Whitepapers

In this paper, our goal is to show how sustainability ETF exposures to a number of sustainability-related factors may vary. It is eminently clear to us that investors with a view about key sustainability features cannot rely on the fund name, but instead need to do more digging into whether their fund meets the required criteria.

In this research paper, we showcase how a portfolio manager can replicate fixed income indices using the Axioma Portfolio Optimizer and the Axioma Credit Spread Factor Risk Model. We replicate a US high yield index with liquid bonds and a set of derivatives and test the solution from a risk perspective. The end goal is to create a set of portfolios that is more cost efficient, as (or more) liquid and as diversified as the index.

The recent launch of the STOXX U.S. Equity Factor Index, which underlies the iShares U.S. Equity Factor ETF (LRGF), highlights the real-world performance benefits of a factor-based approach that seeks to manage risk relative to a capitalization-weighted benchmark.

The STOXX Global Digital Entertainment and Education Index captures the global digital transformation of entertainment and education – a long-term structural change. The individual characteristics of the stocks in this index are what set it apart: the Specific Return factor made the largest positive contribution to the seven-year return of all the indices in the study.

Term spreads have risen in multiple regions around the globe, as long-term sovereign yields soared amid rising (expected and actual) inflation but central banks took longer to raise short-term interest rates. The impact of this on international real estate has mostly been positive over the past two-and-a-half years.

Real estate has long had the reputation of being at least a partial hedge against inflation, since both rental income and property values typically respond positively to inflationary pressures. The iSTOXX Developed and Emerging Markets ex USA PK VN Index has lived up to this reputation historically and is continuing to do so in the current inflationary environment.

The STOXX WTW Climate Transition Indices are a new approach to managing climate risk that offer investors a systematic and transparent way to incorporate climate transition risk into their investment decisions.

This paper focuses on creating SDG portfolios that maximize exposure to one, two or all SDGs. The study shows that it is quite possible to create a portfolio that significantly improves the exposure to SDGs without taking on too much active risk. An optimizer can help manage that active risk.

The Russian invasion of Ukraine spooked equity investors around the world, but losses were not distributed equally across all sectors, with some industries even exhibiting positive returns. This opens up opportunities for more focused strategies such as thematic investing.

Another tech bubble may be about to burst, triggering a US recession. There are multiple similarities between the current tech bubble and the dot-com bubble. This time, however, the Fed cannot leverage interest-rate cuts to put the brakes on a market decline, due to the current record-high inflation combined with low interest rates.

How badly could a portfolio get hurt? What scenario would be responsible for such a loss? What are the main risk drivers in this scenario and how plausible would such a scenario be? These questions are all part of what is commonly called reverse stress testing. This paper aims to illustrate how one could follow a very pragmatic end-to-end workflow to answer these questions.

Historically Canadian equity managers have had difficulty accurately modeling their investment universe across the US and Canada. North America regional risk models used to construct portfolios just aren’t able to capture the nuances of both markets and are dominated by the US. That’s why we created the Axioma North America Linked Model.