UBS Warburg allows only its top-tier clients to use CreditDelta, its portfolio analytics tool, and it’s clear why. The site is a culmination of years of work and investment, combined with an excellent repository of historical data to easily create the best tool of its kind. This is not the kind of site that the bank would give access to just anyone who asked.
The site is not a usual relative value tool, of which several banks can demonstrate excellent examples. It is also not a usual index site, which again is an area that is well served on the web. Instead it is a powerful portfolio risk management tool that is now so well regarded that fund managers are willing to pay sizeable amounts of money – in the hundreds of thousands of pounds – to use it. Soon it may become a requirement for fund managers to have it, if they want actuarial consultants to recommend them to pension funds.
The historical data is based on a database of 110,000 securities, including credit default swaps, interest rate swaps, FRNs and index-linked bonds. The database covers issues in euros, sterling, US dollars, yen and Swiss francs. Australian and New Zealand dollars are being added in the next two months.
This website enables users to see, for example, the relative yields of any issuers, then plot a scatter graph to see where these yields come in over a market curve, a government curve, or Libor. They can also order and plot bonds by Z-score, for quick rich/cheap analysis.
But the real quality of CreditDelta is in its portfolio analytics capabilities. Clients can upload their portfolio and index into the system very easily. And they do not have to use indices that UBS Warburg contributes to.
Users can select the criteria they use to analyze their portfolios – and these can be as individual as they want. One fund manager, for example, wanted to compare portfolio performance according to the age of the manager – CreditDelta made this possible. Clients can then use the tool’s swap hedge calculator to see which swaps would minimize interest rate risk. The optimizing tool will also suggest securities trades, according to chosen specifications, which will optimize the Sharpe ratio of a portfolio. Julie Chakraverty, who runs CreditDelta for UBS Warburg, says the optimizing function is an example of CreditDelta’s strategy of building tools customized to asset managers’ daily needs.
She says: “The optimizer is not an academic model but a real-life, platform for credit traders. Clients would not engage fully until we linked into liquidity, trade requirements, and many other day-to-day challenges.”
