Msci Inc. · NYSE:MSCI
Msci — Debt Investor Presentation (November 2016)
91 slides from Msci's debt investor presentation, November 2016
Slide 1: MSCI Seminar Series: Fixed Income Insights
MSCI SEMINAR SERIES: FIXED INCOME INSIGHTS Navigate the ECB’s Corporate Sector Purchase Program with MSCI Fixed Income Analytics © 2016 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.
Slide 2: MSCI = Fixed Income Expertise
MSCI = FIXED INCOME EXPERTISE • 1 bp tolerance level for MSCI-reconciled bottom up, daily index returns vs. vendor reported returns • 15 years of providing data management, reconciliation, and reporting managed services to large organizations • 40+ fixed income researchers focusing on fixed income m
Slide 3: MSCI Is a Leader in Fixed Income Analytics
MSCI IS A LEADER IN FIXED INCOME ANALYTICS • Over 100 pricing models • Global, including EM • Over 6,000 issuer curves • Integrated with equity & private asset classes Single Factor Security Models Analytics Performance • Data management • Quality control Services Attribution • Curve & Spread • Repo
Slide 4: MSCI Fixed Income Analytics Infrastructure
MSCI FIXED INCOME ANALYTICS INFRASTRUCTURE Data Benchmark Reporting Research • 125+ staff Indexes • Multiple data out • Over 40 research dedicated to data • All major indexes: capabilities: batch staff on FI services Bloomberg / reports, APIs, XMLs, • Majority of client • Significant QA Barclays, iB
Slide 5: Why MSCI for Fixed Income?
WHY MSCI FOR FIXED INCOME? • Expertise ─ Three decades of expertise in fixed income ─ Four decades building factor models • Services ─ Data collection, reconciliation, implementation, & custom workflow integration ─ Built around your process • Scalability ─ On-demand infrastructure for asset growth
Slide 6: MSCI Fixed Income Analytics
MSCI FIXED INCOME ANALYTICS MSCI Fixed Income Analytics is built to meet a series of client requirements PORTFOLIO MANAGEMENT ANALYTICS OPTIMIZATION MSCI FIXED INCOME ANALYTICS RISK INDEX DATA ATTRIBUTION PERFORMANCE
Slide 7: Fixed Income Research Initiatives
FIXED INCOME RESEARCH INITIATIVES 7
Slide 8: Fixed Income Research Headlines
FIXED INCOME RESEARCH HEADLINES Current and Future Successes • New Fixed Income Factor Model (phase 2: Nov 2016) • Integration of Barra and RiskMetrics Models (ongoing effort) • Bank Loan Model (Nov 2016, Q2 2017) • Systematic Strategy Factors (e.g. carry, value, trend) (2017) • Advanced Modeling fo
Slide 9: MSCI Integrated Analytics
MSCI INTEGRATED ANALYTICS Board 3 YEARS + GDP Reporting GROWTH INFLATION Risk Management EQUITY RATES CREDIT Asset Allocation and Total Plan 1 YEAR REAL ASSETS PURE ALTS INFLATION Risk Budgeting Horizon GLOBAL COUNTRY FACTORS GLOBAL RATES GLOBAL VALUE GLOBAL BANKS GLOBAL SPREADS Portfolio Management
Slide 10: Integrating Fixed Income Analytics
INTEGRATING FIXED INCOME ANALYTICS Link RiskMetrics with Barra factor analytics • Asset coverage, pricing models, curves, data … • Connect layers of the investment “pyramid” • Deliver RiskManager positions into BarraOne • Allow BarraOne access to pricing models in RiskManager Benefits to Clients • I
Slide 11: New Model for Bank Loans
NEW MODEL FOR BANK LOANS Data Current Bank Loan Market • Partnership with Markit Currency Par Amount (B) • Unequaled access to best-in-class leveraged USD 1,370 loan data EUR 107 Pricing GBP 20 • Joint treatment of call and default risk HKD 20 • Better modeling of amortization, floors, NOK 7 revolvi
Slide 12: New Fixed Income Factor Model
NEW FIXED INCOME FACTOR MODEL 12
Slide 13: New Fixed Income Factor Model: Bridging Portfolio & Risk Managers
NEW FIXED INCOME FACTOR MODEL: BRIDGING THE NEEDS OF PORTFOLIO & RISK MANAGERS Portfolio Risk Managers Managers Intuitive Factors (examples) • Key Rate Durations • OAS as forward indicator of spread risk Based on deep Designed to assist experience in in portfolio • Breakeven-Inflation modeling facto
Slide 14: New Fixed Income Factor Model
NEW FIXED INCOME FACTOR MODEL Fixed Income Risk Break-even Rates (KRDs) Spread Volatility Basis Inflation MBS Emerging Euro Swap Corporate* ABS* Market* Sovereign* CMBS* * Duration x Spread (DTS) models 14
Slide 15: What Is DTS?
