Portfolio Analytics

Our portfolio analytics service uses the history of a fund’s holdings, longs and shorts, to empirically assess decision making. To do that we analyze the portfolio’s position-weighted exposures to our stock selection models and to the key factors that make them up. We believe the frameworks we employ are systematic sources of alpha, so there is a right and wrong answer to each question. That’s very different from off-the-shelf risk models that can identify exposures to a plethora of factors but say little about whether those exposures are desirable.

We also examine exposures to other factors that aren’t necessarily prescriptive in character yet help us tell the story. Those include arbitrage risk, that quantifies the controversy surrounding each stock, and our fundamental stability score, that measures the volatility of the key financial metrics.

When evaluating a fund we compare its characteristics to those of its benchmark as well as to those of a peer group of like funds. Two examples based on our free cash flow yield framework and our growth stock selection models are shown below.

We believe that there is much to be learned by studying the decisions that were made and see this analytical exercise as consultative in nature. In the end we’re trying to help portfolio managers skew the odds in their favor.

Value Mutual Fund:  Free Cash Flow Yield.

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Growth Mutual Fund vs Empirical Growth Model.

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