Analytics

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.

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.

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.

Factor investing is an investment strategy in which securities are chosen based on certain characteristics with the goal of achieving a given investment outcome.

For both quantitative and fundamental managers, alpha calibration is a critical part of the optimal portfolio construction process – but are you doing it right?

The Index Effect is the phenomenon where stocks that are added to an index experience positive excess returns in the days before being officially added.