WHAT IS DTS? Asset exposure to credit risk is “Duration Times Spread” (DTS) Asset X Ds • Higher-spread = higher risk exposure exposure Asset Spread • Factors reflect relative changes in Spread spread Duration “Times” • Rigorous empirical validation of model Absolute Spread Based Risk…
Slide 16: Why DTS? Responsiveness
WHY DTS? RESPONSIVENESS Annualized portfolio systematic risk 0.2 Legacy model 0.18 DTS model 0.16 DTS model OAS as forward-looking risk indicator 0.14 17: 29-May-2009 ─ Reflects changing quality immediately Annualized volatility Y: 0.11705 0.12 ─ Reduces dependence on rating agencies ─ Recognizes re
Slide 17: DTS for Sovereign Europe: France
DTS FOR SOVEREIGN EUROPE: FRANCE Risk Forecasts 300 France (DTS) 250 Germany France (Absolute) Risk (Monthly bps) 200 150 100 50 0 2007 2010 2012 2015 Spread to German Bund 200 Spread (bps) 100 0 2007 2010 2012 2015 17
Slide 18: Example: Euro Factors
EXAMPLE: EURO FACTORS Yield Curve Credit Rates Swap Inflation1 Sectors Country 1M 1M 1Y EU Financials IG EU Utilities Austria 6M 6M 2Y EU Banking IG EU Electric Utility IG Belgium 1Y 1Y 5Y EU Capital Markets IG EU Materials Finland 2Y 2Y 10Y 5Y 5Y 20Y EU Diversified Financials IG EU Health Care Fran
Slide 19: New Fixed Income Factor Model: Delivery Timeline
NEW FIXED INCOME FACTOR MODEL: DELIVERY TIMELINE • Major fixed income market models available for testing starting July 18th • Model has been locked down after receiving substantial client feedback and is scheduled for release on November 19th Markets: USD, Euro, Sterling, Yen, EM models All FI Mark
Slide 20: Analyzing a Strategy for European Corporates
ANALYZING A STRATEGY FOR EUROPEAN CORPORATES: Background Portfolio Construction Performance Analysis 20
Slide 21: Starting Point
STARTING POINT Key MSCI Tools Used to Analyze Euro Corporate Strategy • New Fixed Income Factor Model • Performance Attribution • Portfolio Optimizer • BLM Model Bid/Ask Spreads 21
Slide 22: Overview of ECB's Corporate Bond Program (CSPP)
OVERVIEW OF ECB’S CORPORATE BOND PROGRAM (CSPP) • Corporate Sector Purchase Program announced on March 10th, 2016 • Part of the ECB’s quantitative easing program • Purchases began on June 8th • Purchases have been averaging approximately €2b per week • €40b has been purchased through November 4th •
Slide 23: Significant Spread Tightening
SIGNIFICANT SPREAD TIGHTENING… • Strong Euro corporate spread tightening following announcement of CSPP • Non-ECB eligible bonds have also benefitted but not as much as ECB eligible sector • In contrast to other sectors, bank spreads have not tightened • ECB eligible sector is now the richest part o
Slide 24: ...and Surging Corporate Bond Issuance
MONTHLY IN € BILLIONS 10 15 25 20 0 5 -10 -5 Jan-14 Feb-14 Mar-14 Source: MSCI Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Net issuance of CSPP eligible issuers Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 J
Slide 25: And What Has Been the Impact on Liquidity?
