PROCESS W. P. Carey School of Business · 2018-10-10 · PROCESS W. P. Carey School of Business INVESTMENT SELECTION FUND PERFORMANCE ... Fund Manager Fundamental Anal ysts PROCESS

UndergraduateUndergraduateSIM F dSIM F dSIM FundSIM Fund

Student Investment Management Student Investment Management FundFund

INTRODUCTION

QUANTITATIVE

INTRODUCTIONINTRODUCTION

QUANTITATIVEPROCESS

FUNDAMENTALPROCESS

W. P. Carey School of BusinessINVESTMENTSELECTION

FUNDPERFORMANCE

Undergraduate FundPERFORMANCE

ATTRIBUTIONANALYSIS

Semi-Annual MeetingDecember 3rd, 2010

CONCLUSION

APPENDICES

1



Today’s AgendaINTRODUCTION

QUANTITATIVE

Today s Agenda

• Team introduction & fund objectivesINTRODUCTIONINTRODUCTION

QUANTITATIVEPROCESS

FUNDAMENTALPROCESS

j• Investment selection• Fund performance

INVESTMENTSELECTION

FUNDPERFORMANCE

• Risk and return attribution• Lessons learned & conclusion

PERFORMANCE

ATTRIBUTIONANALYSIS

CONCLUSION

APPENDICES

2



T INTRODUCTION

QUANTITATIVE


Team

Fundamental AnalystsFund ManagerQUANTITATIVEPROCESS

FUNDAMENTALPROCESS

y

Tom Bochenko

Fund Manager

Tyler RivesJay Joshi

INVESTMENTSELECTION

FUNDPERFORMANCE

Quantitative Analysts

R b HillMichael Cohn Vincent Mendez

PERFORMANCE

ATTRIBUTIONANALYSIS

Rob Hill

Ryan DetlaffNate Irwin Dan Tram

CONCLUSION

APPENDICES

Ryan Detlaff

Steven KutosCole Jackson

3



Investment CharterINTRODUCTION

QUANTITATIVE

Investment Charter

• Long term focusINTRODUCTIONINTRODUCTION

QUANTITATIVEPROCESS

FUNDAMENTALPROCESS

g• Portfolio constraints

INVESTMENTSELECTION

FUNDPERFORMANCE

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

0% C hPERFORMANCE

ATTRIBUTIONANALYSIS

• ≤ 10% Cash• ≤ 25% in a single sector• ≤ 15% i i l U S G iCONCLUSION

APPENDICES

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

4



D fi i h P blINTRODUCTION

QUANTITATIVE

Defining the Problem

Ch t t i t


QUANTITATIVEPROCESS

FUNDAMENTALPROCESS

• Charter constraints

• Quantitative and fundamental INVESTMENTSELECTION

FUNDPERFORMANCE

analysis

• Optimization methodsPERFORMANCE

ATTRIBUTIONANALYSIS

• Optimization methods

CONCLUSION

APPENDICES

Our Solution: Asset Allocation

5



INTRODUCTION

QUANTITATIVEQUANTITATIVEQUANTITATIVEPROCESS

FUNDAMENTALPROCESS

Quantitative ProcessQUANTITATIVE

PROCESS

INVESTMENTSELECTION

FUNDPERFORMANCE

MVO|Black-LittermanPERFORMANCE

ATTRIBUTIONANALYSIS

CONCLUSION

APPENDICES

6



INTRODUCTION

QUANTITATIVEQUANTITATIVEQUANTITATIVEPROCESS

FUNDAMENTALPROCESS

Constrained MVO Data

QUANTITATIVEPROCESS

INVESTMENTSELECTION

FUNDPERFORMANCEPERFORMANCE

ATTRIBUTIONANALYSIS FI Ex-US US

CONCLUSION

APPENDICES

77



Mean Variance OptimizationINTRODUCTION

QUANTITATIVE

Mean Variance OptimizationConstraints/Inputs

QUANTITATIVEQUANTITATIVEPROCESS

FUNDAMENTALPROCESS

Asset Class Cash Fixed Income

Ex-US Equity

US Equity

QUANTITATIVEPROCESS

INVESTMENTSELECTION

FUNDPERFORMANCE

Constraint(1st)

