W. P. Carey School of Business PROCESS FUNDAMENTAL PROCESS - - PowerPoint PPT Presentation

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W. P. Carey School of Business PROCESS FUNDAMENTAL PROCESS - - PowerPoint PPT Presentation

Nov 11, 2022 110 likes •386 views

Undergraduate Undergraduate SIM F SIM F SIM Fund SIM Fund d d Student Investment Management Student Investment Management Fund Fund INTRODUCTION INTRODUCTION INTRODUCTION QUANTITATIVE QUANTITATIVE W. P. Carey School of Business

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SLIDE 1

Undergraduate Undergraduate SIM F d SIM F d SIM Fund SIM Fund

Student Investment Management Student Investment Management Fund Fund

INTRODUCTION QUANTITATIVE INTRODUCTION INTRODUCTION QUANTITATIVE PROCESS FUNDAMENTAL PROCESS

  • W. P. Carey School of Business

INVESTMENT SELECTION FUND PERFORMANCE

Undergraduate Fund

PERFORMANCE ATTRIBUTION ANALYSIS

Semi-Annual Meeting

December 3rd, 2010

CONCLUSION APPENDICES

1

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SLIDE 2

Undergraduate Undergraduate SIM F d SIM F d SIM Fund SIM Fund

Student Investment Management Student Investment Management Fund Fund

Today’s Agenda

INTRODUCTION QUANTITATIVE

Today s Agenda

  • Team introduction & fund objectives

INTRODUCTION INTRODUCTION QUANTITATIVE PROCESS FUNDAMENTAL PROCESS

j

  • Investment selection
  • Fund performance

INVESTMENT SELECTION FUND PERFORMANCE

  • Risk and return attribution
  • Lessons learned & conclusion

PERFORMANCE ATTRIBUTION ANALYSIS CONCLUSION APPENDICES

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SLIDE 3

Undergraduate Undergraduate SIM F d SIM F d SIM Fund SIM Fund

Student Investment Management Student Investment Management Fund Fund

T

INTRODUCTION QUANTITATIVE INTRODUCTION INTRODUCTION

Team

Fundamental Analysts Fund Manager

QUANTITATIVE PROCESS FUNDAMENTAL PROCESS

y Tom Bochenko Fund Manager Tyler Rives Jay Joshi

INVESTMENT SELECTION FUND PERFORMANCE

Quantitative Analysts R b Hill Michael Cohn Vincent Mendez

PERFORMANCE ATTRIBUTION ANALYSIS

Rob Hill Ryan Detlaff Nate Irwin Dan Tram

CONCLUSION APPENDICES

Ryan Detlaff Steven Kutos Cole Jackson

3

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SLIDE 4

Undergraduate Undergraduate SIM F d SIM F d SIM Fund SIM Fund

Student Investment Management Student Investment Management Fund Fund

Investment Charter

INTRODUCTION QUANTITATIVE

Investment Charter

  • Long term focus

INTRODUCTION INTRODUCTION QUANTITATIVE PROCESS FUNDAMENTAL PROCESS

g

  • Portfolio constraints

INVESTMENT SELECTION FUND PERFORMANCE

  • ≤ 95% Equity (up to 25% in Foreign Equity)
  • ≤ 20% Fixed Income

0% C h

PERFORMANCE ATTRIBUTION ANALYSIS

  • ≤ 10% Cash
  • ≤ 25% in a single sector
  • ≤ 15% i i

l U S G i

CONCLUSION APPENDICES

  • ≤ 15% in a single non U.S. Gov. issuer

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SLIDE 5

Undergraduate Undergraduate SIM F d SIM F d SIM Fund SIM Fund

Student Investment Management Student Investment Management Fund Fund

D fi i h P bl

INTRODUCTION QUANTITATIVE

Defining the Problem

Ch t t i t

INTRODUCTION INTRODUCTION QUANTITATIVE PROCESS FUNDAMENTAL PROCESS

  • Charter constraints
  • Quantitative and fundamental

INVESTMENT SELECTION FUND PERFORMANCE

analysis

  • Optimization methods

PERFORMANCE ATTRIBUTION ANALYSIS

  • Optimization methods

CONCLUSION APPENDICES

Our Solution: Asset Allocation

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SLIDE 6

