Axioma Rolls Out Enhanced US Equity Risk Models


Axioma – Axioma, a provider of innovative risk and portfolio management solutions, launched the latest version of its US Equity risk models (“US4”), which offers improved methodologies and enhanced style factors for its fundamental and statistical models. Axioma regularly rolls out enhancements to its models, ensuring that clients have access to the most valuable suite of model capabilities and options needed to respond to the growing challenges in risk management and portfolio construction.

Axioma is also now offering its Custom Risk Models as a Service. This will allow clients to work with Axioma’s experienced and highly credentialed research team to develop custom risk models that cater to their unique investment needs.

“As more and more market participants begin leveraging model customization options, Axioma provides the appropriate balance between state-of-the-art standard risk models and custom solutions that cater to clients’ unique investment strategies,” said Chris Canova, Global Head of Equity Solutions at Axioma. “The enhancements rolled out with US4 will allow our clients to gain a more accurate picture of how their strategies perform.”

Axioma’s US Equity risk models offer:

  • Multiple views of risk – fundamental, statistical and macroeconomic models
  • Multiple horizons – enables distinction between short and longer-term trends
  • Customization options via Risk Model Machine
  • Custom Risk Models as a Service
  • Coupled with the leading optimization and analytics platform, Axioma Portfolio

Axioma is the only provider of macro, fundamental and statistical models. Where statistical models are more beneficial for portfolio construction, fundamental models are better suited to helping decompose performance.  By offering all three model types, Axioma helps front and middle office functions at buy-side firms align their view of risk in a constantly evolving and increasingly complex environment.

Axioma incorporated client feedback in the development of the new US equity models, which include the following updates.

US4 Fundamental:

  • Additional factors – new profitability and midcap factors yield more informative and intuitive results
  • Improvement to the quality and stability of exposures
  • New methodology –  improves estimated factor return properties for superior attribution results
  • Inclusion of the 2016 Global Industry Classification Standard (GICS®) structure that came into effect on Sept. 1, 2016

US4 Statistical:

  • New outlier detection methodology for estimating factor returns

“As a global systematic manager, we have researched and published on the interaction of multiple risk models with our investment process and found Axioma to be the best fit. We appreciate the support provided by Axioma in integrating their risk models into our portfolio construction process and their continuous enhancements to their risk models,” said Sundaram Chettiappan, McKinley Capital Management. “The newly enhanced Profitability factor and the separation of the Book-to-Price based Value factor and Earnings Yield factor in the fundamental risk model resonates with our investment process and enables us to clearly delineate risks and attribute returns from our loadings on those factors.”

A key update to be rolled out for US4 is the advanced Risk Model Machine functionality, which will enable the creation of factor-mimicking portfolios that allow intraday monitoring of risk factors. This will help managers to dig deeper into the performance of custom factors for improved attribution and risk forecasting, an especially important feature in times of market volatility.

“The marketplace is very demanding. It wants to integrate functionally richer portfolio construction tools with risk management systems, have the combined benefits of off-the-shelf modelling products and customization services as well as more sophisticated factor modelling to exploit and survive the new investment climate. Axioma’s new product and services release puts them at the forefront of answering these needs and is further extending and enriching their buy-side offerings,” said Hugh Stewart, Research Director at Chartis Research.

US4 is the first of Axioma’s next generation risk models, with plans for new global, regional and single country equity models to follow.


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