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Portfolio Optimization is used to create the alternative asset mixes to be evaluated. Investment Plus supports the full range of capabilities from traditional mean-variance optimization to more advanced methods using non-traditional risk measures. The results clearly illustrate the detailed characteristics for each portfolio.
Investment Plus is often used to perform standard mean/variance Portfolio Optimization. Many other alternative methods are also available. The Portfolio Optimization can be performed over any time horizon, it can be inflation-adjusted, and it can be denominated in any one of 15 base currencies. Portfolio Optimization methods include:
- Mean/Variance Optimization.
The standard Modern Portfolio Theory approach pioneered by Markowitz for computing optimal portfolios.
- Leveraged Optimization. Find the optimal level of borrowing against the portfolio.
- Surplus Optimization. Compute the optimal portfolios against a benchmark such as pension liabilities.
- Below Target Probability and Average Shortfall Probability. Find portfolios which minimize the risk of falling below a certain target rate of return.
- Currency Overlay Analysis. Calculate the optimal degree of currency hedging.
- Below Target Risk. Use the widely-publicized Below Target Risk (Downside Risk) measure to develop optimal portfolios.
Choose any optimal portfolios you want to view. You are not limited to a certain number of pre-selected portfolios. Choose any points on the Efficient Frontier graph by pointing and clicking with your mouse. You will be able to interactively view the pie chart for the desired portfolio. Try several different "what-if" scenarios easily and efficiently with Investment Plus. This feature makes Investment Plus ideal for on-line presentations to an investment committee. The results of an Investment Plus portfolio analysis provide the following information:
- Portfolio Characteristics. Complete information on the composition of each portfolio, expected return, risk, yield and Sharpe ratio.
- Return Distributions. The expected range of returns for each portfolio over five alternative user-specified time horizons and percentiles.
- Asset Projections. The expected growth in assets over the projection period using the starting value for the actual portfolio being analyzed.
- Target Return Probabilities. The probability of exceeding or falling short of three alternative user-specified target rates of return.
- Present Portfolio Comparisons. All of the Portfolio Optimization results can be shown relative to the allocation and dollar value of the actual portfolio being analyzed.
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