In June-2022 the Fed said that all banks that took part in this period’s stress test passed. This is great news for the banking sector and shows the sector’s ability to navigate an economic crisis.

For the buy-side, there is no equivalent mandate except for reporting for RIAs in the US that have a requirement to file ‘Form N-PORT’ monthly and also liquidity report per SEC 22e-4. Most of these reports are backward looking (i.e. ex-post).

From an investor perspective, it would be helpful for institutional firms to report results of ‘Stress Scenarios’ based on the managers’ expectations of the market, including ‘Expected Shortfall’. This is will be more useful for complex multi-asset portfolios.

Model Transparency and replicability is key for above to be useful. An approach popular with regulators is ‘Portfolio-Revaluation’ using key ‘risk’ factors that affect the valuation of the portfolio holdings.

A value add to above data would be to provide ‘actual vs expected’ details to gauge the managers ‘predictive’ power and the market pulse.

In the wealth management space, the use of ‘historical’ stress scenarios using key risk factors such as interest rates, FX rates, inflation factors, etc. is useful for the HNI audience. The ability for simplified analytics that help explain impact to the portfolio is key to this audience.

Above detail needs to be part of the periodic client communication that today mostly includes ‘ex-post’ analytics and performance results. Forward looking analytics (ex-ante) is a natural extension that savvy investors of the coming generation will look forward to seeing.

IM firms’ thinking along the above lines are building capabilities of centralized data management and the ability to generate real-time risk analytics through the use of modern cloud architectures.