The Axioma Worldwide Equity Linked Factor Risk Model (Linked Model) combines the Axioma United States Equity Model (AXUS4) with the Axioma Developed Markets ex-US (AXDMxUS4) and the Axioma Emerging Markets (AXEM4) Models into one interconnected equity model.
The Challenge for Global Asset Managers
Portfolio managers assigned to domestic or regional mandates may use a risk model estimated from the particular geographic region corresponding to their mandate while those tasked with monitoring firm-wide risk and performance used a more generalized risk model to ensure they are able to capture all the firm’s portfolios.
This may lead to confusion and miscommunication between the portfolio managers using a more granular factor lens to construct and analyze their portfolios and the risk managers using the more generalized factor structure to identify where risk was allocated and what was driving performance.
The Linked Model is a risk model with full coverage of global markets but with a regional factor structure that recognizes the differences in factor phenomena from one market to another. In this way, asset management firms benefit from a fully consistent structure without any tradeoffs. A single model allows for portfolio managers and risk managers to have an identical view of the domestic or regional strategies while still allowing the flexibility for risk managers to combine portfolios for an aggregate view of the firm’s overall book.
Global Model with a Regional View
Benefit from a global model that captures regional factor structure nuances.