Fund Exposure Explanation
Gain insights into performance drivers of hedge funds, absolute return funds, alternative funds and investments which do not report holdings.
Fund Exposure Explanation
Gain insights into performance drivers of hedge funds, absolute return funds, alternative funds and investments which do not report holdings. Fund Exposure Explanation facilitates assessing fees, transparency and liquidity. It represents the first step in the search for alternative sources of exposure.
Fund Exposure Process
The process to explain returns begins with the objectives of a model. One important question to answer is if the model should be investable or not. Most investment managers would first attempt to understand a manager from several angles before deciding if its payoff should be replicated. Answers to these and other questions help defining the universe available to our algorithms. Model expectations on accuracy, frequency and prior knowledge also play an important role as they bound the problem even further.
The actual explanation technique can be based on indices or single line instruments depending on information availability and objectives. We have developed two main tools for such purpose called Index-Basex Exposure Explanation (IEE) and the Lookthrough-Based Exposure Explanation (LEE). IEE and LEE are by nature not investable yet they represent the initial step for an investable solution which is built using Fund Cloner (FC).
Index-Based Exposure Explanation (IEE)
IEE’s primary objective is to fund what drives fund returns. IEE is made up of a main algorithm and a comprehensive database of indices, factors and investment styles. IEE’s algorithm combines simulation, optimization and regression systems who concurrently work to find a solution. Its parameterization is linked to the objectives and restrictions of the model and a pre-defined output called the IEE Book provides an easy way to compare results.
Lookthrough-Based Exposure Explanation (LEE)
LEE is an extension of IEE where a search at a single line takes place. Currently STS database contains more than 6000 indices with the respective members and weights historically.
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*Free consultation call available to sophisticated investors only. Portfolio must be in excess of 20M USD.