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Posted: Wednesday, August 26, 2015

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Active Is as Active Does: Wading Into the Active-Share Debate

Active Is as Active Does: Wading Into the Active-Share DebateAn increasing proportion of asset owners and investment consultants require managers to report the active share of their portfolios. Active share as a concept was introduced to the investment community in a
2009 paper by Cremers and Petajisto. It is a metric that presumes to measure how active a portfolio is. The underlying idea is that the closer a manager is to his or her benchmark, the smaller the degree of potential outperformance, and therefore the less likely that fees can be justified (or the more likely the manager is a closet indexer). But is active share the right measure for achieving this worthy objective?

Posted: Tuesday, August 18, 2015

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Adjusted Factor-Based Performance Attribution

Adjusted Factor-Based Performance AttributionFactor-based performance attribution is ubiquitously employed in the asset management industry as a way to both understand and assess the management of a portfolio. Unfortunately, this attribution analysis can fail to tell the whole story. One reason is a strong correlation between the factor and specific return contributions that leads to potentially erroneous attributions. This correlation stems from a “misspecification” of the returns model and causes the factors to over- or under-explain the returns of a given portfolio. With the trend towards “smart beta”, and factor-investing in general, this correlation is becoming more pervasive and accounting for it is critical when analyzing the return contributions of such factor-based strategies. We propose an adjusted factor-based performance attribution methodology that shifts the portion of the asset-specific contribution that is correlated with the factor contributions back into the factor portion. The resulting factor and specific contributions have near-zero correlation leading to factor contributions that do not over- or under-explain the returns of a portfolio. From a practical perspective, we find that the proposed methodology generally results in attributions that are more intuitive and provide stronger support of factor-based investment mandates.

Posted: Tuesday, August 11, 2015

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SEB Implements Axioma Risk™ as Its Global Enterprise-Wide Risk Management Platform

NEW YORK, August 11—Axioma announced today that Skandinaviska Enskilda Banken AB (SEB), one of the largest financial institutions in northern Europe with more than €180 billion in assets under management, has completed the implementation of Axioma Risk, the innovative multi-asset class risk-management platform launched by Axioma in 2013.

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Posted: Thursday, August 6, 2015

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A huge part of Nasdaq risk comes from six stocks

A huge part of Nasdaq risk comes from six stocks

Apple’s stock has seen a rough summer, dropping from 123 to 114 in just a couple of weeks. As its volatility has been increasing, the tech giant’s effect on the broader Nasdaq 100 index is also growing. Those numbers are from Axioma.

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Posted: Wednesday, August 5, 2015

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SEB’s Implementation of Axioma Risk

SEB's Implementation of Axioma Risk

We have now put in place one of the most sophisticated risk systems in the world,” says Hans Johnsson, Head of Risk Control - Wealth Management, for Skandinaviska Enskilda Banken AB (SEB). In this case study, Axioma examines SEB’s implementation of Axioma Risk™, the global, SEB’s Implementation of Axioma Riskenterprise-wide multi-asset class risk management system that unifies the front and middle offices.

“Before Axioma Risk, the investment managers were looking at risk in one way and the risk-control people were looking at it in another way,” adds Rikard Andersson, Asset Class Head - Equities. “We now have one common system, with everyone talking about risk using the same numbers and looking at those numbers in the same system. And that has really moved us forward, not only in terms of knowledge, but in terms of cooperation within the organization itself.”

Axioma Case Study No. 002

Posted: Wednesday, July 29, 2015

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The Only Six Stocks That Matter — from a Risk Perspective

The Only Six Stocks That Matter--from a Risk PerspectiveA recent Wall Street Journal article (The Only Six Stocks That Matter, July 27) described the impact of six stocks on the strong performance of the Nasdaq Composite Index this year. In this research brief, Axioma puts those same stocks under the risk microscope. Not only did their risk change more than other stocks in the benchmark, but it increased more than their weights. What does this mean for the overall risk of the benchmark and can index risk give us a clue about the index•s future direction?

Posted: Tuesday, July 28, 2015

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The 2015 Tech 50: Racers to the Edge

The 2015 Tech 50: Racers to the Edge

For the second year running, Axioma’s CEO Sebastian Ceria was included in Institutional Investor’s Tech 50.

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Posted: Sunday, July 19, 2015

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Tradability Versus Performance: The Role of Liquidity in Minimum Variance Smart Beta Products

Tradability Versus Performance: The Role of Liquidity in Minimum Variance Smart Beta ProductsLow-volatility themed strategies have been among the most popular “smart beta” index products introduced in recent years, and minimum variance in particular has become a widely adopted approach to implementing low-volatility exposure. In the following analysis, we consider to what extent is the “theoretical” low risk of these strategies driven by illiquidity masquerading as low volatility? Do returns of minimum variance strategies encapsulate some form of liquidity premium in addition to the outperformance of low risk stocks? And, if there is a tendency to tilt towards smaller and less liquid stocks, what can be done to ensure tradability of minimum variance portfolios?
Journal of Index Investing

Posted: Thursday, July 16, 2015

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Axioma’s D’Assier on Greece, China, U.S. Rate Risks

Axioma’s D’Assier on Greece, China, U.S. Rate RisksOlivier d’Assier talked about potential Greek crisis fallout, the Chinese stock selloff, and higher U.S. rates with Rishaad Salamat on Bloomberg Television’s
“Trending Business.”

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Posted: Wednesday, July 15, 2015

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Risk Pops in the Second Quarter as Issues In China and Greece Fray Investors’ Nerves

But North American Benchmarks Refuse to Be Spooked, according to Axioma Quarterly Risk Report

NEW YORK, July 15, 2015 – Market risk surged in the second quarter, driven by angst over China’s market plunge, the off-again/on-again Greek bailout, and a sharp increase in bond volatility. In contrast, energy prices stabilized, lowering the oil sector’s volatility, according to a report released today by Axioma, Inc. Read more…