Undergraduate Undergraduate SIM F d SIM F d SIM Fund SIM Fund

Student Investment Management Student Investment Management Fund Fund

INTRODUCTION QUANTITATIVE QUANTITATIVE QUANTITATIVE PROCESS FUNDAMENTAL PROCESS

Quantitative Process

QUANTITATIVE PROCESS INVESTMENT SELECTION FUND PERFORMANCE

MVO|Black-Litterman

PERFORMANCE ATTRIBUTION ANALYSIS CONCLUSION APPENDICES

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SLIDE 7

Undergraduate Undergraduate SIM F d SIM F d SIM Fund SIM Fund

Student Investment Management Student Investment Management Fund Fund

INTRODUCTION QUANTITATIVE QUANTITATIVE QUANTITATIVE PROCESS FUNDAMENTAL PROCESS

Constrained MVO

Data

QUANTITATIVE PROCESS INVESTMENT SELECTION FUND PERFORMANCE PERFORMANCE ATTRIBUTION ANALYSIS

FI Ex-US US

CONCLUSION APPENDICES

7

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SLIDE 8

Undergraduate Undergraduate SIM F d SIM F d SIM Fund SIM Fund

Student Investment Management Student Investment Management Fund Fund

Mean Variance Optimization

INTRODUCTION QUANTITATIVE

Mean Variance Optimization

Constraints/Inputs

QUANTITATIVE QUANTITATIVE PROCESS FUNDAMENTAL PROCESS

Asset Class Cash Fixed Income Ex-US Equity US Equity

QUANTITATIVE PROCESS INVESTMENT SELECTION FUND PERFORMANCE

Constraint (1st)

1% 20% 25% 95%

PERFORMANCE ATTRIBUTION ANALYSIS

R

Inputs

CONCLUSION APPENDICES

Returns

  • Historical vs. Expected
  • Rolling Betas

Risk

  • Volatility
  • Correlations – 7 years

8

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SLIDE 9

Undergraduate Undergraduate SIM F d SIM F d SIM Fund SIM Fund

Student Investment Management Student Investment Management Fund Fund

Unconstrained Constraine

INTRODUCTION QUANTITATIVE QUANTITATIVE

d

QUANTITATIVE PROCESS FUNDAMENTAL PROCESS QUANTITATIVE PROCESS

rn

INVESTMENT SELECTION FUND PERFORMANCE

Risk Retur

PERFORMANCE ATTRIBUTION ANALYSIS

Asset Allocation Weights

CONCLUSION APPENDICES

Cash Fixed Income Ex-US Equity US Equity

1.00% 16.35% 21.06% 61.59%

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SLIDE 10

Undergraduate Undergraduate SIM F d SIM F d SIM Fund SIM Fund

Student Investment Management Student Investment Management Fund Fund

INTRODUCTION QUANTITATIVE

Current U.S. Equity Market Weights

QUANTITATIVE

Constrained MVO Data

QUANTITATIVE PROCESS FUNDAMENTAL PROCESS QUANTITATIVE PROCESS

FI Ex-US US

INVESTMENT SELECTION FUND PERFORMANCE PERFORMANCE ATTRIBUTION ANALYSIS CONCLUSION APPENDICES

10

*as of 9/30/10

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SLIDE 11

Undergraduate Undergraduate SIM F d SIM F d SIM Fund SIM Fund

Student Investment Management Student Investment Management Fund Fund

INTRODUCTION QUANTITATIVE

FI Ex-US US

QUANTITATIVE QUANTITATIVE PROCESS FUNDAMENTAL PROCESS QUANTITATIVE PROCESS INVESTMENT SELECTION FUND PERFORMANCE

Black- Litt

Fundamental Analysis

Data

PERFORMANCE ATTRIBUTION ANALYSIS

Litterman

Analysis

Data

CONCLUSION APPENDICES

Sector Weights

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SLIDE 12

Undergraduate Undergraduate SIM F d SIM F d SIM Fund SIM Fund

Student Investment Management Student Investment Management Fund Fund

Black-Litterman Results

INTRODUCTION QUANTITATIVE

Black-Litterman Results

QUANTITATIVE QUANTITATIVE PROCESS FUNDAMENTAL PROCESS 15% 20% QUANTITATIVE PROCESS INVESTMENT SELECTION FUND PERFORMANCE 10% PERFORMANCE ATTRIBUTION ANALYSIS 0% 5% CONCLUSION APPENDICES

