Measuring and Managing Risk of Private Assets in Global Portfolios

MSCI launches Private Assets Analytics Framework in RiskManager

Private assets, including private equity and commercial real estate, constitute major components of the portfolios of many institutional investors, but risk management for these asset classes has not kept pace.  Too often, the low volatility of private asset valuations is mistaken for low risk, and many investors have no risk management framework in place for private assets. 

MSCI is pleased to announce a Private Assets Analytics Framework that allows investors to model private assets in RiskManager.  

This time series-based framework helps identify the main sources of risk in many private assets as part of managing the risk of a global, multi-asset class portfolio.

MSCI’s Private Assets models synthesize information from private asset class data sets, public markets and individual private investment characteristics to offer an integrated view that spans:

  • Buyouts, ventures, mezzanine and distressed private equity in the U.S., Europe and Asia
  • Private real estate in 31 countries
  • Farmland and timberland in the U.S. and U.K.

This new models capture exposure of private assets to traditional risk factors and more granular pure private factors.

MSCI’s factor-based approach allows investors to understand diversification effects at both the asset-class level (e.g., how diversifying is private real estate in aggregate?) and within private asset classes (e.g., how similar is an office in New York to an office in London?).

The MSCI Private Assets Model and Private Assets Analytics Framework allow investors to manage risk over the broadest range of asset classes, and in turn help make better-informed decisions about risk and return.

Research Paper

This Model Insight describes the introduction of private asset models into the time-series-based RiskMetrics’ RiskManager.

MSCI PRIVATE ASSETS IN Riskmanager

One of the toughest challenges of managing private assets is that they can’t be easily analyzed alongside the rest of a portfolio.

Risk Management

The goal of investment risk management is to maximize a portfolio’s expected return for a given amount of risk through careful asset allocation.