft commitments is cumbersome. As many factors need to be considered. For example: What will be the future exposure? What about the performance? What about liquidity? What about risk? Does the pacing plan meet the predefined targets?
With this draft wizard, you can create a very basic plan comprising drafts spread over a defined period and using different fund models.
What problem(s) does it solve:
- Inputting too many draft commitments is likely to stop users from working with the cash-flow forecasting module.
- The wizard provides an easy way to create the first version of an investment plan and allows the user the refine this plan in an iterative manner.
Caption: This image illustrates the wizard’s basic functionality. For the pacing plan’s desired start and end date the user specifies the total commitment in RC and the number of funds to be committed to. Then drafts commitments are spread over the draft fund models in line with the set weights.
Subscription based licensing
Cash-flow forecasting for illiquid alternative investment funds
Sales module dependency
Alternative Investments Manager
Release 22.01
Diversification management for portfolios of illiquid alternative investment funds
What is the solution about?
- The forecasts for expected cash flows and market values for portfolios of illiquid alternative investment funds (set up as closed ended, self-liquidating limited partnerships) take the relevant diversification dimensions (vintage years, management companies, strategies, geographies, industries) into account.
- A portfolio of funds resilience under economic stresses is measured as diversification efficiency. Investment managers can assess the impact of adding new funds to a portfolio on the diversification efficiency, i.e. whether it is improved or goes down.
- The algorithm groups funds into different clusters (sets of objects that share attributes) based on their similarities. Members in the same cluster tend to react similarly to an external event and differently from members in another cluster. The basis for the clustering is the pair-wise distance between funds across their various diversification dimensions.
- Cluster analysis is applied to the management of diversification, and construction and monitoring of a portfolio of funds.
- The probability distribution of return outcomes (TVPIs) can be visualized in the form of histograms, that are also the basis for further analysis.
What problem(s) does it solve:
- Sophisticated institutions have long been incorporating funds investing in illiquid alternatives to improve the diversification and performance of their portfolios. However, this solution is a first in systematically addressing the inter-asset diversification within the illiquid alternative asset class.
- This is also a solution for risk management as stacking a portfolio with too many similar funds leads to concentration-risk.
- The solution can also help to reduce costs as many portfolios are poorly diversified in the sense that a targeted level of protection could also be achieved with a significantly smaller number of funds. Avoiding this over-diversification would allow investors to be more selective and to save expenses for sourcing investment opportunities, due diligence, legal structuring, and monitoring.
New commitment impact:
Caption: An illustration of the impact on a portfolio’s diversification efficiency of adding new commitments to funds (as draft). The boxes show the diversification efficiency before and after adding new funds, and the percentage change in diversification efficiency. The commitment timeline (lower part) visualizes the portfolio’s development in terms of size and timing (here yearly) of commitments.
Impact on return outcomes:
Caption: The histogram for return outcomes for a portfolio with little (effective) diversification. In this case the histogram shows fat tails where for the portfolio very low or very high TVPIs occur quite often in the simulations.
Caption: The histogram for return outcomes for a portfolio with a higher degree of (effective) diversification compared to the previous example. In this case the histogram shows that very low or very high TVPIs occur less frequently in the simulations, and thus the portfolio’s outcome volatility as one indicator for risk is lower.
Benefits
- Embedded in SimCorp’s plug-and play solution for cashflow forecasting that is fully integrated within SimCorp Dimension and does not require transferring data between systems.
- Can be run at any point in time without the need to first check and reconcile data and is directly accessible to investment managers without the need for help from back-office and staff familiar with an administration system’s data structures.
- Captures the diversification dimensions that in practice have been proven to have the highest impact on the portfolio’s risk and return profile.
Subscription based licensing
Requires Risk Analysis Manager and (VaR Parametric or Ex-Ante Volatility)
Recommends Risk Analytics for AM integration
Recommend Compliance Manager for CM integration
Sales module dependency
Risk Reporting and (VaR- Parametric or Ex-Ante Volatility) Recommends: