LOS ANGELES -- Increased volatility in the fixed-income market has resulted in pension funds, banks, insurance companies and others issuing more detailed investment guidelines for fixed-income portfolios, said Laurie Adami, chief operating officer for Capital Management Sciences Inc.
As a result of the guidelines, money managers and their clients want more precision in their ability to measure the level of compliance in their portfolios, she said.
Her comments are based on CMS' survey of client needs. CMS, the maker of BondEdge for Windows analytical software, is about to release new software called The Compliance Module.
Investors, she said, originally put general constraints on portfolios. Now, she said, they set limits on investments in certain sectors, and even set limits within sectors.
As an example, she said, some investors always have set duration limits for overall portfolios. But now those limits have been made more specific so they set duration limits for derivatives within portfolios. In other cases, she said, investors have put limits on investing in certain industries, from tobacco to trucking.
Because of the expansion in guidelines, "managers want to stay much more on top of risks," she added. Money managers are demanding greater precision in measuring their compliance, as are their clients.
CMS' Compliance Module will be released in April and will be used with BondEdge.
The module permits daily monitoring of compliance across all portfolios. It permits exception reporting and pre-trade monitoring of portfolios.
Users are notified of any portfolio conditions that would breach or result in a violation of guidelines before securities trades are placed.
With the module, a user can build an existing set of portfolio constraints in the software, and then copy the software constraint set under a different name. By being able to copy the sets, users can apply the constraints for multiple portfolios with similar policy guidelines.
Users can also set constraints for minimum and maximum percentages of the portfolio, minimum average quality, minimum and maximum effective duration, and minimum and maximum contribution to duration from a particular sector of the portfolio.
For further information, call Teri Geske at CMS, (310) 479-9715.
PEP revision offers user-defined groups
SAN FRANCISCO -- In a revised software release expected in the second quarter, Callan Associates Inc.'s Performance Evaluation Program for Windows will permit users to define their own comparison groups.
PEP does risk and risk-adjusted analysis of equity and fixed-income portfolios and does style analysis of the portfolios using more than 750 benchmarks and securities indexes. The custom comparison feature to be released will be in addition to a number of recent improvements in PEP, said Devin T. Ahlvin, manager of client software solutions for Callan.
PEP users can compare 40 equity and fixed-income portfolio characteristics vs. a style group. With the use of portfolio characteristics, users can answer more questions about managers' portfolios, Mr. Ahlvin said. One question might be whether the duration of a particular portfolio is outside the duration of other money managers within a particular style group.
The new, faster 32-bit software that runs on Microsoft Windows 95 and NT, also has increased flexibility and charting capabilities. Users can customize charts, preview charts before opening them and create multiple charts in a single file.
The new product has a Chartbook Editor that permits users to create multiple charts in a short time.
A consultant works with the software user. "We don't drop a piece of software and say, 'Good luck,' " Mr. Ahlvin said.
PEP has about 350 users and 80 clients. It offers quarterly updates on CD-ROM and monthly updates via the World Wide Web.
For more information, call Mr. Ahlvin at (415) 978-3888.
