Deleveraging Risk Monitor

Deleveraging Risk Monitor (DRM) provides an early warning of major reductions in gross exposure across equity hedge funds and affords clients the opportunity to position portfolios accordingly. Signal’s Deleveraging Risk Model includes three major components: Funding & Systemic Risk, Equity Market Dynamics and Hedge Fund Stress.

The DRM includes a graphical representation of the Deleveraging Risk Model and commentary on the movements in the underlying components.

It also includes a listing of names, by sector, we believe are potentially over-represented in market neutral hedge fund portfolios based on our proprietary Market Neutral Hedge Fund model, which we developed in order to help us approximate general hedge fund returns in real time. We believe these names are among those most at risk to experience dislocations in the event of a sudden reduction of gross exposure by equity hedge funds.

By providing both an early warning system for deleveraging events and an objective, statistically-based measure for identifying names that are potentially over-represented in highly leveraged portfolios, the DRM helps clients to understand and mitigate the risk of a major drawdown in the event of a general deleveraging event.