What am I doing now
I have been working for close to two years now at Fabric. It’s been a very interesting two years, as one would expect at a startup. Some of the things I have worked on during my time here:
Developed and implemented an agent-based model for the broad equity market. We currently use this model for simulating the long-term behavior of an investment portfolio. You may read more about the motivation behind the work in an article published by the CFA.
It isn’t enough to simply simulate the long-term behavior of an investment portfolios. Investors generally also care about shorter-term market movements. They would like to understand how a certain set of events, or scenarios, might impact their portfolios. So, I ended up developing a hybrid approach which couples the ABM and the short-term behavior of the markets. The short-term (up to 5 years) scenarios are based on MSCI factors. Hence, the final model is a hybrid ABM-Factor model.
Investment portfolios need to be continuously rebalanced. Traditional mean-variance optimization isn’t really suitable for a whole host of reasons.I helped developed a new method, based on MSCI factor risk for efficiently rebalancing portfolios to their intended target. Read more about it here.
Why is this relevant? If you are a portfolio manager for an institutional asset manager then you have complete control over the selection of assets and have a pretty good idea about the intended mandate for the portfolio. This is not the case for the wealth management space: Investment advisors serve clients, and these client portfolios can be constructed in different ways. Clients typically also have restrictions about what they can trade, what they can’t, legacy positions etc. The advisor then has to manage these portfolios to a benchmark or a target while accounting for all these restrictions. This is where a risk-first approach really helps.
There are some other things in the pipeline that I can’t completely discuss here. Exciting times ahead!
Why a “Now” page
The idea for a now page came from Derek Sivers and for more details look here