The 1990’s is often seen as the Information Age, as both computer speed and processing power increased dramatically. At the time, risk management was largely an informal process across much of the industry, but MFS® looked to systematize it in two ways to better benefit clients. MFS hired quantitative analysts, or “quants,” who were tasked with generating data-driven risk reports using advanced mathematical and statistical methods, and the firm brought in new technology to model and evaluate risk.
One of the first quantitative analysts MFS hired was Chief Investment Risk Officer Joe Flaherty, who joined the firm in 1993. In describing the purpose of these analysts, Flaherty noted “We were making sure that the risks that we were taking were consistent with our philosophy, consistent with where we thought we had skill, consistent with what we told clients.”
The portfolio managers met regularly with quant analysts to ensure that they were acutely aware of topical market conditions that could inform long-term growth. This pioneering cross-departmental effort created even greater investment value for clients. As former Co-CIO for Global Equity Kevin Beatty put it, “There’s no company in the world that has their quant people sitting in on meetings with equity and fixed income [the way MFS does].”
By also updating the firm’s technological capabilities, MFS modernized the firm’s risk management platform, so that it now had the ability to store and algorithmically organize data more quickly. Where it once took a full day or more to update a risk investing model, the enhanced computing power allowed models to be updated instantaneously.
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