Implementing systematic indices requires both technical expertise in portfolio construction and a strong understanding of investment strategies. Axioma’s portfolio-construction software and risk models help managers create effective index-based solutions.
Axioma partners with leading index providers to deliver systematic index products that incorporate our risk modeling and portfolio-construction expertise. We develop tradable factor and risk-based indices to meet a variety of asset-management needs.
- Tradable factor and risk-based indices
- Efficient way for asset managers and investors to better match returns with a specific systematic approach
- Appropriate for asset managers or investors seeking to implement systematic beta strategies
- Can serve as the basis for ETF or structured products
- Partnerships with leading index providers, including Russell, CSI and STOXX
- Partnerships with asset managers and investment banks
- Utilizes Axioma factor risk models
- Highly customized to your specific investment parameters
Where Have All the Utilities Gone? Financials Now Dominate a Crowded Low Vol World
Since mid-2012, the allocation to the Financials sector in typical low volatility portfolios has doubled in most markets and is now the largest sector allocation. At the same time, allocations to utilities and consumer staples have decreased substantially. The resulting portfolios may be so concentrated in Financials that managing the resulting exposures is difficult.
Tradability versus Performance: The Role of Liquidity in Minimum Variance Smart Beta Products
Low 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. Axioma researchers consider to what extent the "theoretical" low risk of these strategies is 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?
Demystifying Low Volatility Strategies
Choosing a suitable low-volatility product can be a daunting task. Apart from the sheer number of choices, different providers employ different methodologies to capture the systematic sources of return common to low volatility stocks. Approaches range from simple rules-based selection screens to those involving more mathematical tools. This study differentiates the various methods of creating low volatility portfolios and describes the risk and return implications of each.
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