Take a closer look at risk.
Equity portfolio risk analysis by Causeway Analytics
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The risk conundrum.
Investors have a justifiably complicated relationship with risk. The top risk contributors are the primary generators of potential returns, yet represent the greatest portfolio vulnerabilities.
Managing risk is integral to successful portfolio management, but risks, especially at the portfolio level, are difficult to observe.
A better way to appraise risk?
To manage risk, investors need a reliable tool that provides deep insights into their equity portfolios’ risk exposures.
How is your investment manager “spending” your portfolio’s risk budget? Is your investment manager pursuing a strategy “true to label”? And, how does your manager’s strategy complement or replicate other strategies?
A powerful tool
Providing insights into portfolio risk and performance.
The Risk Lens
Risk Lens is a risk analysis tool provided by Causeway Analytics and Causeway Capital Management LLC. It can be used by an investor to confirm, or refute, that managers are indeed pursuing the strategy advertised. It can allow the investor to determine the relative magnitude of portfolio risks and identify potential sources of excessive concentration (to specific stocks, countries, sectors, currencies, or styles).
These analytics are effective in highlighting similarities and differences among multiple portfolios, permitting investors to make timely assessments of which portfolios best complement each other and which are the closest substitutes.
Risk Lens is designed to provide investors with transparency into the specific factors a manager or strategy is most heavily exploiting at the portfolio level. It is also useful in identifying the risks critical to producing returns and forecasting the management regimes in which a strategy may succeed or underperform.
How does Risk Lens assess sources of volatility?
It begins with our proprietary risk algorithm…
We start by identifying systematic sources of risk. All multi-factor risk models involve analyzing factor returns, a portfolio’s risk exposures and the returns attributable to these risks. Our proprietary risk model includes factor categories and idiosyncratic risks not captured by the common factor categories.
Then we connect the dots…
Once we know the weight of all positions in a portfolio, we can aggregate the risk factors of individual stocks across the entire portfolio. From there, we can examine the contributions of individual stocks, factors, and factor groups to total volatility and tracking error (volatility relative to a benchmark).
How do I get started?
Ready to go? Use the form below to send up to 12 equity mutual fund tickers and a benchmark index. Or, let us know if you would prefer to submit actual portfolio holdings and weights and we will contact you to obtain the data. That’s it!
Use this form to request a Risk Lens or for more information.
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Over our 17-year history managing equities, Causeway has relied on our in-house quantitative capabilities to augment our investment research. As longstanding members of our research team, our quantitative analysts provide an incisive, nuanced understanding of portfolio risk that is integral to the equity strategies we manage. Via Causeway Analytics, we are sharing some of our most perceptive proprietary tools with institutional investors.
Causeway Capital Management LLC is an employee owned investment management firm based in Los Angeles, California, specializing in managing global, international, emerging market and absolute return equities. Our clients include corporations, pension plans, sovereign wealth funds, superannuation funds, public retirement plans, Taft-Hartley pension plans, endowments and foundations, mutual funds and other collective investment vehicles, charities, private trusts and funds, wrap fee programs, and other institutions, and are located around the world.
We invest in major equity markets spanning the U.S., international, and emerging markets. A comprehensive research department of fundamental and quantitative analysts supports our global equity strategies, available through separate accounts and commingled vehicles and managed with a team approach by our portfolio managers. We believe that our fusion of fundamental and quantitative research gives us a global knowledge advantage, which we put to work for our clients.