Whitepapers

Sector-allocation decisions form an integral part of many investment processes, both in equity and fixed income portfolio management. Most benchmark providers in both asset classes provide a wide range of sector sub-indices, and many risk models contain sector factors. By comparing Axioma’s new Factor-based Fixed Income Risk Model with a more traditional approach, we demonstrate that while sectors do play a role in credit investment management, they do so to a much lesser extent than one might expect.

There is no denying the impact of climate change — and associated regulatory realities — on the business of investment management. For portfolio managers, it is essential to understand how to successfully adapt and prepare for what some call the “mother of all correlated risks”. Here we expose — in three parts — what portfolio managers need to know when switching to a fully Paris Aligned Benchmark (PAB) portfolio from a current market-cap weighted (CWB) portfolio.

In this paper, we have narrowed our focus and analyzed the performance of the DAX® 50 ESG Index over the period from March 20, 2020 (the end date of our analysis last time and which was around the beginning of the recovery from the market distress caused by the COVID-19 pandemic) until November 13, 2020. Our findings show that the DAX® 50 ESG Index has outperformed during this period, with the sustainability criteria applied as part of the index methodology contributing favorably to returns.

This Special Report explores some of the threats our planet is currently facing and discusses ways in which sustainability can help to save it. It also outlines how economies and companies can shift to more sustainable models.

In this paper, we evaluate the EURO STOXX 50® ESG Index’s liquidity and tradability characteristics compared to its benchmark, and make an estimation of execution cost of switching from the benchmark to the index. We believe this analysis would be of interest to market participants given the recent launch of derivatives on the EURO STOXX 50® ESG Index, and to those with exposure to the EURO STOXX 50® that may be seeking a more sustainable flagship alternative.

This study explores the impact of the reclassification, from a risk-oriented perspective, on the STOXX® Global 1800 and STOXX® Europe 600 indices. We focus our analysis on the highest two tiers of the classification: Industry and Supersectors.

Style-factor risk premia have been well-documented (and harvested) in the equity world for decades but have proven far more elusive for bonds. The new Axioma Factor-based Fixed Income Model (FFIM) demonstrates that style factors not only do exist in credit, but that they also carry discernible risk premia, which, in turn, can be utilized for systematic, smart-beta investing.

The global equity market recovery continued in the third quarter, as benchmark risk slid. But not all components of risk participated in the decline, and volatility remained much higher than it was when the year started.

Understanding changes in risk estimates can be key, especially in times of crisis when volatilities spike and correlations point in the same direction, eliminating the diversification that was supposed to protect a portfolio.

In this note, we take a look at the methodology behind the index, explore how its composition has changed over time and assess the impact of the 2020 annual index review.

Low Volatility strategies have a deservedly good reputation for offering investors equity-like returns with less risk.

Factor investing has gained popularity in recent years and large asset flows have been recorded into so-called smart beta and risk premia themed products.