Attribution


Traditional financial models address attribution as a formal exercise. They decompose active return into formally defined elements that are only vaguely related to economic questions and then assign these terms suggestive names like Sector Allocation, Currency Allocation or Stock Selection.

Opturo, instead, clearly formulates the precise economic questions which decision evaluation intends to address, for example, the effect of Allocation or Selection, and then rigorously calculates their answers. Other performance systems employ plausible definitions for single period sector allocation and issue selection based upon an arithmetic or geometric version of a Brinson model for evaluating portfolio construction decisions. Some then find they need to include a single-period interaction effect that does not correspond to any investment decision.

Opturo Decision Risk Attribution allows users to analyze the relationship between alpha creation and risk. Opturo goes considerably further than other models by providing the contribution of each decision in the bespoke decision tree toward the creation of each risk characteristic. Thus, not only will one have the information ratio or volatility for a portfolio, but along with the degree to which each decision contributed to the active return of your portfolio, you will see the amount that same decision contributed to the creation of the information ratio or active volatility. For the first time you will be able to do a risk/reward analysis for each decision in the investment process that constructed your portfolio.

Many attribution models also address currency decisions. Some correctly take to heart the insight of Karnosky and Singer who, in 1994, were the first to make the point that any valid investment decision must actually be able to be instantiated in a portfolio investment strategy. This requires incorporating local risk free rates in any country/currency decision set. Since Karnosky and Singer only provided a solution for a single-period attribution analysis and only to first order in returns, few have been able to properly generalize their results. Opturo’s attribution system addresses the fullest range of investment decisions, including all those discussed above. However, none of the mentioned or other common cogency problems arises in Opturo’s approach to either arithmetic or geometric attribution, since Opturo always deliberately constructs each and every attribution value as the exact answer to a well-formed economic question.

The Opturo Advantage


Advanced Brinson Fachler

Andre Mirabelli, PhD, Director of Peformance Analytics, has been developing and building attribution models for over two decades. Opturo’s Advanced Brinson Fachler model for decision attribution is the culmination and realization of Dr. Mirabelli’s vision and research.

Accurate Attribution

Opturo offers exact attribution roll-ups while eliminating all Interaction Terms and issues with Temporal Smoothing. Top and bottom decision effects can be identified and tracked in order to ascertain which real-world investment decisions are adding and detracting alpha.

Customized Attribution

Opturo’s decision attribution provides economically meaningful analysis in which each term is a precise answer to a clear financial question. Decision trees can be built on-the-fly and customized to accurately reflect portfolio managers’ actual investment processes. Decisions can be based upon continuous variables and avoid ad-hoc boundaries.

Multi-Asset

Attribution analysis can be conducted using separate decision branches for different asset classes. For example, a uniform analysis bifurcating the independent decision branches for a balanced strategy owning both equity and fixed income securities.

Multi-Factor Attribution

Opturo integrates to all third-party (Northfield®, Barra®, APT®, etc.) and in-house factor-based Risk or Attribution Models, and can analyze factor attribution according to multiple models. Opturo introduces the industry's first multi-factor attribution product using transaction-based performance measurement to generate the most accurate and reliable factor attribution results.

Fixed Income Attribution

Opturo can incorporate any fixed income characteristics (key rate curves etc.) to conduct return decomposition analysis and/or market-differentiation analysis relative to a benchmark. Our return decomposition methodology analyses a portfolio's return in terms of the set variables chosen by the user, while our market-differentiation analysis explains the differences between a fund and its benchmark in terms of the variation among market returns.

Key Benefits


Implementation

Opturo’s various analytical solutions can be implemented in a fraction of the time of competing systems, as we leverage each client’s unique infrastructure. Data formatting, replication and synchronization issues can be minimized or eliminated with an Opturo implementation.

Meaningful Analytics

Gain a competitive advantage by deploying analytics which reflect your investment professionals’ actual decision making processes. Restrictive “black box” analytics can be a thing of the past when you use Opturo’s pioneering marriage of enterprise data management with innovative analytics.

Speed and Scalability

Opturo’s innovative architecture provides clients with a platform which can be scaled to meet the needs and scope of any project. Whether leveraging significant proprietary data infrastructure or going to the cloud, Opturo can help the largest enterprises address their big data challenges.

Advanced Reporting

Opturo offers clients the industry’s most robust suite of reporting and visualization tools. Transparent data and model calculations allow cascading time series drill-down visualization. Clients are provided the tools to create custom reports themselves, or they can leverage our professional staff to assist.

Flexible Customization

Is your infrastructure robust enough to meet the challenges and opportunities the future may present? Opturo offers our clients a modular platform which is inherently flexible and able to respond to emergent trends and requirements, whether it be for data management, reporting or analytical needs.

Cloud or Local Deployment

Opturo can be deployed in the cloud or within a client’s existing infrastructure. Opturo is agnostic and works with each client to insure a deployment that makes the most sense for each client’s business priorities, whether they are regulatory-driven or business model preference.