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Multi-Asset Class Portfolio Construction White Paper

Learn how FactSet's various optimization methods support your portfolio construction strategies

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A growing number of investment managers today regard the function of enterprise risk management systems
as moving above and beyond simple compliance and into the heart of the investment process itself. Risk models are no longer simply used to monitor risk but actually drive portfolio construction and performance. Multi-Asset Class portfolio construction is a multi-faceted task that first requires an appropriate choice of a risk-return model, and subsequent optimization to optimize the risk-return tradeoff.

In this paper, we cover:

  • The FactSet Linear MAC risk model and how it is integrated with the mean-variance framework to form the Parametric Approach of MAC portfolio
  • Our Scenario-Based Approach in the context of the Fat-Tailed MAC
    model, a major and powerful component of our scenario simulation engine. By imposing a suitable measure of risk, namely the Expected Tail Loss measure, the scenario-based optimization for a single period can
    be formulated as a linear program and thus solved effectively by large-scale linear solvers.
  • Examples that demonstrate the proposed optimization capabilities

Download the Multi-Asset Class Portfolio Construction white paper for a detailed review of FactSet's different optimization approaches.

Download the White Paper