1% 20% 25% 95%

PERFORMANCE

ATTRIBUTIONANALYSIS

R

InputsCONCLUSION

APPENDICES

Returns• Historical vs. Expected

• Rolling Betas

Risk•Volatility

• Correlations – 7 years

88



Unconstrained ConstraineINTRODUCTION

QUANTITATIVEQUANTITATIVE

d

QUANTITATIVEPROCESS

FUNDAMENTALPROCESS

QUANTITATIVEPROCESS

rn

INVESTMENTSELECTION

FUNDPERFORMANCE

Risk

Ret

ur

PERFORMANCE

ATTRIBUTIONANALYSIS

Asset Allocation WeightsCONCLUSION

APPENDICES

Cash Fixed Income Ex-USEquity

US Equity

1.00% 16.35% 21.06% 61.59%

9



INTRODUCTION

QUANTITATIVE

Current U.S. Equity Market Weights

QUANTITATIVE

Constrained MVO Data

QUANTITATIVEPROCESS

FUNDAMENTALPROCESS

QUANTITATIVEPROCESS

FI Ex-US US

INVESTMENTSELECTION


ATTRIBUTIONANALYSIS

CONCLUSION

APPENDICES

10*as of 9/30/10



INTRODUCTION

QUANTITATIVE

FI Ex-US US


FUNDAMENTALPROCESS

QUANTITATIVEPROCESS

INVESTMENTSELECTION

FUNDPERFORMANCE

Black-Litt

Fundamental Analysis DataPERFORMANCE

ATTRIBUTIONANALYSIS

LittermanAnalysis Data

CONCLUSION

APPENDICES

Sector Weights

11



Black-Litterman ResultsINTRODUCTION

QUANTITATIVE

Black-Litterman Results


FUNDAMENTALPROCESS 15%

20%QUANTITATIVE

PROCESS

INVESTMENTSELECTION

FUNDPERFORMANCE

10%

PERFORMANCE

ATTRIBUTIONANALYSIS

0%

5%

CONCLUSION

APPENDICES

12Market Weights B-L Weights



INTRODUCTION


FUNDAMENTALPROCESS

Fundamental ProcessFUNDAMENTAL

PROCESS

INVESTMENTSELECTION

FUNDPERFORMANCE

Industry AnalysisPERFORMANCE

ATTRIBUTIONANALYSIS

CONCLUSION

APPENDICES

13



Industry AnalysisINTRODUCTION

QUANTITATIVE

Industry Analysis

Industry overviewQUANTITATIVE

PROCESS

FUNDAMENTALPROCESS

y─ Current position of each sector─ CompositionFUNDAMENTAL

PROCESS

INVESTMENTSELECTION

FUNDPERFORMANCE

Fundamental analysis─ Historical returns and volatility

M i tPERFORMANCE

ATTRIBUTIONANALYSIS

─ Macroeconomic events─ Sector drivers

CONCLUSION

APPENDICES

14



Fundamental Example FinancialsINTRODUCTION

QUANTITATIVE

Fundamental Example – Financials

• Macro events: regulation banking restrictionsQUANTITATIVEPROCESS

FUNDAMENTALPROCESS

FUNDAMENTALPROCESS

• Macro events: regulation, banking restrictions

• Drivers: rate of recovery unemployment real INVESTMENTSELECTION

FUNDPERFORMANCE

• Drivers: rate of recovery, unemployment, real estate prices, vacancies and supply