AND WHAT HAS BEEN THE IMPACT ON LIQUIDITY? • Early concerns that ECB corporate bond buying would dry-up liquidity • As measured by bid/ask spreads, liquidity conditions have not noticeably deteriorated since launch of program Liquidity Trends: MSCI BLM Model for Bid/Ask MSCI BLM Model 65 • Estimates
Slide 26: Portfolio Positioning
PORTFOLIO POSITIONING • ECB quantitative easing efforts scheduled to end by March 2017, but considerable market speculation that it will be extended through September 2017 • Peter Praet (Member of ECB Executive Board) 26 October 2016: “We remain committed to preserving…monetary accommodation…to secu
Slide 27: Analyzing a Strategy for European Corporates
ANALYZING A STRATEGY FOR EUROPEAN CORPORATES: Background Portfolio Construction Performance Analysis 27
Slide 28: Investor Persona: European Credit PM
INVESTOR PERSONA: EUROPEAN CREDIT PM Type of Institution Investment Perspective • Long Only Asset Manager • Risk premia exists in the corporate bond market. High spread bonds will Benchmark outperform low spread bonds over • BoA Merrill Lynch Euro longer periods of time. Corporate Index • Banks, the
Slide 29: Portfolio Construction: Setup
PORTFOLIO CONSTRUCTION: SETUP • Maximize {Return Forecast – Risk Aversion * Active Risk} Subject to: ─ Tracking Error : 90 bp – 150 bp ─ No more than 5% turnover per month ─ Term structure risk to be no greater than 10% of active risk ─ Banking weight limited to 37% (1.15 x Benchmark’s Banking Weigh
Slide 30: Barra Optimizer
BARRA OPTIMIZER • Developed in-house resulting from over two decades of dedicated research • Takes advantage of the special structure of multi-factor risk models employed by many portfolio managers • Incorporates proprietary solvers with innovative, high-quality heuristic techniques to certain ill-b
Slide 31: Example of Optimization Parameters
EXAMPLE OF OPTIMIZATION PARAMETERS Optimization Types Types of Constraints 31
Slide 32: Portfolio Construction Workflow
PORTFOLIO CONSTRUCTION WORKFLOW Initial Cash (10 Initial Portfolio Implementation Optimization Milllion Euros) (Jan 1 2016) Starting Portfolio Rebalance Process Risk Risk / Compliance Monitoring Check Month-end Optimization 32
Slide 33: Portfolio Construction: OAS and # of Assets
PORTFOLIO CONSTRUCTION: OAS AND # OF ASSETS 300 600 250 500 OAS to German Govt Curve OAS on Portfolio Assets in Portfolio 200 400 150 300 100 200 OAS on BoAML Euro Corporate 50 100 0 0 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 • Portfolio OAS in excess of index OAS by 70-
Slide 34: Portfolio Construction: Tracking Error
PORTFOLIO CONSTRUCTION: TRACKING ERROR Ex-Ante TE vs BofAML Euro Corporate Index 190 170 Ex-Ante Tracking Error (bps) 150 130 110 90 70 50 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 • Ex-ante tracking error ranges between 91 bp to 135 bps 34
Slide 35: Portfolio Construction: Over/Under Weights
PORTFOLIO CONSTRUCTION: OVER/UNDER WEIGHTS Active Weight vs BofAML Euro Corporate Index 30 Other Portfolio Weights 20 Weight: Port Less Index 10 Banks Jan 4th Oct 3rd 0 ECB Eligible 14% 9% -10 Banks 37% 37% ECB Eligible -20 Other 49% 54% -30 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Se
Slide 36: Time Series of Spread % of Active Risk
TIME SERIES OF SPREAD % OF ACTIVE RISK Spread Risk contribution to Tracking Error Volatility 01.nov..16 01.okt..16 01.szept..16 01.aug..16 01.júl..16 01.jún..16 Spread contribution Tracking Error 01.máj..16 01.ápr..16 01.márc..16 01.febr..16 01.jan..16 0 0.2 0.4 0.6 0.8 1 1.2 1.4 1.6 • Tracking erro
Slide 37: Drivers of Spread Risk: Bet on Insurance
DRIVERS OF SPREAD RISK: BET ON INSURANCE 1.4 1.2 1 0.8 Spread Risk EU Insurance IG EU Banks IG 0.6 EU Financials HY 0.4 0.2 0 01.jan..16 01.febr..16 01.márc..16 01.ápr..16 01.máj..16 01.jún..16 01.júl..16 01.aug..16 01.szept..16 01.okt..16 01.nov..16 37
