Linked Models

Why Using a Single Integrated Regional Model May Help You Achieve Better Results

The best risk model is the one most closely aligned to your strategy

That’s why Qontigo offers you a range of Equity Factor Risk Models connected as a single linked risk model. Combining US, Developed Markets ex-US, and Emerging Market models our Linked Model1 leverages a state-of-the-art modeling technique and provides answers to common questions faced by investors and risk managers such as:

How do I capture local factor diversification with a global model without losing the aggregated view of global allocation of my fund?

How can I – someone in firm-wide risk management – arrive at the same risk numbers as my portfolio manager?

How do I achieve factor granularity at the regional level across my entire global portfolio?

How do I gain a better understanding of whether or not my risk estimates are reliable for my regional bets?

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Linked Models Use Cases

Key Benefits

Balance

Ability to understand and manage the risk of out-of-region bets

Risk Management

A balance between a parsimonious and granular factor structure for both portfolio construction and risk decomposition

Focus and Alignment

Better alignment across the organization with the ability to monitor risk across the full book while maintaining focus on regional mandates

Consistency

Consistent risk estimates from Axioma’s Linked Model and US, Developed Markets ex-US and Emerging Market Equity Factor Risk models for any country and region-specific portfolio

“The art is in the combination of these models, where we can effectively recognize that banks in the US are not perfectly correlated with banks outside the US, or that value in the US may perform differently than value in emerging markets.”

Melissa Brown, Head of Applied Research at Qontigo. Waters Technology, December 2020

For even more customization, investors may also consider the Axioma Risk Model MachineTM (RMM) which allows you to seamlessly create your own custom risk model tailored specifically to your investment process.

Learn more about the Axioma Worldwide Equity Linked Factor Risk Model

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[1] Axioma Worldwide Equity Linked Factor Risk Model