PERFORMANCE

ATTRIBUTIONANALYSIS

• 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%

15



INTRODUCTION


FUNDAMENTALPROCESS

Investment SelectionINVESTMENTSELECTION

FUNDPERFORMANCE

INVESTMENT SELECTION

PERFORMANCE

ATTRIBUTIONANALYSIS

CONCLUSION

APPENDICES

16



ETF S l iINTRODUCTION

QUANTITATIVE

ETF Selection

General ConsiderationsSector Ticker

QUANTITATIVEPROCESS

FUNDAMENTALPROCESS

General Considerations

• Holdings overlap• Expense ratio

Consumer Discretionary XLY

Con Staples VDC

Energy VDEINVESTMENTSELECTION

FUNDPERFORMANCE

Expense ratio• Tracking error• Composition

Li idi

Energy VDE

Financials XLF

Healthcare VHT


PERFORMANCE

ATTRIBUTIONANALYSIS

• LiquidityIndustrials VIS

Technology XLKCONCLUSION

APPENDICES

Utilities XLU

Ex-Us VFWIX

Fi d I IPE17

Fixed Income IPE



Fixed IncomeINTRODUCTION

QUANTITATIVE

Fixed Income

Ch t t i tiQUANTITATIVEPROCESS

FUNDAMENTALPROCESS

• Charter restrictions

• Breakeven inflation from TIPSINVESTMENTSELECTION

FUNDPERFORMANCE

• Breakeven inflation from TIPS

• Long-term inflation → TIPS


PERFORMANCE

ATTRIBUTIONANALYSIS

Long term inflation → TIPS

• TIPS negative yieldCONCLUSION

APPENDICES

g y

• IPE in lieu of TIP

18



INTRODUCTION


FUNDAMENTALPROCESS

Fund PerformanceINVESTMENTSELECTION

FUNDPERFORMANCE

FUND PERFORMANCEPERFORMANCE

ATTRIBUTIONANALYSIS

PERFORMANCE

CONCLUSION

APPENDICES

19



H ldiINTRODUCTION

QUANTITATIVE

HoldingsSector Ticker Weight

QUANTITATIVEPROCESS

FUNDAMENTALPROCESS

Consumer Discretionary XLY 9.77%

Con Staples VDC 12.64%

E VDE 8 00%INVESTMENTSELECTION

FUNDPERFORMANCE

Energy VDE 8.00%

Financials XLF 3.52%

Healthcare VHT 9.57%FUND PERFORMANCEPERFORMANCE

ATTRIBUTIONANALYSIS

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%20

TIPS (Fixed Income) IPE 15.72%



BenchmarksINTRODUCTION

QUANTITATIVE

Benchmarks

• MSCI World Equity IndexQUANTITATIVE

PROCESS

FUNDAMENTALPROCESS

q y• S&P 500 US Index• Composite Index

INVESTMENTSELECTION

FUNDPERFORMANCE

• 60% US Equity• 25% Ex-US Equity

% S G d bFUND

PERFORMANCEPERFORMANCE

ATTRIBUTIONANALYSIS

• 14% US Investment Grade Debt• 1% Cash

PERFORMANCE

CONCLUSION

APPENDICES

21



Fund PerformanceINTRODUCTION

QUANTITATIVE

Fund Performance

6.00%QUANTITATIVE

PROCESS

FUNDAMENTALPROCESS

4.00%

5.00%

INVESTMENTSELECTION

FUNDPERFORMANCE

FUND PERFORMANCE

3.00%

PERFORMANCE

ATTRIBUTIONANALYSIS

PERFORMANCE

1.00%

2.00%

CONCLUSION

APPENDICES -1.00%

0.00%

Undergrad Constraint S&P 500 MSCI World

22

Undergrad Constraint S&P 500 MSCI World



Fund PerformanceINTRODUCTION

QUANTITATIVE

Fund Performance

QUANTITATIVEPROCESS

FUNDAMENTALPROCESS

Over Holding Period

Annualized Volatility Sharpe Ratio

Undergraduates 1.37% 9.44% 13.46% .252

INVESTMENTSELECTION

FUNDPERFORMANCE

Constrained BM 1.25% 8.58% 13.76% .231

S&P 500 2.54% 18.08% 15.28% .462FUND PERFORMANCEPERFORMANCE

ATTRIBUTIONANALYSIS

S& 500 .5 % 8.08% 5. 8% . 6

World Equity 0.42% 2.8% 16.37% .069

PERFORMANCE

CONCLUSION

APPENDICES

23



INTRODUCTION


FUNDAMENTALPROCESS

Attribution AnalysisINVESTMENTSELECTION


ATTRIBUTIONANALYSIS

ATTRIBUTIONANALYSIS

CONCLUSION

APPENDICES

24



Risk AnalysisINTRODUCTION

QUANTITATIVE

Risk Analysis

Con Discretionary

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

QUANTITATIVEPROCESS

FUNDAMENTALPROCESS 12.00%

15.00%Con Staples

Energy

Financials

INVESTMENTSELECTION

FUNDPERFORMANCE 6 00%

9.00%

Healthcare

Industrials

Technology

UtilitiRet

urn

PERFORMANCE

ATTRIBUTIONANALYSIS

ATTRIBUTIONANALYSIS

S&P 5003.00%

6.00% Utilities

Ex US

TIPS Fund

Cash

R

CONCLUSION

APPENDICES

SIMF

ConstraintMSCI 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

25

-3.00%MSCI WorldVolatility



Going ForwardINTRODUCTION

QUANTITATIVE

Going Forward

• Continual monitoring of riskQUANTITATIVE

PROCESS

FUNDAMENTALPROCESS

g• Monthly attribution framework • Rebalance as necessary to match opinions

INVESTMENTSELECTION

FUNDPERFORMANCE

• Improve• IPE and liquidity

PERFORMANCE

ATTRIBUTIONANALYSIS

CONCLUSION

APPENDICES

CONCLUSION

26

Documents

PROCESS W. P. Carey School of Business · 2018-10-10 · PROCESS W. P. Carey School of Business INVESTMENT SELECTION FUND PERFORMANCE ... Fund Manager Fundamental Anal ysts PROCESS