FactMaster: About: Style

STYLE ANALYSIS
FactMaster's high-powered returns-based investment style optimization capabilities can add a whole new dimension to your investment decision making. These are the techniques which have received widespread industry attention. Now you can run analyses using features found on $5,000 to $15,000 programs.

FactMaster helps you determine the appropriate weighting of types of investment styles (called 'asset classes'). You can analyze all major types of mutual funds, money manager products, and multi-manager funds including: domestic equity, domestic fixed income, international equity and global balanced.

BENCHMARK
What is the appropriate benchmark for evaluating a particular fund's investment performance? FactMaster provides insight by creating the best Style Benchmark for the fund. That is, the combination of the asset classes which have best tracked the historical performance of the fund over the time period being analyzed. Using optimization techniques, FactMaster will find the portfolio of asset classes that have had the highest correlation to the fund.

STYLE DRIFT
Has the fund's management style remained fairly constant, or has it changed dramatically over time? FactMaster lets you examine the behavior of the fund's Style Benchmark over time. From this history, shifts in the management style of the fund can be observed.

To generate the history of the Style Benchmark, the optimization calculations are repeated many times (according to the time period covered and averaging period used) to compute the style points at each interval. Before, this type of analysis would be impossible using the traditional approach of dissecting the individual fund holdings.

The Historical Style Map in FactMaster is another way of showing the history of the Style Benchmark over time.

ATTRIBUTION
Does the fund manager exhibit superior security selection ability? FactMaster can be used for evaluating the fund's returns performance. When using the Style Benchmark as a tool in performance measurement, the returns obtained from the Style Benchmark are compared with the returns achieved by the fund.

The Style Benchmark is used to separate the market return and the style return from the fund's return. By viewing whether the fund outperformed its Style Benchmark, the Style Benchmark can be used to evaluate the security selection ability of the manager. Positive excess returns indicate superior selection ability, while the opposite is true of negative excess returns. See if the manager has earned their active management fee.