Understandable Artificial Intelligence

Overview

©2018 Economic Data Sciences

Analyzing factor exposures of funds

EDS tool was provided with a portfolio of funds with the goal to analyze each fund's exposures



The goal of the exercise was to make sure that each fund manager provided the exposures that they were meant to



  • We provided a point-in-time analysis, although exposure over time is possible as well

  • Any desired metric can be added/subtracted from the list

Analysis Stages

©2018 Economic Data Sciences

Analyzing factor exposures of funds

The analysis included 3 steps:
  1. Stand-alone exposures of 3 funds in the portfolio
  2. Aligning funds based on expected alpha and risk
  3. Comparing funds on each metric
  • Analysis is driven by historical returns
    • Historical holdings could increase accuracy
  • Alpha expectations and active risk for each fund

TwentyFour Dynamic Bond Fund

  • Goals: attractive income with opportunity for capital growth
  • Dividend yield provides a 131bps boost
  • However, U.S. interest rates detract 2%

©2018 Economic Data Sciences

*Data from EDS & Bloomberg, courtesy of London Business School

Schroders U.K. Property

  • Goals: mixed property around the U.K., blend of capital and growth
  • Quantifiable exposure to metals
  • The largest exposure of the fund is to European interest rates

©2018 Economic Data Sciences

*Data from EDS & Bloomberg, courtesy of London Business School

AQR True Styles

  • Goals: exposure to value, momentum, carry and defensive through hedges
  • Fund has little momentum or value exposure
  • Large exposure to U.S. interest rates - not meant to have

©2018 Economic Data Sciences

*Data from EDS & Bloomberg, courtesy of London Business School

Funds Alpha and Active Risk

  • BMO Global Absolute Return has highest alpha expectatios
  • M&G Alpha Opportunities has the lowest alpha expectations

©2018 Economic Data Sciences

*Data from EDS & Bloomberg, courtesy of London Business School

Factor Exposure For Each Fund

European Construction Spending

©2018 Economic Data Sciences

*Data from EDS & Bloomberg, courtesy of London Business School

European Consumer Prices

  • U.K. Property Debt Investments Fund leading the way
  • Alpha Opportunities Fund is at the low end
  • Some results could be slightly skewed due to short history

©2018 Economic Data Sciences

*Data from EDS & Bloomberg, courtesy of London Business School

Momentum

  • AQR Global Risk Premium Fund has the highest exposure

©2018 Economic Data Sciences

*Data from EDS & Bloomberg, courtesy of London Business School

Disclaimers

©2018 Economic Data Sciences

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this presentation, will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for an individual's portfolio.

Our projections are based on current market conditions which can vary over the coming months and weeks. Additionally, our projections are based on historical market behavior which may vary unexpectedly. Using Machine Learning, our tool should adjust to new market fluctuations but we might not be able to avoid short term volatility.

Get In Touch

©2018 Economic Data Sciences

info@EconomicDataSciences.com

www.EconomicDataSciences.com

info@EconomicDataSciences.com

Fund factor exposures

By Economic Data Sciences

Fund factor exposures

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