February, 2015


Alternative Mutual Funds 3

“I can’t stress enough: Boards are now being asked to look at things in great detail,” said Kathleen Moriarty, Partner at Katten Muchin Rosenman LLP. “We spend a lot of time educating the Board,” she said, referring to the Board of Directors of alternative mutual funds. It’s simply that the Board is required to understand the fund at a deeper level than ever before. Moriarty was the third of three speakers at a GARP-sponsored webinar on Alternative Mutual Funds: Risk Governance Under SEC Security on February 17, 2015. She described a recent instance of going over the legislation on mutual […]

Alternative Mutual Funds 2

“SEC’s mission is to protect investors and support responsible capital formation,” said Raymond Slezak, Assistant Regional Director at the Securities and Exchange Commission (SEC).  He was the second of three presenters at the GARP-sponsored webinar held February 17, 2015, on Alternative Mutual Funds: Risk Governance Under SEC Security. Liquid alternative mutual funds were “listed as a priority” as early as 2013, he said, because “any time there’s rapid growth” or “concern about the dynamics of money managers moving into an area,” it attracts SEC interest. As a metaphor about the regulatory thought about the new funds, Slezak repeated a quotation […]

Alternative Mutual Funds 1

Alternative mutual funds have been experiencing a growth “nothing short of phenomenal,” said Amy Poster, Director of Financial Services Advisory at Berdon LLP, “and this has not escaped the notice of the Office of Compliance Inspections and Examinations (OCIE).” She was the first of three speakers in a webinar about alternative mutual funds held on February 17, 2015, and sponsored by the Global Association of Risk Professionals (GARP). She pointed to a 2014 Barclays study, Developments and Opportunities for Hedge Fund Managers in the ’40 Act Space , that estimated assets controlled by liquid alternative funds would reach between $USD […]

Stress Testing Mortgages. Part 2

The team of Scott L. Smith, Jesse Weiher, and Debra Fuller at the Federal Housing Finance Agency (FHFA) use specialized financial models to estimate potential losses. They carried out empirical tests of countercyclical shocks using four different models of mortgage credit risk. This posting continues a February 4, 2015, presentation by Scott L. Smith to an audience of financial risk managers at Global Association of Risk Professionals (GARP). Two models were devised at FHFA, and two are commercially available credit models: one, called Black Knight (formerly LPS-AA), and the other called ADCO Loan Dynamics. The estimated losses were converted to a capital […]

Stress Testing Mortgages. Part 1

“One needs to be careful and not over-reliant on any one model,” said Scott L. Smith, Associate Director for Capital Policy at the Federal Housing Finance Agency (FHFA). He was referring to the financial models used by major financial institutions to estimate potential losses. On February 4, 2015, he was presenting a GARP-sponsored webinar on countercyclical stress tests to set capital requirements. Smith explained how credit risk is measured for mortgages, and described a way to embed stress testing that uses countercyclical concepts. He and colleague Jesse Weiher, Senior Economist at FHFA, performed dynamic stress testing that was adjusted to […]