Understandable Artificial Intelligence

Overview

Analyzing investment manager's style/behavior over time

Broad EDS investment manager's behavior analysis capabilites

Specific examples:

EDS was given two equity fund managers by a UK pension fund: Emerging Markets and Global. The goal was to find changes in managers' investment behavior using only fund returns

Generally, EDS tool provides more conclusive results using historical holdings

Manager Exposure Over Time

EDS software provides several key benefits:

Quantitative metrics to better analyze fund managers
Ability to compare managers across multiple categories
Freedom to choose any metrics across any time frame

Broad EDS Software Capabilities

Manager Churn Over Time

*Data from EDS, St. James's Place, & Bloomberg, courtesy of London Business School

Manager Beta Exposure

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

Manager Beta Exposure - Detailed

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

Manager Trading Betas

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

Specific Analysis

Emerging Markets Equity Manager

Several changes in exposure:
- Increased exposure to metals
- Lower Systemic risk
- Lower Trade exposure
- Increased exposure to EM consumer prices
- Lower exposure to Industrial Production

Emerging Markets Equity Manager

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

Emerging Markets Equity Manager

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

Emerging Markets Equity Manager

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

Emerging Markets Equity Manager

Less conclusive metrics:
- Market Factors
- Retail Sales
- Construction Spending
- Consumer Prices

Emerging Markets Equity Manager

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

Emerging Markets Equity Manager

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

EM Over Bench

Similar results when reviewed vs. bench:
- Higher Systemic risk
- Increaed exposure to metals
- Lower exposure to Industrial Production and Retail Sales

EM Over Bench

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

EM Over Bench

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

Global Fund Manager

Overall exposures appear to move closer to the bench

Key conclusions:
- Higher Systemic Risk
- Higher exposure to metals
- Smaller exposure to Industrial Production
- Little exposure to other metrics

Global Fund Manager

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

Global Fund Manager vs Bench

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

Disclaimers

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.

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