US 2020/0005396 A1Published application

Risk Factor Splitting

AssigneeAxioma, Inc.

InventorAnthony A. Renshaw

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Abstract

Factor-based performance attribution results are often used to identify portfolio exposures or bets that either perform well or underperform. By identifying particular exposures or bets that appear to be opportune to be increased or reduced, the overall performance of the portfolio can potentially be improved. However, the factors present in standard factor risk models are often too broad to identify exposures or bets which can be easily altered. Changing exposures based on the original risk model factors can involve trading too many stocks, or can involve trading stocks that a portfolio manager may not want to trade. The present invention allows portfolio managers to split the original risk model factors into more granular factors that cover smaller sub-sets of the assets in the portfolio. The over- and under-performing exposures of split factors are often easier to alter in practice and can be used to improve the performance of the portfolio.

Claims20

Dependent claims

A computer-implemented method for computing and reporting the performance attribution of a set of portfolio holdings over time by providing a tool for display of results facilitating appreciation of performance attribution on a more granular basis, the method comprising:

electronically receiving and storing by the programmed computer a set of dates defining an attribution time horizon to be analyzed;
for each date, electronically receiving and storing by the programmed computer a historical portfolio of holdings having investment weights in a set of investible assets;
for each date, electronically receiving and storing by the programmed computer an original factor risk model modeling each investible asset in the historical portfolio of holdings as of that date, the original factor risk model comprising at least a set of factors, an original factor exposure matrix, and an original vector of factor returns;
for each date, electronically receiving and storing by the programmed computer a partitioning of the investible assets as of that date into two or more partitioning groups such that each investible asset belongs to one and only one of the partitioning groups;
for each date, electronically receiving and storing by the programmed computer a subset of factors to be partitioned which includes at least one original factor;
for each date, electronically calculating and storing by the programmed computer for the subset of factors to be partitioned a set of partitioned factor contributions, each partitioned factor contribution corresponding to a partitioning group, each partitioned factor contribution being computed as a sum of a product of an investment asset weight for an asset in the partitioning group, an asset exposure from the original factor exposure matrix, and a factor return from the original factor return vector;
computing a performance attribution analysis for the historical portfolios of holdings based on the partitioned factor contributions for each date;
tabulating a ranked listing by contribution for the partitioned factor contributions for each date to facilitate user selection of one or more partitioned factor contributions to be neutralized;
and
outputting the performance attribution results using an output device.

7 more elements

A computer-implemented system for improved computing and reporting the performance attribution of a set of portfolio holdings over time by providing a tool for display of results facilitating appreciation of performance attribution on a more granular basis, the method comprising:

a memory storing data for a set of dates defining an attribution time horizon to be performed;
a processor executing software to operate:
to retrieve data for historical portfolios of holdings having investment weights in a set of investible assets at each date;
to retrieve data for an original factor risk model predicting risk for each investible asset in the historical portfolio of holdings at each date, the original factor risk model comprising at least a set of factors, an original factor exposure matrix and an original vector of factor returns;
to retrieve data for a partitioning of the investible assets as of that date into two or more partitioning groups such that each investible asset belongs to one and only one of the partitioning groups;
to retrieve data for a subset of factors to be partitioned which includes at least one original factor;
to compute for each date and set of factors to be partitioned, a set of factor contributions, each partitioned factor contribution corresponding to a partitioning group, each partitioned factor contribution being computed as a sum of a product of an investment asset weight for an asset in the partitioning group, an original asset exposure from the factor exposure matrix, and a factor return from the original factor return vector;
to compute a performance attribution analysis for the historical portfolios of holdings based on the partitioned factor contributions for each date;
to tabulate a ranked listing by contribution for the partitioned factor contributions for each date to facilitate user selection of one or more partitioned factor contributions to be neutralized;
and
electronically outputting the performance attribution results on an output device.

8 more elements

A computer-implemented method for computing and reporting factor contributions for a set of portfolio holdings over time by providing a tool for display of results facilitating appreciation of performance attribution on a more granular basis, the method comprising:

electronically receiving and storing by a programmed computer a set of dates defining a time horizon for the computation;
for each date, electronically receiving and storing by the programmed computer a historical portfolio of holdings having investment weights in a set of investible assets;
for each date, electronically receiving and storing by the programmed computer a set of factors, a set of original factor exposures for each factor and each investible asset in the historical portfolio of holdings, and an original factor return for each factor;
for each date, electronically receiving and storing by the programmed computer a partitioning of the investible assets as of that date into two or more partitioning groups such that each investible asset belongs to one and only one of the partitioning groups;
for each date, electronically receiving and storing by the programmed computer a subset of factors to be partitioned which includes at least one original factor;
for each date, electronically computing and storing by the programmed computer for the set of original factors to be partitioned, a set of partitioned factor contributions, each partitioned factor contribution corresponding to a partitioning group, each partitioned factor contribution being computed as a sum of a product of an investment asset weight for an asset in the partitioning group, an original factor exposure, and an original factor return;
computing an aggregated summary of factor contributions over the time horizon;
tabulating a ranked listing by contribution for the partitioned factor contributions for each date to facilitate user selection of one or more partitioned factor contributions to be neutralized;
and
electronically outputting the aggregated partitioned factor contributions.

7 more elements

Dependencies are inferred from the claim text.

Facts

Application: 16/552,129Filed 27 Aug 2019
Priority: 24 Sep 2014
Published: 2 Jan 2020
Term ends: Not estimatedThe source records don’t support an estimate.

Classification3 codes

G06Q 40/06
Finance; Insurance; Tax strategies; Processing of corporate or income taxes: asset management; Financial planning or analysis
G06Q 40/04
Finance; Insurance; Tax strategies; Processing of corporate or income taxes: trading; Exchange, e.g. stocks, commodities, derivatives or currency…
G06Q
Information and communication technology [ict] specially adapted for administrative, commercial, financial, managerial

Family

Application14/495,470Continuation · filed 24 Sep 2014
Application16/552,129Continuation
US 2016/0086278 A1Published application
US 2020/0005396 A1This patent

From the US filing history. Foreign family members aren’t listed.

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