Slide 38: Which Segment of the Insurance Market
WHICH SEGMENT OF THE INSURANCE MARKET Subordinated Debt Allocation Subordinated Debt: Risk Contribution (Overweight/Underweight) 1.4 30.00% 1.2 25.00% 1 20.00% 0.8 15.00% 0.6 Allocation Risk 10.00% 0.4 Selection Risk 5.00% 0.2 0.00% 0 We are significantly overweighted in the subordinated debt segmen
Slide 39: Example of Output: Spread Exposure and Risk
EXAMPLE OF OUTPUT: SPREAD EXPOSURE AND RISK • EU Insurance IG is the biggest contributor to spread risk (35 bps) 39
Slide 40: Analyzing Tracking Error
ANALYZING TRACKING ERROR Ex-Ante TE vs BoAML Euro Corporate Index 190 170 Ex-Ante Tracking Error (bps) 150 130 110 90 70 50 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 • Tracking error drops substantially in September – why? 40
Slide 41: August Risk Delta – Why Did Risk Change?
AUGUST RISK DELTA – WHY DID RISK CHANGE? Active Risk Active Risk Active Exposure Active Volatility Active Correlation Risk Source Contribution Contribution Change Change Change (2016-08-31) (2016-08-30) Contribution Contribution Contribution Total Risk 0.95 1.23 -0.26 -0.01 -0.01 Local Market Risk 0
Slide 42: Portfolio Exposure Snapshot (Aug 31)
PORTFOLIO EXPOSURE SNAPSHOT (AUG 31) Zooming to Financial Merrill sector1 • Big over-weight in Financial Sector and more specifically in Insurance and Banking • Different bets in both sectors – Insurance equally split between sector allocation and bond selection • Banking purely sector allocation 1
Slide 43: Drivers of Spread Risk: Bet on Insurance
DRIVERS OF SPREAD RISK: BET ON INSURANCE Allocation Risk Selection Risk Date Sector Active Weight(%) Total Contribution Contribution Contribution 11/1/16 Insurance 9.11% 0.49 0.25 0.24 10/1/16 Insurance 9.15% 0.54 0.27 0.27 9/1/16 Insurance 6.75% 0.36 0.19 0.18 8/1/16 Insurance 8.60% 0.55 0.28 0.27
Slide 44: Summary of Key Takeaways
SUMMARY OF KEY TAKEAWAYS • The high OAS spread strategy subject to constraints has been consistently applied for each month in 2016 YTD • Over the course of the year, the optimizer increased the weight on ECB ineligible, non-bank bonds (particularly subordinates from the Insurance sector) and reduce
Slide 45: Analyzing a Strategy for European Corporates
ANALYZING A STRATEGY FOR EUROPEAN CORPORATES: Background Portfolio Construction Performance Analysis 45
Slide 46: Questions on Our Clients' Minds
QUESTIONS ON OUR CLIENTS’ MINDS How can I attribute the performance of a credit spread strategy? How did the ECB’s Corporate Sector Purchase Program (CSPP) impact the market? How does MSCI’s solution allow us to smoothly transition from our current system and what is your roadmap? Answering these qu
Slide 47: Integrated Analysis on One System
INTEGRATED ANALYSIS ON ONE SYSTEM • Holdings & REPORTING transactions loaded into one system only • Multiple Analytics Solutions • Increased efficiency and PRICING reduced total cost of software HISTORICAL MARKET DATA, INDEX DATA AND TERMS AND CONDITIONS • Impossible to carry out risk and performanc
Slide 48: Correspondence Between Risk and Performance
CORRESPONDENCE BETWEEN RISK AND PERFORMANCE • Sources of risk correspond to drivers of return Active Risk Ex Ante to Ex Post Active Return Currency Local Currency Local Risk Risk Return Return Prepayment Specific Carry Spread Term Structure Term Structure Paydown Unexplained Spread Risk Change Risk
Slide 49: Hybrid FI PA Model with Flexible Spread Attribution
HYBRID FI PA MODEL WITH FLEXIBLE SPREAD ATTRIBUTION Active Base Return Model Base Trading Pricing Look Through Benchmark Return Impact Impact Impact Residual Currency Local Return • Tie back return to distinct drivers of Return fixed income return • Return components provide a granular Income Paydow
