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1 Private & Confidential A Growing, Broad, Global Market Institutional Clients: Pension Funds, Endowments & Insurance Cos. Central Banks and Social Security.

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Presentation on theme: "1 Private & Confidential A Growing, Broad, Global Market Institutional Clients: Pension Funds, Endowments & Insurance Cos. Central Banks and Social Security."— Presentation transcript:

1 1 Private & Confidential A Growing, Broad, Global Market Institutional Clients: Pension Funds, Endowments & Insurance Cos. Central Banks and Social Security Systems Retail: Private Wealth Management Investment Managers: Hedge Funds and Fund of Funds Asset Management Companies Trillions of dollars in assets – not always effectively managed

2 2 Private & Confidential 1. Key to Success – Effective Decisions Good management = must make many decisions well Must make these decisions in an informed manner Process, transparency and governance are critical AlphaEngine: Bring state-of-the-art to investors desktop Measure Risk Evaluate Performance Outperform Benchmark Determine Benchmark Set Objectives Annual Daily Monthly

3 3 Private & Confidential 1. Portfolio =Many Decisions Asset Allocation Sector/ Regional Style Selection Manager Selection Cash/ Currency = 20% Equity = 40% By Market (Local, US etc.) Large Stocks/ Small Stocks By Market (Local, US, Euro) Govt./Agency etc. Bonds = 40% P o r t f o l i o Mgr A Mgr B Mgr C Mgr D Mgr E Mgr F Bank 1 for Deposits Bank 2 for Deposits

4 4 Private & Confidential AlphaEngine - Features AlphaEngine TM facilitates optimal portfolio construction: Asset allocation: Tactical Asset Allocation process at the total fund level Style/Sector/Market allocation strategy within an asset class Evaluating of rebalancing relative to other alternatives Implement risk budgeting framework to improve returns for a given portfolio risk. Improve manager allocations/manage cash flows relative to static manager allocations.

5 5 Private & Confidential Ensure Decisions Generate Returns Excess Return = 0.5% Total Excess = 2% Local Bonds Foreign bonds Mortgage/ Corporate Government Bonds Total Portfolio EquitiesCurrency Cash 1-mo LIBOR Asset allocation strategy Country allocation strategy Sector allocation strategy + + Manager Excess Return = 0.5% + Internal/External Managers

6 6 Private & Confidential Local Bonds Foreign bonds Mortgage/ Corporate Government Bonds Total Portfolio EquitiesCurrency Cash 1-mo LIBOR Naïve Rebalancing Let Portfolio Drift Sector allocation strategy Internal/External Managers Use Attribution to Improve Decisions Excess Return = 0.5% Excess Return = - 0.5% Total Excess = 0% + Manager Excess Return = 0.5% + Too much focus on manager selection

7 7 Private & Confidential Rules: Convert Ideas into Good Process Good decisions add returns and reduce risk Rule Criteria: IF (( Price of Gold Today > Price of Gold a Year Ago )) THEN Allocate more to Cash ELSEIF (( Price of Gold Today < Price of Gold a Year Ago )) THEN Allocate less to Cash ELSE Do Nothing Investment Idea: Cash vs Bonds: Apparently, the price of gold is a good indicator of whether funds should be invested in cash or higher duration assets (bonds). Rising gold prices are good for cash relative to bonds. Performance Statistics: Excess Annualized Return: 0.61% Risk: 0.94% Information Ratio: 0.65 Max Drawdown: -1.24% on 3/31/1999 Success Ratio: 61.1% Confidence in Skill: 97.95% Example: *Purely hypothetical example and not an investment recommendation

8 8 Private & Confidential Deliver Detailed Reports Through Web Performance Measures Benchmark Strategy Return % Cum. Return % Risk % Return / Risk Ratio Excess

9 9 Private & Confidential PortRate – Under Development Customize analysis to clients objectives Evaluates performance of funds/managers on multiple metrics and combinations Clients can: Rate and select individual funds/managers Create fund-of-funds Manage dynamic manager allocations (with AlphaEngine ) Optimize fund manager selection


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