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Market Weights B-L Weights

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SLIDE 13

Undergraduate Undergraduate SIM F d SIM F d SIM Fund SIM Fund

Student Investment Management Student Investment Management Fund Fund

INTRODUCTION QUANTITATIVE QUANTITATIVE PROCESS FUNDAMENTAL PROCESS

Fundamental Process

FUNDAMENTAL PROCESS INVESTMENT SELECTION FUND PERFORMANCE

Industry Analysis

PERFORMANCE ATTRIBUTION ANALYSIS CONCLUSION APPENDICES

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SLIDE 14

Undergraduate Undergraduate SIM F d SIM F d SIM Fund SIM Fund

Student Investment Management Student Investment Management Fund Fund

Industry Analysis

INTRODUCTION QUANTITATIVE

Industry Analysis

Industry overview

QUANTITATIVE PROCESS FUNDAMENTAL PROCESS

y

─ Current position of each sector ─ Composition

FUNDAMENTAL PROCESS INVESTMENT SELECTION FUND PERFORMANCE

Fundamental analysis

─ Historical returns and volatility M i t

PERFORMANCE ATTRIBUTION ANALYSIS

─ Macroeconomic events ─ Sector drivers

CONCLUSION APPENDICES

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SLIDE 15

Undergraduate Undergraduate SIM F d SIM F d SIM Fund SIM Fund

Student Investment Management Student Investment Management Fund Fund

Fundamental Example Financials

INTRODUCTION QUANTITATIVE

Fundamental Example – Financials

  • Macro events: regulation banking restrictions

QUANTITATIVE PROCESS FUNDAMENTAL PROCESS FUNDAMENTAL PROCESS

  • Macro events: regulation, banking restrictions
  • Drivers: rate of recovery unemployment real

INVESTMENT SELECTION FUND PERFORMANCE

  • Drivers: rate of recovery, unemployment, real

estate prices, vacancies and supply

PERFORMANCE ATTRIBUTION ANALYSIS

  • Decision: underweight relative to market

– 9/30/10 Market holds 16.00%

CONCLUSION APPENDICES

9/30/10 Market holds 16.00% – SIMF target weight 5.96%

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SLIDE 16

Undergraduate Undergraduate SIM F d SIM F d SIM Fund SIM Fund

Student Investment Management Student Investment Management Fund Fund

INTRODUCTION QUANTITATIVE QUANTITATIVE PROCESS FUNDAMENTAL PROCESS

Investment Selection

INVESTMENT SELECTION FUND PERFORMANCE INVESTMENT SELECTION PERFORMANCE ATTRIBUTION ANALYSIS CONCLUSION APPENDICES

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SLIDE 17

Undergraduate Undergraduate SIM F d SIM F d SIM Fund SIM Fund

Student Investment Management Student Investment Management Fund Fund

ETF S l i

INTRODUCTION QUANTITATIVE

ETF Selection

General Considerations

Sector Ticker

QUANTITATIVE PROCESS FUNDAMENTAL PROCESS

General Considerations

  • Holdings overlap
  • Expense ratio

Consumer Discretionary XLY Con Staples VDC Energy VDE

INVESTMENT SELECTION FUND PERFORMANCE

Expense ratio

  • Tracking error
  • Composition

Li idi Energy VDE Financials XLF Healthcare VHT

INVESTMENT SELECTION PERFORMANCE ATTRIBUTION ANALYSIS

  • Liquidity

Industrials VIS Technology XLK

CONCLUSION APPENDICES

Utilities XLU Ex-Us VFWIX Fi d I IPE

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Fixed Income IPE

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SLIDE 18

Undergraduate Undergraduate SIM F d SIM F d SIM Fund SIM Fund

Student Investment Management Student Investment Management Fund Fund

Fixed Income

INTRODUCTION QUANTITATIVE

Fixed Income

Ch t t i ti

QUANTITATIVE PROCESS FUNDAMENTAL PROCESS

  • Charter restrictions
  • Breakeven inflation from TIPS

INVESTMENT SELECTION FUND PERFORMANCE

  • Breakeven inflation from TIPS
  • Long-term inflation → TIPS

INVESTMENT SELECTION PERFORMANCE ATTRIBUTION ANALYSIS

Long term inflation → TIPS

  • TIPS negative yield

CONCLUSION APPENDICES

g y

  • IPE in lieu of TIP

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SLIDE 19

Undergraduate Undergraduate SIM F d SIM F d SIM Fund SIM Fund

Student Investment Management Student Investment Management Fund Fund

INTRODUCTION QUANTITATIVE QUANTITATIVE PROCESS FUNDAMENTAL PROCESS

Fund Performance

INVESTMENT SELECTION FUND PERFORMANCE FUND PERFORMANCE PERFORMANCE ATTRIBUTION ANALYSIS PERFORMANCE CONCLUSION APPENDICES

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SLIDE 20

Undergraduate Undergraduate SIM F d SIM F d SIM Fund SIM Fund

Student Investment Management Student Investment Management Fund Fund

H ldi

INTRODUCTION QUANTITATIVE

Holdings

Sector Ticker Weight

QUANTITATIVE PROCESS FUNDAMENTAL PROCESS

Consumer Discretionary XLY 9.77% Con Staples VDC 12.64% E VDE 8 00%

INVESTMENT SELECTION FUND PERFORMANCE

Energy VDE 8.00% Financials XLF 3.52% Healthcare VHT 9.57%

FUND PERFORMANCE PERFORMANCE ATTRIBUTION ANALYSIS

ea t ca e V 9.57% Industrials VIS 2.57% Technology XLK 12.63%

PERFORMANCE CONCLUSION APPENDICES

Utilities XLU 3.35% Ex-Us VFWIX 21.27% TIPS (Fi d I ) IPE 15 72%

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TIPS (Fixed Income) IPE 15.72%

