Aladdin Risk gives advisors access to Aladdin’s risk data in investment exposures, performance attribution, ex ante risk, asset allocation and compliance. In addition to portfolio and security level risk analytics, advisors can also access portfolio and attribution reports, asset allocation analysis, security valuation, cash flow projections and compliance tools.
“Using Aladdin can be very complicated and mathematical, but the idea of risk is no different from trying to explain drivers of return of your portfolio’s performance,” says Kwong. “People intuitively know what these things are, but they may not be able to measure and employ them.”
All told, nearly 30,000 people use the platform to manage about $17 trillion of the world’s assets, according to BlackRock, conducting 250,000 trades and running billions of hypothetical scenarios each day.
Aladdin’s beginnings lie in a humble Sun Microsystems workstation nestled in 1988 between the refrigerator and coffee machine in BlackRock’s one-room Manhattan Office. The system was first used to track risk in the mortgaged-backed securities space before being expanded to other assets. During the global financial crisis, governments turned to Aladdin to evaluate the toxic assets responsible for the housing bubble.
“These were the same tools used to help the New York Federal Reserve and Bear Stearns to hedge their portfolios,” says Kwong. “They are highly sophisticated. We had to change the way we presented that information for the advisor audience.”
Most of Aladdin’s work now takes place at a data center in Washington state, where a number of inputs are stored, including historical events, weather patterns, political scenarios and the rise and collapse of financial markets.
Clients like Deutsche Bank, JPMorgan Chase, Prudential and CalPERS have used Aladdin to perform millions of Monte Carlo simulations on thousands of investments.
Aladdin’s machine learning capabilites can read news stories, broker reports, email and other documents to create a view of investor and consumer sentiment towards investment. Aladdin can also screen social media feeds for information about events or investments.
Through “collective intelligence,” Aladdin is augmenting its knowledge by user-imputed content and investments, absorbing more potential scenarios and historical case studies as it evolves, according to BlackRock.
“Aladdin is basically a risk engine for analyzing portfolios,” says Kwong. “iRetire comes with a portfolio that’s supposed to generate an outcome in retirement income. In Future Advisor, a set of questions is used to deploy a portfolio for a clients’ objectives and goals, with Aladdin analyzing all of that. These outputs are being produced by Aladdin, but the users don’t actually touch the tool.”