News & Research

The new Axioma Worldwide Macroeconomic Projection Equity Factor Risk Model offers a unique way to identify a portfolio’s exposures to macroeconomic factors, such as interest rates and inflation, while maintaining the structure and benefits of a more traditional fundamental equity factor risk model.

The surge in oil prices since November 2020 has highlighted the challenges—and even opportunities—of measuring and managing the impact of swings in oil prices on portfolios.

Investors are getting jittery over inflation, thanks to continued fiscal stimulus, combined with the effects of prolonged monetary easing. This, in turn, has pushed long-term government rates to 12-month highs, while share prices continue to climb.

This is the third installment of a series of posts highlighting the risk-measurement benefits of a model that links separate regional models, versus a single global model.

In this infographic, we outline how the data and methodology of the Sustainable Development Investments Asset Owner Platform (SDI AOP) can help investors align and track portfolios’ contributions to the UN’s Sustainable Development Goals (SDGs) and to report PRI sustainable outcomes.

As a result of the derivatives rule SEC 18f-4 passed on October 28, 2020, all SEC-registered mutual funds, ETFs and Business Development Companies (BDCs) with derivative notional exceeding certain threshold are required to appoint a derivatives risk manager in charge of implementing a regulatory framework for its fund’s derivatives use. The necessary risk guidelines focus on reporting limits of fund leverage risk based on Value-at-Risk (VaR).

The impact of Robinhood at al did not escape the attention of our risk models. The roles of Liquidity and Leverage as risk factors in the Axioma fundamental models has been in full display on the heels of the recent trading frenzy which sent previously unpopular stocks soaring in January, only to tumble in early February. Other typically “compensated” style factors, such as Volatility and Size, also had a significant reaction, resulting in an overall increase in style factor risk.

Is one global model sufficient to manage the risk of a global equity factor portfolio? Yes, but because factors behave differently by geography, we believe a model that is aware of these variations can do an even better job of identifying, and therefore managing, active risk.

The year of the Rat is finally over. The COVID-19 pandemic. Global lockdowns. Failed reopenings. Second and third infection waves. Anti social distancing protests. Pre and post US election theatrics. Brexit trade deal. Multiple vaccines. GameStop. So, what’s in store for investors in the year of the Ox?

The recent euphoric trading of GameStop and other high-flying stocks—prompted by retail traders trying to squeeze institutional short sellers out of their positions—had a substantial impact on specific risk, particularly on less diversified portfolios, but even large benchmarks such as the Russell 2000 have been affected. The frenzy produced large dislocations in equity-portfolio active risk. […]

The SEC has adopted the 18-f Rule which will affect specific investment companies using derivatives. Reporting on stress tests, VaR measurements and backtests, are just some of the mandatory requirements – all of which can be accessed through the cloud-native Axioma RiskTM risk management platform.

A sector rotation may be brewing, but it hasn’t happened yet. In fact, the comeback will likely be to a “new normal” and, therefore, we may never see a “full rotation.”