Risk premia

FACTOR EXPOSURE ANALYSIS

Our factor exposure reports enable portfolio and risk managers to quickly identify factor exposures in their portfolios and see if any factor tilts have worked for or against them in terms of performance. All major factors and equity markets are covered and reporting is offered on daily, weekly or monthly basis. The reports include the following:

 

  • Factor exposure of the portfolio, either bottom up (stock-based) or top-down (regression-based)
  • Recent factor performance
  • Factor correlation matrices
  • Top and bottom stocks for each factor in the portfolio

SELECTED EXAMPLES FROM FACTOR EXPOSURE ANALYSIS

The analysis below shows the tilts of a portfolio for all the major factors aggregated from stock level. The chart highlights that the portfolio has tilts towards nearly all factors, some positive and some negative, although no exposure is extreme, e.g. there is a tilt towards Value, which would be reflected in lower multiples of the portfolio compared to a benchmark.

FACTOR EXPOSURE ANALYSIS (STOCK-BASED)

Factor Exposure Analysis (Stock-Based)

Once the factor exposure has highlighted any factor tilts it’s interesting to review the most recent factor performance, i.e. has the factor tilt generated positive or negative returns for the portfolio. The report also includes correlation matrices, highlighting any risks of having highly correlated factor exposure in the portfolio.

FACTOR PERFORMANCE TODAY

Factor Performance Today

The chart below highlights factor exposure based on regressing the portfolio returns against the factors, where also other factors such as currencies or interest rates can be added. In this example we can observe that the portfolio returns are mainly explained by the index, i.e. the portfolio represents a long-only portfolio, and some factors, e.g. Growth.

FACTOR LOADING (REGRESSION-BASED)

Factor Loading (Regression-Based)

In addition to factor analysis the reports also includes analytics to identify any other risks, either for the portfolio on a stand-alone basis or compared to a benchmark. Standard features are breakdowns by sector and geography. A high degree of customisation is possible.

RISK ANALYTICS: BREAKDOWN BY SECTOR

Breakdown by Sector

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