Stress-Testing Capabilities and New Macroeconomic Model Strengthen Axioma Portfolio Analytics v 7.6

New York - 4 March 2014

Axioma, a leading provider of advanced tools for risk management and portfolio construction, today announced the launch of Axioma Portfolio Analytics v 7.6, with enhanced stress-testing capabilities and access to Axioma’s new US Macroeconomic Equity Factor Risk Model, giving users an unprecedented array of options for portfolio analysis. 

“The new capabilities in 7.6 open doors to a whole new range of choices for risk analysis and performance attribution,” said Mark Cushey, Director of Product Management. “Using 7.6 in conjunction with our new Macroeconomic Model allows clients to approach their investment process with more information and insight, resulting in both improved understanding of the sources of portfolio returns and better control over risk exposures.”

With the introduction of Axioma’s new US Macroeconomic Model, users of Axioma Portfolio Analytics can now choose from four risk-model variants: macroeconomic, statistical, fundamental or custom, such as those generated by Axioma’s Risk Model Machine. Having access to multiple risk models gives users the ability to “triangulate” their risk analysis for more accurate insights.

The stress-testing features in Axioma Portfolio Analytics v 7.6 allow users to evaluate the performance of their portfolios during historical periods of stress, such as the collapse of Lehman Brothers in 2008 or the US credit downgrade in 2011. Users can also define their own situations, including forward-looking stress-tests aimed at evaluating the performance of their portfolios given defined macroeconomic volatility in particular market sectors.

“The combination of 7.6 with our new Macroeconomic Model gives you the ability to shock a factor and see the impact of credit spreads, for example, or the effects of a drop in GDP growth rates,” added Cushey. “Not only can you see the impact on the portfolio itself, but you can drill down and see which individual stocks are driving the changes.”

Users can also analyze exposures relative to a particular benchmark to determine, for example, if a portfolio is sufficiently diversified or more exposed to a particular factor than the benchmark.

In Axioma’s new US Macroeconomic Model, equity risk is explained by economic factors that drive the equity markets, such as economic growth rates, inflation, interest rates, credit spreads, oil prices, and other economic indicators. The model covers over 8,800 securities (over 18,700 historically) listed on various U.S. stock exchanges, including American Depository Receipts (ADRs). The model also covers more than 250 ETFs and more than 300 EIF contracts, including all assets covered by Axioma’s AXUS3 Fundamental and Statistical models. Shocking a factor from Axioma’s US Macroeconomic Model allows for stress testing that utilizes a true robust economic risk model and is more transparent than other approaches that append macroeconomic factors to a fundamental risk model covariance matrix.

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