NEW YORK, March 2, 2021 – Qontigo, an investment intelligence leader and provider of best-of-breed analytics and world-class indices, launched the Axioma Worldwide Macroeconomic Projection Equity Factor Risk Model (“Macro Model”), which is designed to capture the investment risk of a global portfolio through the lens of macroeconomic risk factors. The new medium-term horizon model uses the Axioma Worldwide Fundamental Equity Factor Model (“Fundamental Model”) to decompose portfolio risk into components driven by interest rate, inflation, credit and commodity risk.
The new model is suited for a number of uses including performance and risk attribution, backtesting, factor exposure analysis and alpha construction across the asset management, hedge fund and wealth management spaces.
“One of the key advantages of using our Macro Model is that it uses the same framework that is within our Fundamental Model. Instead of using two different models that result in misalignment, you can use one macro model across the entire organization resulting in an efficient and robust solution for factor analysis.”Alessandro Michelini, Head of Portfolio Solutions
The Macro Model also has advantages over standard macroeconomic time-series models including increased macro-exposure stability (betas tied to fundamental factors are more stable than those at the asset-level) and improved estimation accuracy (reduced number of exposure parameters).
“The Macro Model gives clients another tool in which to dive deeper and validate how key equity fundamental factors like Market Sensitivity or Volatility may be driven over time by macroeconomic factors. For example, a portfolio may not always have significant macroeconomic exposures, but when it does those exposures can have a meaningful impact on returns. Constraining an exposure to, for example, Market Sensitivity may be a blunt-instrument device when the risk really lies in credit spreads.”Melissa R. Brown, Head of Applied Research
The Macro Model is the latest in the expanded suite of equity factor risk models from Qontigo. Last year, the company released the Axioma Worldwide Equity Linked Factor Risk in both short- and medium-term horizons following the launch of the Axioma Developed Markets ex-US Equity Factor Risk Model.
In addition to being available in the company’s line of portfolio construction, performance analytics and risk management solutions, Qontigo’s open architecture approach also allows users to seamlessly integrate the Macro Model data within internal or third-party systems.