Slide 50: Reporting Aligned with the Investment Process
REPORTING ALIGNED WITH THE INVESTMENT PROCESS • Flexible multi-level partitioning to tie back attribution results to the investment process ─ Native vendor sector classifications • Bloomberg Barclays, BoA ML, JPM, Citi, Markit iBoxx, S&P, Moodys, ─ Country, Coupon, Currency, ID, Inst. Type, Issuer ─
Slide 51: Performance Attribution Summary
PERFORMANCE ATTRIBUTION SUMMARY • Active performance was high at 1.39% YTD ─ Outperformance after the announcement of the CSPP ─ Performance was also high on a risk-adjusted basis 51
Slide 52: Impact of Spread Management Decisions
IMPACT OF SPREAD MANAGEMENT DECISIONS Spread Duration Positioning, Sector Management and Issue selection outperformance ECB Eligible Banks Others • Issue selection was the dominant driver of outperformance • Then spread duration market exposure • Sector management provide only a small contribution 5
Slide 53: Dashboard with Exposures, Risk and Performance
DASHBOARD WITH EXPOSURES, RISK AND PERFORMANCE EURO Corporate Bond Portfolio vs. BofAML Euro Corporate Bond Index1 Active ACTIVE TERM STRUCTURE ACTIVE SPREAD SELECTION TOTAL Active Average Carry Change Change Active Risk Risk Carry Active Rating Average Cont. to Return Return Return Risk Cont. Risk
Slide 54: Pricing Impact & Trading Impact Dashboard
PRICING IMPACT & TRADING IMPACT DASHBOARD Pricing Impact from different price sources for common assets in the portfolio & benchmark, attribution in summary and for drilldown at asset, and group level Trading Impact from differences in traded prices and closing 54 prices – also available down to pos
Slide 55: Hybrid FI PA Model with Flexible Spread Attribution
HYBRID FI PA MODEL WITH FLEXIBLE SPREAD ATTRIBUTION Active Base Return 139 bps Model Base Pricing Impact Look Through Benchmark Return Trading Impact -1.5 bps Impact Residual 140.5 bps Currency Local Return Return 140.5 bps • Have we captured return from spreads mean reverting? Income Return Paydown
Slide 56: Hybrid FI PA Model with Flexible Spread Attribution
HYBRID FI PA MODEL WITH FLEXIBLE SPREAD ATTRIBUTION Active Base Return 139 bps Model Base Pricing Impact Look Through Benchmark Return Trading Impact -1.5 bps Impact Residual 140.5 bps Currency Local Return Return 140.5 bps Paydown Term Structure Spread Unexplained Return 0.1 bps -25.4 bps 157.2 bps
Slide 57: Term Structure Change Return
TERM STRUCTURE CHANGE RETURN • Term Structure Change Return ─ Captured using an exposure-based approach ─ Return due to term structure exposure and observed shift at each rate in the relevant curve K R term structure j ,t KRDk , j ,t Δyk , j ,t k 1 Key-Rate Duration at key rate k Change in key
Slide 58: Term Structure Change Performance Attribution
TERM STRUCTURE CHANGE PERFORMANCE ATTRIBUTION Active Contribution to Duration (yrs) Yield curve positioning • Active EUR Gov. yield curve exposure Initial Term Structure • Initial curve negative below 5y rate Term Structure Change • Flattening at long end Key Rate Change Attribution • Attribution of
Slide 59: Spread Change Return
SPREAD CHANGE RETURN • Spread Change Return ─ Captured using an exposure-based approach ─ Driven by spread exposure and shift in asset option adjusted spread (OAS) R spread j ,t D j ,t Δs j ,t s Spread Duration of asset j Change in OAS to Base of asset j • Tightening credit spreads lead to highe
Slide 60: Monthly Trend in Performance Attribution
MONTHLY TREND IN PERFORMANCE ATTRIBUTION Program Announcement (Spread Change) outperformance was largest during March Where spreads tightened significantly Purchases Begin 140 OAS Trends: BofAML Euro Corporate Index1 130 Index of OAS (Jan=100) 120 110 Banks 100 90 Others 80 70 1 Performance and risk
Slide 61: How Did the ECB's CSPP Program Impact the Market (Index)?
