Fund Allocation Solutions
Investment Consultants, Financial Advisors and Asset Managers are the custodians of their client’s risk exposure and composition. In order to ensure that a fund fits a client’s risk profile, it is essential to explicitly measure and control its risk level and exposures.
Our proprietary models facilitate the re-blending of portfolios, at the fund-level, according to their total risk contribution. Any organisation responsible for creating an optimal blend of portfolios will be able to leverage the A-Dex range of capabilities to optimise their fund to improve performance, reduce risk and ultimately meet their investor objectives.
A-Dex’s X-Ray analysis reveals a fund’s style signature and true alpha facilitating verification of a manager’s strategic fit and value contribution to the fund. Our “look thru” capability exposes what the fund actually receives in terms of share, asset class, industry, liquidity and style exposures. Attribution reporting is also integrated.
The “Time Machine” tab in the Prism (Portfolio Risk Management System) introduces new technology to construct Goals Based Portfolios.
Is the risk budget of the client efficiently allocated? Is the allocation to funds optimally diversified? A-Dex’s Risk Budgeting framework allows FoF managers to allocate risk and not simply dollars. Both total fund total risk and tracking error over the feasible set of all possible fund blends are decomposed and attributed to their sources. Being able to measure and control risk contributions empowers the FoF manager to explicitly implement risk budgeting in his portfolio construction and re-balancing.
Can you demonstrate what is driving your portfolio’s returns? Can you independently verify a manager’s investment philosophy? For any investment fund or blend of funds it is possible to directly “look thru” to what you are actually getting in terms of underlying share, asset class, industry, liquidity and style exposures. Individual share, sector, asset class and style based attribution of realised returns are available in high-quality graphics and reports for your client reportback. A returns based “X-Ray” reveals a fund’s style signature and true alpha and can assist in selecting active managers.
Fully customisable reports designed to impress clients are available as downloadable PDFs (or as individual images for presentations). Communicate with clarity and transparency. Graphically demonstrate the fund’s consistency with its risk profile, investment philosophy and goals.
What is Risk Budgeting?
It is the process of identifying, quantifying and “spending risk” in the most efficient manner possible.
A-Dex enables managers to control the total risk and tracking error of the blend. Importantly we facilitate the application of risk budgeting in allocating to the sub-components of the client’s risk.
The amount of active risk allowed in the fund and underlying portfolios can be measured, controlled, and reported helping our clients retain and win business.
Our powerful interactive 3-D graphical blending, offers a new and unique approach to the visualisation of risk, tracking error and money weighted contributions to the portfolio blend. ‘Top down’ and ‘bottom up’ analyses are also seamlessly and aesthetically integrated.
Traditional 2-dimensional approaches to portfolio optimisation, without an active risk budgeting process will often not deliver optimal reduced risk to fund of fund managers because they don’t tell you how to size two managers together.
A-Dex calculates a vast array of feasible blends and offers complete drill-down and look-through to the detailed blend analysis.
Increasing regulation means that all advisors and managers of multi-manager fund structures must justify their management fee.
Multi-Managers need to deploy quantitative strategies in combination with qualitative analyses when selecting managers for their fund, rather than just based on their fundamentals. Manager fit processes must incorporate active risk budgeting to achieve as much active return as possible for every unit of active risk the client takes.
A broad range of fund and index data is available in the Prism. Users can also upload their own fund data.
Risk budgeting is a quantitative endeavour that brings logic and scientific rigor to the portfolio management process that helps Managers to understand the risks they are taking as they attempt to maximise returns.
Fund alpha assessments
A-Dex analyses your fund allocations through our X-Ray process and delivers comprehensive reporting on the historical alpha, risk and tracking error contributions delivered by each portfolio.
This analysis offers complete portfolio transparency which includes in depth statistical, liquidity and style / sector information. Comprehensive reports are produced to support any blend analysis and resultant re-allocation decision-making process.
Fund alpha assessments and Look-Thru require more in depth data inputs, in addition to returns, such as fund holdings and style proxies, ETF’s for example.
A-Dex can also provide any necessary style building blocks as required. Please contact us if you would like to upload the returns to your own funds and make them available to fund selectors.
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