MARKET INFRASTRUCTURE

Euroclear teams up with FinTech on asset allocation algorithms

Euroclear has unveiled a partnership with UK-based financial technology company Quantessence in a bid to automate asset allocation in the funds industry.

By Charles Gubert editors@globalcustodian.com June 14, 2017 8:45 AM GMT
Euroclear is partnering with Quantessence, a UK-based financial technology company, to deliver an open architecture platform that manages the running of predefined asset allocation algorithms.

The first application on the platform will offer a service for individualised constant proportion portfolio insurance (iCPPI) products.

iCPPI is a risk management strategy that runs pre-agreed asset allocation algorithms to provide capital protection to an individual’s fund portfolio. The service will connect distributors, asset managers and hedge providers (investment banks and re-insurers) on the Euroclear Quantessence platform to automate the running of these algorithms.

iCPPI has grown in importance over the last few years as insurers face new capital requirement and accountancy rules in the US and EU respectively. Solvency II demands insurers hold risk-weighted capital, and insurers are increasingly turning to iCPPI as a risk management tool for hedging risk instead of using options or reinsurance.

Peter De Clercq, chief executive officer, speaking at Fund Forum in Berlin, said the platform would bring significant automation to what has traditionally been an IT heavy infrastructure. He added the system would reduce the operational burden at asset managers, distributors and investment banks. The automated processing will also help address on-going changes around algo-asset distribution and robo-advice.