The enhancement consists of the implementation of daily security-level detail for fixed income within its Investment Risk and Analytical Services (IRAS) product suite for investment managers and institutional investors.
Northern Trust is using a “Successive Pricing” model to provide a fixed income analysis tool, leveraging the company’s performance data. It is fully integrated with the company’s IRAS Fundamentals ad hoc analysis application and is intended for clients seeking to better understand the sources of return in their investment portfolios. By analyzing the relationship of a security to market factors such as interest rate and foreign exchange changes, the model is intended to account for performance on a variety of fixed income instruments including bank loans, swaps, options, repos, and futures.
“Our new daily security-level attribution model allows Northern Trust to deliver a more granular breakdown of returns generated within fixed income portfolios,” said James Haran, senior product manager for IRAS at Northern Trust. “While we have been able to provide fixed income attribution for many years, this model enhances our ability to highlight individual market factors such as curve, carry, yield, duration, and maturity and the resulting impact on client portfolios.”
According to Haran, the model analyzes the securities within a portfolio and benchmark to determine the pricing impact resulting from changes in underlying markets, and is integrated with other performance and risk reporting, so clients can see absolute and relative returns along with risk metrics on their portfolios.