The tools combine R-Squared’s range of equity risk models with PRISM, the firm’s proprietary Portfolio Risk Management and risk-adjusted Performance Attribution system. The new risk models incorporate the most recent techniques of the principals of R-Square Risk Management for minimizing estimation error and generating better portfolio risk forecasts.
A variety of geographic regions are covered, including Europe, the U.S., global developed markets and global emerging markets, and are available in different base currencies.
Portfolio managers can use these models to distinguish their deliberate factor tilts from any unintended risks in their portfolios, according to Jason MacQueen, founder of R-Squared Risk Management Ltd. “They can also be used to determine the sensitivity of their portfolios to a wide variety of macroeconomic variables and currency risks,” he said. “By including a small number of statistical factors, we ensure that there is no missing systematic risk, thereby giving managers more accurate forecasts of portfolio risk and tracking error.”
The R-Squared Risk Solutions provide a standard set of Risk Reports, which can be customized to highlight the more relevant results for managers and investors, including a summary, portfolio risk decomposition by holdings and portfolio risk decomposition by factors. Users can run risk-adjusted performance attribution analyses to identify consistent sources of performance in their portfolios over time, and may also identify the number and size of the truly Independent bets in a portfolio.
The goal of R-Squared is to help managers improve investment performance by ensuring that their portfolio selection skills are harnessed efficiently by aligning risk with expected return and eliminating unwanted risk.