Whitepapers

This Special Report discusses the increasing importance of sustainability for investors. It also outlines how investors are able to the measure the carbon footprint of their portfolios, and ensure they meet their climate goals.

In this paper we attempt to answer the following questions: in which region can you make the most impact, and how much active risk is required to achieve your climate goals?

In this paper we review some of the most prominent forward-looking climate metrics (FLCMs) that are currently available to investors, including proprietary methodologies developed by dedicated providers.

While sustainable investing is not a new concept, its growing popularity means a sharper focus is needed on how to achieve sustainability goals without sacrificing returns or taking on too much unintended risk.

Foreign-exchange rates can be very volatile. Investors looking to bet on markets outside their own base currency must decide whether to embrace or mitigate the additional risk. In this paper, we propose a stress-testing framework that can help investors with the decision whether “to hedge or not to hedge”, given their assumptions on expected returns and cross-asset correlations.

In this paper, we analyze tax efficient smart-beta portfolios based on the flagship STOXX Factor Index Suite with direct indexing to realize the tax advantages. Smart-beta strategies naturally lend themselves to tax alpha given their high turnover. The STOXX Factor Index suite consists of the Value, Momentum, Small Size, Low Risk, and Quality single-factor indices and a multifactor index engineered to deliver the risk premium associated with each factor using a diversified index of securities with carefully managed exposure, liquidity, and risk characteristics.

Active tax management targets higher post-tax portfolio returns by achieving pre-tax investment goals with lower tax costs. In this paper, we investigate the benefit of active tax management for investment strategies tracking broad cap-weighted equity market indices. Our simulations with historical market data show that tax loss harvesting with the Axioma Portfolio Optimizer can deliver substantial tax savings at low or moderate tracking error levels.

In this research piece, we demonstrate the value of the Axioma Worldwide Equity Linked Factor Risk Model (WWLM4-MH or ‘Global Linked Model’) for solving two very common analytical problems when managing global portfolios. Global equity mandates are often broken into specialist mandates segregated by geography.

In this paper, we take a closer look at the pairwise interactions of some of the asset-class pairs and review how they affected the risk of a global multi-asset class portfolio over the past 14 months, with a particular focus on the most recent environment.

In a surprising turn of events, most equity markets finished 2020 with sizable gains—and the fourth quarter unquestionably did its part. Benchmark risk continued to slide in Q4—except for a blip in November—but still ended the year higher than where it started. Factor returns went wild in Q4 and many regions saw outsized returns for the year.

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.