HOW DID THE ECB’S CSPP PROGRAM IMPACT THE MARKET (INDEX)? Benchmark Contribution to OASD (yrs) Average OAS (bp) Change in OAS (bp) Benchmark Spread Change Contribution ECB Eligible Banks Others • March: all spreads tightened, all sectors gained ─ 135 bps benchmark return • Largest exposure to Non-El
Slide 62: How Did the ECB's CSPP Program Impact the Market (Index)?
HOW DID THE ECB’S CSPP PROGRAM IMPACT THE MARKET (INDEX)? Benchmark Contribution to OASD (yrs) Average OAS (bp) Change in OAS (bp) Benchmark Spread Change Contribution ECB Eligible Banks Others • June: spreads widened but ECB spread widened less than Non-ECB ─ 103 bps benchmark return • Largest expo
Slide 63: Isolate Top Performing Bonds in March
ISOLATE TOP PERFORMING BONDS IN MARCH …the scatter plot shows active spread exposure against spread change attribution Use the heat map to drill into the bonds within each bucket… BBB3 bond saw a marked …and the table shows more decrease in OAS results for bonds selected 63
Slide 64: And Largest Detractors in June
AND LARGEST DETRACTORS IN JUNE • Extremely easy to identify contributors and investigate bond level results BBB1 bond with large OAS saw its spread increase further 64
Slide 65: Summary of Results
SUMMARY OF RESULTS • Investment strategy to select high OAS bonds outperformed the benchmark ─ Issue selection was the dominant driver of outperformance ─ Overweighting high OAS, non-ECB non-bank paid off in the long run ─ Performance was driven by main source of risk ─ Could have neutralized term s
Slide 66: Performance Analytics Roadmap
PERFORMANCE ANALYTICS ROADMAP 66
Slide 67: Model Evolution: Consistent Investment in FI Analytics
MODEL EVOLUTION: CONSISTENT INVESTMENT IN FI ANALYTICS 1st • 2008 ─ Initial FI PA model released, term structure KRD effects & allocated spread return from residual • 2011 ─ Returns Calculator introduced for limited instrument types • 2013 ─ Income, Paydown, and Rolldown Return ─ Index data integrit
Slide 68: FI PA Product Development Strategy
FI PA PRODUCT DEVELOPMENT STRATEGY 4th Generation Fixed Income Performance Attribution Existing FI PA Strategic model Add flexibility, More enhancements model is used enhancements to extend granularity to be added in 2017 extensively by help ensure a and accuracy with • DTS Attribution many BarraOne
Slide 69: Carry Return Decomposition & Enhanced Curve Change and Spread Change Decomposition
CARRY RETURN DECOMPOSITION & ENHANCED CURVE CHANGE AND SPREAD CHANGE DECOMPOSITION: UAT Q4 2016 • Add flexibility, extend granularity and accuracy with reduction in unexplained return • Introducing: ─ Carry Return Decomposition • Term Structure Carry, Spread Carry Return • Income, Pull-to-Par, Rolld
Slide 70: Carry Return Decomposition & Enhanced Curve Change and Spread Change Decomposition
CARRY RETURN DECOMPOSITION & ENHANCED CURVE CHANGE AND SPREAD CHANGE DECOMPOSITION: UAT Q4 2016 • Alternative decompositions according to investment process & granularity required ─ Carry return distinct from market change return or within overall term structure and spread return • View impact of ti
Slide 71: Hybrid FI PA Model with Top-Down Spread Carry and DTS Attribution: Roadmap Q2 2017
HYBRID FI PA MODEL WITH TOP-DOWN SPREAD CARRY AND DTS ATTRIBUTION: ROADMAP Q2 2017 Capture impact of sector Base Return management, issue selection and DTS investment decisions Model Base Trading Pricing Look Through Return Impact Impact Impact Using top-down Spread Carry & DTS Attribution Currency
