Adapting to Evolution of Financing Markets
Prime Services and Financing Products
Equity prime services remains a competitive and lucrative business opportunity for investment banks with scale. The business is estimated to service about $1.4Trln of equity-oriented AUM and generated over $20bln revenues for providers. Services include clearing, custody, financing and reporting, in addition to value-add services of capital raising and consulting, as well as being a portal to wider services at the banks. The business lines also include equity swaps, futures and OTC clearing. Since the Archegos default in 2021, there has been significant focus in risk management and also a change in the provider landscape. Panoramix has been involved in a variety of projects in the space.
Strategic build of prime brokerage, swap and secured financing platforms
Review of margining processes and counterparty risk assessment
Liquidity risk modelling
Client profitability and capital optimization
Review of prime brokerage arrangements for asset managers
The team of Panoramix has deep experience in managing prime businesses, optimizing capital and client profiles, and assessing strategic build plans. They are uniquely positioned to advise banks, hedge funds and other intermediaries in the prime financing business.
Cleared products & CCPs
Central Counterparties (CCP’s) started to come into prominence in the mid -1990s when the banks needed to de-risk their counterparty risk whilst continuing to grow their derivatative books. Clearing has increased expediential since 2009 following the 2007-08 financial crisis and the legislative and regulatory changes bought in by globally regulators. Central clearing now accounts for over 60 % of derivatives traded.
The team at Panoramix has a in-depth understand of CCP’s including:
The asset classes that the CCP’s clear, and how they are margined.
How their default funds are constructed and risk management process in the event of a default.
How clearing can benefit their members, potential reducing risk, their leverage ratios and capital costs, as well as giving operational efficiencies.
Collateral Management and Optimization
Collateral management remains a key area of focus for banks, with significant opportunities for balance-sheet and funding optimization. In addition there are Increasing needs for additional collateral due to a number of factors:
Introduction of UMR and SA-CCR regulatory regimes,.
Decrease in central bank balance-sheets globally
Banks using more collateral for capital management
The Panoramix team can help advise clients on devising best-in-class collateral management processes, as well as the new assets classes and technologies coming to the market.
Insurance
Our practice focuses on market risks arising from insurance liabilities’ actuarial characteristics. We use a bottoms-up approach to construct enterprise risk solutions for profitability, earnings volatility and reserves sufficiency.
1. Risk Identification, Characterization and Quantification:
Identification and quantification of market risks including rates, equity, credit and FX
Characterization of net risk to the firm’s profitability and reserves, in comparison to firm’s overall risk posture
2. Development of Risk Mitigation Programs with Investment and Risk Officers
Changes to investment guidelines to match reserves to market risk of liabilities, including instances where firms have outsourced significant portions of their investment activities
Hedging programs to mitigate the net market risks borne by the firm
Investment return and hedge cost metrics to inform product development
Implementation of these programs, including regulatory filings, trading, operations and both financial and management reporting
Our team of professionals has worked with a broad range of insurers, both in the US and internationally, in a variety of insurance markets and products, with particular experience in variable, fixed and indexed annuities and in portfolio construction supporting mortality and P&C offerings.