Bond Multi Factor
Improved analytical methodology based on changes in the concept of Return/Risk on bonds
Existing: Analyzing Return / risk of sector / maturity → Focusing on changes in interest rate structure and spreads by credit ratings
Using Key Rate Duration
It is possible to measure not only parallel movement of interest rates, also possible to measure spread movement, curvature and change of specific bond section movement and movement of all interest rate structures.
Consistency to the various portfolio analysis
- Analyze by bottom up method which is sum of decomposition results for each items
- Gives consistency to various portfolio analysis
Easy comparison between the bond indices and the portfolios
- Capability of interpreting bond index as a single bond item by sum of decomposition results for each items in the index.
- Simplified comparison between the portfolio and the index
Capability
Analysis of the investment product and Portfolio style
- Factor Exposure comparison between portfolio and Bond-Index
- Ability to identify/ differentiate investment management style
Portfolio Risk Management
- Calculate the variability of factor return by each factor
- Estimation of variability of excess return compared to the index (Ex-ante risk)
- Portfolio performance risk management with expected distribution of excess returns
- By analyzing the variability of excess returns by factor, preemptive risk management is possible
Portfolio performance Analysis
- Analyze the source of performance by dividing the profit during the operating period By decomposing each factor of the returns able to display source of the performances
- Existing Performance Analysis
- Bond / maturity breakdown is the main analytical structure
- Existence of a gap between the actual investment decision-making process
- Factors that contributes to returns can be analyzed (realistic comparison between actual performance and performance analysis)
Reporting and Optimization Portfolio Configuration
- Consistent analysis of the entire process (management style, performance, and risk) based on Factor
- Objective and reasonable bond management report possible
- Factor Optimized portfolio composition can be achieved by placing constrains on the