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How Cognivo Modernized the Legacy Risk & Portfolio Management Systems of a Global Macro Investment Management Firm

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The Client

A large global long-short, multi-asset and multi-currency, investment management firm with over $4Billion in Assets Under Management.

New York, NY

The Challenge

The global long-short investment manager, with positions in multiple asset classes in various currencies, needed to replace its in house legacy risk and portfolio management system that was built over many years by integrating multiple systems in an ad hoc fashion.

The Chief Operating Officer (COO) wanted to build a more planned and structured centralized risk and portfolio management system that could generate a multitude of reports, including various settlement, reconciliation, risk, exposure, allocations, and benchmark comparison reports, soon after market close.

The technical requirements of the project included support for multiple asset classes and multiple currencies. The solution also needed to be highly efficient, cost-effective, and most importantly, scalable over time. For example, the solution needs to reflect that their requirements would evolve over time due to diversification of investment strategies, development of new markets, and new regulations such as Dodd-Frank Wall Street Reform and the Consumer Protection Act.

The Solution

During the discovery and project planning phase, the Cognivo team, with extensive knowledge and experience in the capital markets, reverse engineered the current legacy system to design the architecture of the new custom risk and portfolio management solution.

The Cognivo team started small by building a proof of concept to port over non-critical, risk and portfolio management functions to the new system first. Once, the client was able to experience the value derived from the proof-of concept upgrades, Cognivo, and the investment manager’s internal investment management team started porting more critical functions to the new, customized data warehouse and system architecture built utilizing the latest programming languages and technologies. This highly customized risk solution included custom features like variance-covariance value at-risk calculations with over 99% confidence level, in-house stress test scenarios, and back testing of models.

New York, NY

The Result

The new system met the client’s goals, as described in the Challenge above. Cognivo’s extensive knowledge and experience in the investment management industry enabled reverse engineering of the legacy system in a short period.

Our thorough understanding of financial risk reporting and portfolio management models allowed the Cognivo team to start small and perform rigorous testing and validation of the new reports against independently built Microsoft Excel workbooks and models, in conjunction with current reports being used in production.

Main Accomplishments

Near real-time, Customized Risk & Performance Dashboards.

The risk and performance information are presented to the investment and risk management team via a custom, web-based interactive dashboard. Some of the statistics and features implemented include, (a) Real time P&L, NAV, VAR view by portfolio, baskets, sectors, asset class, geography, and other attributes, (b) Support for multi-asset (equities, commodities, and FX), and multi-currency portfolios, (c) Support for all three VAR calculations, including Historical method, Variance-Covariance method, and Monte Carlo simulation, (d) Flexible what-if scenario calculations and analysis, (e) Integration with a multitude of broker-dealer trading APIs, market data sources, and charting APIs, (f) Seamless integration with industry-leading middle and back office systems.

Complete integration across various internal and external systems.

The modernized system, having been developed using the latest programming languages and APIs is open in format, which allows for easy integration with other systems that the investment firm uses. The system also automatically extracts data from various internal and external sources via API, and FTP. Then post-process, the data is stored in a centralized data warehouse.


Highly efficient workload management.

The investment management and the operations team no longer need to gather data manually from various sources, and then reconcile the data after generating the reports. According to the Chief Investment Officer, the biggest advantage of this new solution is that this allowed them to better utilize their small team of analysts, who are now able to use their time performing more meaningful tasks for the firm.

Exceptional return on investment (ROI).

According to the Chief Investment Officer, the many hours saved by automation allowed at least one full-time role to be dedicated to other functions within the firm. This amount to over eight hundred thousand dollars in savings over a ten-year period.