Brendan O. Bradley said expected shortfall is an improvement on value-at-risk measurements. BOSTON — Acadian Asset Management Inc. is turning to a little-used risk measurement tool, as company officials ponder developing new investment strategies.
The tool, known as expected shortfall, is a measure of how much money a strategy could lose, particularly from esoteric asset classes. It has been used for years by Wall Street trading desks and by some hedge funds, but is rarely used by money managers.
"As mainstream managers make more use of things like derivatives, going to something along the lines of expected shortfall does make sense," said H. Gifford Fong, president of Gifford Fong Associates, Lafayette, Calif., a fixed-income and derivatives consultant.
Expected shortfall is particularly important as Acadian considers moving into newer and more volatile asset classes, such as emerging market currencies and commodities.
Acadian, with $55 billion in assets under management, is running into capacity constraints in several of its existing investment strategies. The firm has closed its emerging markets equity, international small-cap equity, European equity and Japanese equity strategies to new business, said Churchill Franklin, senior vice president. Acadian is also taking a break in accepting new assets for its international equity strategy, he said.
The firm's U.S. equity, global equity and global long-short equity strategies remain open.