16 Nov 2010
Ermitage Group, the fund of hedge funds operator, has signed up CalPERs, the world’s biggest pension fund group, to use its Optics advanced portfolio construction software. The California Public Employees’ Retirement System will use Optics, which constructs portfolios to client-specified risk-return objectives, to run both its alternative and long-only equities portfolios.
The deal follows a trial earlier this year when CalPERS applied Optics to its Risk Managed Absolute Return Strategies Program and Global Equity Program. Ermitage has managed a bespoke European Multi-Strategy Portfolio for CalPERS since 2006, but this is the first time it has made its proprietary systems available on a stand-alone licence.
The multi-manager portfolio software accords with Ermitage’s philosophy that traditional investment models are ultimately ineffective in regime change market conditions. The fund of funds group is now in talks with several other pension funds and insurers about using Optics to improve risk adjusted performance across their investment portfolios.
Ermitage is looking to add a handful of additional clients for Optics from pension funds, endowments and insurers. The need for portfolio management software has been growing as US pension funds have increasingly looked to invest directly in single manager hedge funds.
The software uses forward looking macro, strategy and fund forecasts. It features a series of advanced construction algorithms that translate complex qualitative and quantitative information into risk-adjusted portfolios with a high probability of meeting their agreed-upon objectives. It also allows the user to see exactly what underlying investments are proposed for the portfolio and why.
Ermitage is currently managing $1.3 billion. It has been building up an office in New York since late 2007 to complement offices in Jersey and London.
The deal follows a trial earlier this year when CalPERS applied Optics to its Risk Managed Absolute Return Strategies Program and Global Equity Program. Ermitage has managed a bespoke European Multi-Strategy Portfolio for CalPERS since 2006, but this is the first time it has made its proprietary systems available on a stand-alone licence.
“Markets are very dynamic, very violent sometimes,” said Ian Cadby, the CEO of Ermitage. “You need to consider what might happen in the market and be prepared for a range of outcomes. Optics lets you do something about that.”
The multi-manager portfolio software accords with Ermitage’s philosophy that traditional investment models are ultimately ineffective in regime change market conditions. The fund of funds group is now in talks with several other pension funds and insurers about using Optics to improve risk adjusted performance across their investment portfolios.
“Investors with liabilities to fund need to establish control over their funding programs,” said Nick Macleod, the managing director of Ermitage investment solutions. “Optics helps in that it recognises that changes in market conditions are not mere fluctuations; they are genuine shifts in the environment whose tendency to persist once they become established can disrupt convergence towards long-term average returns and lead to serious funding issues.”
Ermitage is looking to add a handful of additional clients for Optics from pension funds, endowments and insurers. The need for portfolio management software has been growing as US pension funds have increasingly looked to invest directly in single manager hedge funds.
“This is the type of system that could help them structure their investment programme,” Cadby said. “Optics helps them put their investment into a coherent programme.”
The software uses forward looking macro, strategy and fund forecasts. It features a series of advanced construction algorithms that translate complex qualitative and quantitative information into risk-adjusted portfolios with a high probability of meeting their agreed-upon objectives. It also allows the user to see exactly what underlying investments are proposed for the portfolio and why.
Ermitage is currently managing $1.3 billion. It has been building up an office in New York since late 2007 to complement offices in Jersey and London.
“The general trend is that asset flows have slowed dramatically to offshore funds,” said Cadby, discussing the fund of funds sector. “What we are seeing is a growth of bespoke managed account solutions.”
