Intro
FACTOR RISK MODELS DESIGNED FOR ALLOCATORS

Risk models are not much use to allocators
.

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FACTOR RISK MODELS DESIGNED FOR ALLOCATORS

Risk models are not much use to allocators
unless you can offset the exposures you don't want

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FACTOR RISK MODELS DESIGNED FOR ALLOCATORS

It's interesting to see how momentum or turnover
contributed to performance, but ...

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FACTOR RISK MODELS DESIGNED FOR ALLOCATORS

if you can'tdo anything about those exposures,
how does it help?

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FACTOR RISK MODELS: THE NEXT GENERATION

Asset
Owners

Detect statistically significant evidence of security-selection skill that is likely to persist.

Avoid funds taking too little active risk to ever overcome fees… even with skill.

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Investment Consultants

Offset risk from unintended market exposures with ETFs or better fund combinations.

Avoid closet-indexing the aggregate portfolio.

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Asset
Managers

Identify and offset unintentional systematic risk exposures that can overwhelm skill.

Identify key contributors to idiosyncratic risk.

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Wealth
Managers

Win and retain more business with superior manager selection,  oversight, and risk management capabilities that high net worth clients value.

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We’re fortunate in some wonderful clients, including:

Equity Risk Models Designed for Asset Owners

We differ from conventional risk models in that all of our factors are available as passive ETFs.

For allocators, this makes a world of difference.   For the first time, allocators can:

Separate return due to security selection from return due to unintentional passive risk exposures…. and reveal skill. Offset the unintended passive exposures that can overwhelm skill.   Identify the one-third of funds taking too little active risk to ever compensate for fees.   Ensure the aggregate portfolio has no hidden risk exposures.

The Problem with Performance Evaluation

The conventional approach to evaluating past performance does not tell us anything useful about the future.

Performance evaluation is useful only if it can lead to actionable insights.

How ESG Overlays Lead to Unintended Market Bets

ESG constraints can create unintentional systematic exposures within equity portfolios. Once identified and measured, these exposures are easily managed.

Factor Risk Models Designed for Allocators

New passive factor risk models distinguish between performance due to security selection and that due to unintended passively-available market exposures that differ with those of the benchmark, detect security-selection skill likely to persist, and revolutionize risk management.

Manager Selection: The Quixotic Search for Skill

Active skill exists …. but it is challenging to detect reliably and, even when present, decays over time.

Together with Beacon Pointe Insurance Consulting Services

Risk Models for Insurance Companies

DFA/ALM Models

Cloud-based, user-friendly, transparent, flexible yet robust, stochastic asset-liability models designed to be easily vetted.

DFA Peer Company Risk Analysis

Asset-liability modeling of both client company and individual peer company’s surplus and net income risk postures.      Provides added insight into that most critical investment decision: How much surplus risk can we tolerate?