Clearwater: 88% of fund managers increased stress test spending
16 October 2026 US, UK, Hong Kong
Image: H_Ko/stock.adobe.com
A study from Clearwater Analytics — which polled 250 senior executives and fund managers across the US, Europe, and Asia Pacific — shows that 88 per cent have increased expenditure on stress testing funds in the past year.
The study finds the increase is due to challenging market conditions like rising interest rates, restricted market liquidity, and geopolitical instability which heighten the risk of sudden and disorderly market dislocations.
When asked how they will try to reduce the risk of severe “left-tail” portfolio losses over the next year, 49 per cent of asset managers cite enhanced quantitative risk modelling or stress testing.
In response to growing concern that traditional diversification strategies may not offer enough protection during extreme market events, 54 per cent of asset managers say they will increase focus on defensive stocks with less sensitivity to market moves.
Further, the survey reports that 56 per cent of asset managers will put protective puts in place, guaranteeing a payout if the market falls below a certain strike price.
More than a third of respondents say to mitigate severe losses they will use volatility products such as buying call options or futures on the CBOE Volatility Index.
Speaking on the study, Kirat Singh, president of risk and alternative assets at Clearwater Analytics, says: “Traditional risk assumptions are being challenged by a combination of higher volatility, reduced dealer balance sheet capacity, and greater geopolitical uncertainty.
“It is no surprise that asset managers are turning to stress testing and scenario modelling because they want faster access to accurate, consolidated investment data to better evaluate how portfolios may behave during left-tail events and make more informed risk management decisions.”
The study finds the increase is due to challenging market conditions like rising interest rates, restricted market liquidity, and geopolitical instability which heighten the risk of sudden and disorderly market dislocations.
When asked how they will try to reduce the risk of severe “left-tail” portfolio losses over the next year, 49 per cent of asset managers cite enhanced quantitative risk modelling or stress testing.
In response to growing concern that traditional diversification strategies may not offer enough protection during extreme market events, 54 per cent of asset managers say they will increase focus on defensive stocks with less sensitivity to market moves.
Further, the survey reports that 56 per cent of asset managers will put protective puts in place, guaranteeing a payout if the market falls below a certain strike price.
More than a third of respondents say to mitigate severe losses they will use volatility products such as buying call options or futures on the CBOE Volatility Index.
Speaking on the study, Kirat Singh, president of risk and alternative assets at Clearwater Analytics, says: “Traditional risk assumptions are being challenged by a combination of higher volatility, reduced dealer balance sheet capacity, and greater geopolitical uncertainty.
“It is no surprise that asset managers are turning to stress testing and scenario modelling because they want faster access to accurate, consolidated investment data to better evaluate how portfolios may behave during left-tail events and make more informed risk management decisions.”
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