SCI's profile questions are answered by Triphonas Kyriakis, md for analytics at MSCI; Raghu Suryanarayanan, executive director of MSCI's risk research group; and Thomas Ta, who directs the company's development of risk management analytics.

Q: How and when did MSCI's analytics business become involved in the securitisation market?
TT: MSCI has been helping investors analyse securitised products for over a decade, though we've intensified our focus in recent years. For example, because such analytics are computationally intensive, we decided to start from the ground up and invested heavily in our infrastructure about three years ago.

Today, MSCI conducts several billion securitised product pricings and several hundred billion pricings across all asset classes each day. This allows users to stress-test credit spreads and prepayment rates, as well as to project the impact of varying assumptions to see the protection around any particular tranche.

We've also deepened our team of researchers and modellers in fixed income. They include: David Zhang, who was formerly head of securitised products research at Credit Suisse [SCI 18 January]; Misha Shefter, who previously headed analytics modeling at Barclays Portfolio & Index Analysis Tools (POINT); and, in technology, Nooshin Komaee, who previously headed analytics for JPMorgan's BondStudio.

Q: What are your key areas of focus today?
TK: We're hearing from clients, who are being spurred by evolving regulatory frameworks to embed risk management at the core of their organisations. The financial crisis proved that different departments within organisations need a common language of risk.

That can be a challenge because the language of risk departments is typically framed by value at risk, whereas front offices tend to think in terms of factors and exposures. MSCI helps them bridge that gap with technology, data, analytics and insights.

We also create risk models to address particular uses and provide highly detailed, specific sensitivities that allow the users within organisations to interact with one another. That requires the scale to support all asset classes and to create a consolidated view of risk for the different departments within the organisation.

Q: How do you differentiate yourself from your competitors?
TK: While some providers may be good at single asset classes or providing a holistic view, the granularity gets lost with a one-size-fits-all approach. When it comes to integrating our risk and performance analytics across an organisation, we believe in optionality.

Users have a choice in how to consume our content, which allows them to focus on what they're good at. They can access our content via an MSCI workflow application, their own applications or through a third-party application.

RS: Another differentiator is that our analytics are strongly grounded in research. Investors increasingly need consistent ways to measure the portfolio implications of forward-looking scenarios that incorporate market, macroeconomic and geopolitical risks. Before the financial crisis, the concern was where you were in the cycle; now, clients want to identify potential new risks that could be destructive.

The focus is shifting from the risk around a trend to the risk of the trend itself or uncertainty. This can be challenging from a modelling perspective.

However, our stress-testing analytics, best-practices guide and macroeconomic risk model provide a structured framework for investors to measure the impact of their forward-looking views on market and portfolio returns. In short, we've embedded innovative research into the system. Uses range from risk management to governance and portfolio construction.

Q: Which challenges/opportunities does the current environment bring to your business and how do you intend to manage them?
TK: A significant opportunity for us is facilitating investment differentiation. That means helping clients build better portfolios and establish best practices and efficiencies via traditional market risk models (such as factor risk and value-at-risk), as well as non-traditional market risk paradigms (such as stress testing, credit, liquidity and counterparty risk).

Technology facilitates that, but it also requires an operationally efficient infrastructure. We're seeing investment managers consolidate platforms, especially those legacy systems whose complexity makes them costly to maintain. We help clients simplify that with the goal of a coherent ecosystem from the front to the back offices.

TT: In the securitisation market, risk managers tend to be relying less on widely held assumptions. We're seeing a return to basics in terms of stress testing at both the tranche and loan levels, with an emphasis on shocking pieces of collateral and gauging the impact on the rest of the capital structure.

Q: What major developments do you expect from the market in the future?
TT: We recently integrated IHS Markit's rich bank loan index and reference data into our new syndicated loan risk analytics model. The data covers 16,000 loans across 85 countries and 25 currencies.

It allows our pricing models to better reflect optionality, terms and conditions, first and second liens, and revolvers. The next step is for us to begin modelling CLOs with this information, which we're aiming to introduce later this year.

We've ramped up coverage of Japanese and Australian securitisations, and continued to improve US agency and non-agency RMBS and European ABS. We decide what to build based on client demand and, in this instance, clients are increasingly pushing us to invest in improving securitisation.

CS