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  1. Net InterestMarc Rubinstein9/25/2015 min
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    Net Interest
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    • normanbae3 years ago

      When AWS went down in 2017 and 2018, a huge portion of the internet went down. Could the same happen in finance as a result of Blackrock's Aladdin?

      "The concern is that with so much money managed off the same risk system, portfolios will begin to look alike. The Los Angeles County Employees Retirement Association tendered for a risk management solution earlier this year. Their concern with Aladdin was “potential groupthink” on the basis that Blackrock’s asset management teams use the identical platform in their investment process.

      Not a month after the retirement association made their decision, Blackrock rolled out a coronavirus stress-test scenario to Aladdin clients. It would be interesting to see how those clients performed in the ensuing market turmoil in late February/March and to what extent Aladdin influenced herding. Market correlations rose to 20 year highs in the period, which isn’t a surprise – they always rise in periods of stress – but what impact Aladdin may have had is a question few have asked.

      The flipside is the benefit that comes from bringing together so much data on one platform. Blackrock markets Aladdin’s collective intelligence on the basis that it “gets better with every new user, and every new asset that joins the platform”. This is true of most platforms built around data. In this case clients have to trade off the value of that collective intelligence with the potential groupthink that comes with it. "