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SLIDE 21

Undergraduate Undergraduate SIM F d SIM F d SIM Fund SIM Fund

Student Investment Management Student Investment Management Fund Fund

Benchmarks

INTRODUCTION QUANTITATIVE

Benchmarks

  • MSCI World Equity Index

QUANTITATIVE PROCESS FUNDAMENTAL PROCESS

q y

  • S&P 500 US Index
  • Composite Index

INVESTMENT SELECTION FUND PERFORMANCE

  • 60% US Equity
  • 25% Ex-US Equity

% S G d b

FUND PERFORMANCE PERFORMANCE ATTRIBUTION ANALYSIS

  • 14% US Investment Grade Debt
  • 1% Cash

PERFORMANCE CONCLUSION APPENDICES

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SLIDE 22

Undergraduate Undergraduate SIM F d SIM F d SIM Fund SIM Fund

Student Investment Management Student Investment Management Fund Fund

Fund Performance

INTRODUCTION QUANTITATIVE

Fund Performance

6.00%

QUANTITATIVE PROCESS FUNDAMENTAL PROCESS

4.00% 5.00%

INVESTMENT SELECTION FUND PERFORMANCE FUND PERFORMANCE

3.00%

PERFORMANCE ATTRIBUTION ANALYSIS PERFORMANCE

1.00% 2.00%

CONCLUSION APPENDICES

  • 1.00%

0.00% Undergrad Constraint S&P 500 MSCI World

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Undergrad Constraint S&P 500 MSCI World

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SLIDE 23

Undergraduate Undergraduate SIM F d SIM F d SIM Fund SIM Fund

Student Investment Management Student Investment Management Fund Fund

Fund Performance

INTRODUCTION QUANTITATIVE

Fund Performance

QUANTITATIVE PROCESS FUNDAMENTAL PROCESS

Over Holding Period Annualized Volatility Sharpe Ratio Undergraduates 1.37% 9.44% 13.46% .252

INVESTMENT SELECTION FUND PERFORMANCE

Constrained BM 1.25% 8.58% 13.76% .231 S&P 500 2.54% 18.08% 15.28% .462

FUND PERFORMANCE PERFORMANCE ATTRIBUTION ANALYSIS

S& 500 .5 % 8.08%

  • 5. 8%

. 6 World Equity 0.42% 2.8% 16.37% .069

PERFORMANCE CONCLUSION APPENDICES

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SLIDE 24

Undergraduate Undergraduate SIM F d SIM F d SIM Fund SIM Fund

Student Investment Management Student Investment Management Fund Fund

INTRODUCTION QUANTITATIVE QUANTITATIVE PROCESS FUNDAMENTAL PROCESS

Attribution Analysis

INVESTMENT SELECTION FUND PERFORMANCE PERFORMANCE ATTRIBUTION ANALYSIS ATTRIBUTION ANALYSIS CONCLUSION APPENDICES

24

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SLIDE 25

Undergraduate Undergraduate SIM F d SIM F d SIM Fund SIM Fund

Student Investment Management Student Investment Management Fund Fund

Risk Analysis

INTRODUCTION QUANTITATIVE

Risk Analysis

Con Discretionary

Return vs. Volatility (Bubble Size Represents Weight in Portfolio)

QUANTITATIVE PROCESS FUNDAMENTAL PROCESS

12.00% 15.00%

Con Staples Energy Financials INVESTMENT SELECTION FUND PERFORMANCE

6 00% 9.00%

Healthcare Industrials Technology Utiliti

Return

PERFORMANCE ATTRIBUTION ANALYSIS ATTRIBUTION ANALYSIS

S&P 500 3.00% 6.00%

Utilities Ex US TIPS Fund Cash

R

CONCLUSION APPENDICES

SIMF Constraint MSCI World 3 00% 0.00%

  • 2.00%

2.00% 6.00% 10.00% 14.00% 18.00% 22.00% 26.00%

Cash SIMF Constraint S&P 500

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  • 3.00%

MSCI World

Volatility

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SLIDE 26

Undergraduate Undergraduate SIM F d SIM F d SIM Fund SIM Fund

Student Investment Management Student Investment Management Fund Fund

Going Forward

INTRODUCTION QUANTITATIVE

Going Forward

  • Continual monitoring of risk

QUANTITATIVE PROCESS FUNDAMENTAL PROCESS

g

  • Monthly attribution framework
  • Rebalance as necessary to match opinions

INVESTMENT SELECTION FUND PERFORMANCE

  • Improve
  • IPE and liquidity

PERFORMANCE ATTRIBUTION ANALYSIS CONCLUSION APPENDICES CONCLUSION

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