Varenne Capital Partners, a global alternative investment manager, has chosen to leverage a partnership between its depositary, INDOS Financial, and fintech risk firm Clarus Risk, to provide a liquidity stress-testing solution.
This follows the new European Securities and Markets Authority (ESMA) liquidity stress test guidelines, which came into force on 30 September 2020.
The collaboration enables independent stress-testing and enhanced liquidity risk oversight while utilising connectivity now established between INDOS Financial and Clarus Risk to streamline the risk governance process.
Under the new operating model, Clarus Risk will source fund asset and liability data from INDOS Financial to generate liquidity risk metrics via its RiskMonitor Liquidity solution.
This solution incorporates analysis of investor behaviour as well as asset risk scenarios to provide a comprehensive asset and liability appraisal in an investor friendly format.
According to Bill Prew, CEO of INDOS Financial, the new ESMA liquidity stress testing guidelines came into effect at a challenging time for the funds industry due to the ongoing impact of COVID-19 on operations and financial markets.
Prew explains that through this partnership with Clarus Risk, INDOS is now able to facilitate independent liquidity stress testing for its clients in an efficient way, reducing their operational burden and enabling them to demonstrate compliance with the new requirements.
David Mellul, managing director of Varenne, comments: “Strong risk management and corporate governance are key pillars of our responsible investment policy and our chosen independent depositary and risk service providers are now able to reinforce our risk oversight and transparency through their collaboration and the provision of regular liquidity stress testing.”
Max Hilton, managing director of Clarus Risk, says: “The ESMA guidelines are principal based which brings subjectivity and complexity to the implementation of an appropriate solution.”
Hilton adds: “This fits well with our RiskMonitor platform which is designed to facilitate client and fund specific risk reporting that aligns with the risk tolerance and underlying asset mix of each fund. This partnership with INDOS brings new operational efficiencies to the benefit of our clients.”
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