The role of risk management for institutional investors is evolving. Risk leaders are looking to broaden their teams’ focus beyond traditional risk measurement and increase their influence with investment teams. How could AI help? 

Since ChatGPT's debut less than 18 months ago, artificial intelligence has dominated headlines, and excitement and apprehension now surround its entry into the world of finance and investment. But just what are the expectations and misconceptions?

Wealth managers face the challenge of matching clients’ objectives with an ever-growing set of investment products. Standard practice is to build strategic asset-allocation models based on broad capital-market assumptions. But we present a new approach.

Investors who commit capital to private-asset funds must provide money when the fund managers buy portfolio companies, but receive it back only when the managers sell. The uncertain timing and size of these cash flows demand careful liquidity management.

When selecting private-credit funds, investors can often only consider broad strategies, due to the general opacity of the asset class. We draw on loan-level data and proprietary analytics to produce a more detailed picture of the direct-lending market. 

When global fixed income investors have been squeezed by hawkish central-bank policy, rates momentum was a defensive play. 

Factors have long had a place in constructing equity portfolios, but investors increasingly use factors in sovereign and corporate bonds, commodities and currencies. Which non-equity factors have been the best performers coming out of recent crises, and why?

Momentum can be an important factor in sovereign-rates markets. But investors concerned with exposures to short-term rate movements in global bond markets may wish to ask themselves whether the trend is indeed their friend.

Factor investing has brought disruptive change to the asset management industry. First established to systematize stock selection, factor investing now takes many forms and spans many asset classes.

This paper describes BIM303, a new version of the Barra Integrated Model (BIM). This new version incorporates the latest Barra equity models, includes several new and updated Barra fixed income models, and completes the history of the private equity and private real estate components. Other local models that form the complete BIM are the same as those in BIM301, the previous integrated model. BIM303, like BIM301, comes in versions for multiple horizons: Short, Long, and Extra Long.

Bond recovery rates after default vary considerably across seniorities, industries, regions and macroeconomic environments. In this RiskMetrics Technical Note, we update our recommendations for bond recovery rates to reflect this diversity and discuss their impact on bond analytics. To support our new recommendations, we introduce a flexible configuration for managed services clients that provides additional granularity when setting recovery rates for generic bonds.

This Model Insight describes the new Barra Malaysia Fixed Income Model, which offers clients an enhanced view of the risk of ringgit-denominated bonds. We have re-estimated the sovereign and swap spread models using improved data sources. Backtests from 2007 to 2014 demonstrate the improved explanatory and forecasting power of the new model.

MSCI has enhanced Barra government bond models that cover all developed nominal and inflation-protected markets and added five new emerging market models. BIM301 models improve in-sample and risk forecasting by estimating more detailed and longer term structures and improved risk modeling, including higher frequency weekly returns, short and long horizon models, and improved specific risk models.