Axioma acquired the risk model and performance attribution components of Goldman Sachs Asset Managementâs Portfolio Analytics and Construction Environment (PACE) in 2005.
âThis acquisition provided Axioma with a proven, thoroughly researched foundation on which to build its new Robust Risk Model. This model brings three significant innovations to the marketplace: methodological transparency, the patent-pending Axioma Alpha Factorâ¢ and fully updated daily risk estimates,â said Sebastian Ceria, chief executive officer of Axioma. âNo other risk models on the market today offer this combination of state-of-the-art features designed to satisfy the needs of such a broad range of clients, from quantitative to fundamental.â
The transparency of Axiomaâs risk model provides a clear definition of both the model risk factors and how they are computed. This departure from conventional âblack boxâ approaches gives clients greater insight into their sources of risk because the model factors are known precisely.
Axiomaâs risk model also incorporates the Axioma Alpha Factorâ¢, Axiomaâs patent-pending approach that significantly improves risk forecasts of factor risk models. Using the Axioma Alpha Factor mitigates the effects of risk underestimation, a common problem that occurs when risk models are used to build optimized portfolios.
âWhile the transparency of our risk model allows clients to âseeâ the factors that are influencing returns, the Axioma Alpha Factor improves the quality of risk
forecasts by including an additional factor that is dependent on the clientâs portfolio and investment strategy,â said Daniel Cashion, president of Axioma. âWe are confident that Axiomaâs Alpha Factor-equipped Robust Risk Model provides superior risk estimates under the broadest range of market conditions.â
Axiomaâs Robust Risk Model is enhanced by daily estimation of all risk estimates. Most risk models offered in the marketplace are estimated on a monthly basis, resulting in unintuitive and hard-to-explain jumps in predicted volatility each month. Noted Cashion, âIf portfolio performance is monitored daily, risk should be, too. Daily updates result in smoother and timelier estimates of portfolio risk.â
Axiomaâs Robust Risk Model seamlessly integrates into Axioma Portfolioâ¢, the companyâs innovative risk analysis and portfolio rebalancing software. While Axiomaâs commitment to open-platform flexibility allows any risk model to be used in conjunction with Axioma Portfolio, the use of Axiomaâs Robust Risk Model greatly simplifies the implementation process and improves the overall performance of the investment strategy.
The launch of Axiomaâs Robust Risk Model is a major milestone for the company. To support its rapid growth, Axioma recently relocated to new headquarters in New Yorkâs Wall Street area. Axioma also has offices in Atlanta, Hong Kong, San Francisco, and Singapore.