Slide 72: Hybrid FI PA Model with Common Factor-Based DTS Attribution: Roadmap H2 2017
HYBRID FI PA MODEL WITH COMMON FACTOR-BASED DTS ATTRIBUTION: ROADMAP H2 2017 Base Return Capture impact of FI400 common factor exposure Model Base Trading Pricing Look Through Using common factor-based Return Impact Impact Impact DTS Attribution Currency Local Return Return Paydown Term Structure Un
Slide 73: Incorporating Fixed Income FI400 Factors and MIM Factors in Performance Attribution
INCORPORATING FIXED INCOME FI400 FACTORS AND MIM FACTORS IN PERFORMANCE ATTRIBUTION • Research in Progress Active Base Return ─ Plan to support all sources of MIM common factor risk Look Model Base Return Trading Impact Pricing Impact Through Benchmark Residual in Performance Attribution Impact • Eq
Slide 74: Summary: Performance Attribution for Credit Portfolios
SUMMARY • Performance Attribution for Credit Portfolios ─ Best-of-breed solution, integrated with risk, with ongoing investment enables a smooth transition from current systems ─ Flexible FI PA model captures drivers of return with reporting aligned with your investment process ─ Built on strong fou
Slide 75: Performance Analytics Solutions
PERFORMANCE ANALYTICS SOLUTIONS Best-of-Breed Solution for Fixed Income & Multi-Asset Class Integrated Risk and Performance Analytics • MEASUREMENT – Portfolio gross/net return and attribution of intra-day P&L using asset-level transactions • ATTRIBUTION – Granular attribution models covering all as
Slide 76: Closing Remarks
CLOSING REMARKS
Slide 77: An Integrated View of Risk and Performance
AN INTEGRATED VIEW OF RISK AND PERFORMANCE Single Security Factor-Based Performance Portfolio Analytics Analytics Analytics Optimizer • 100+ Pricing models • Best-in-class • Accurate • Mean/Variance Based • Flexible analytics • Integrated MAC factors • Granular Attribution • Developed In-House • Gra
Slide 78: Appendix
APPENDIX • Additional Performance Attribution Capabilities • MSCI • Disclaimers and Rights of Use 78
Slide 79: Additional Performance Attribution Capabilities
ADDITIONAL PERFORMANCE ATTRIBUTION CAPABILITIES 79
Slide 80: Benchmark Data Integrity and Index Coverage
BENCHMARK DATA INTEGRITY AND INDEX COVERAGE Daily reconciled index and constituent returns for +20,000 indexes from +30 vendors Fixed Income ─ Bloomberg Barclays, BoA ML, JP Morgan, Markit iBoxx, Citigroup, Nomura, FTSE, Nikko, SIX Swiss, Thompson Reuters, Bloomberg Aus Bond, China Bond, HSBC, UBS E
Slide 81: Built-in Asset Returns Calculator
BUILT-IN ASSET RETURNS CALCULATOR Provides daily valuations, asset returns & return decomposition for fixed income Equity • Term Deposit • Contract for Difference • Variable Rate Note • Equity Basket Future/Option, Equity Claim/Future/Index • Zero Coupon Swap Future Interest Rate • Equity Index Futu
Slide 82: Attribution of Trading and Pricing Impact
ATTRIBUTION OF TRADING AND PRICING IMPACT For Classic Brinson, Fixed Income and Equity Factor Attribution Portfolio Base Transactional Return vs. End-of-Day Return Return Impact of official performance differing Look Model Trading Pricing from end-of-day holding-based Through Base Impact Impact perf
Slide 83: Important Flexibility for Portfolio-Specific Price Source
IMPORTANT FLEXIBILITY FOR PORTFOLIO-SPECIFIC PRICE SOURCE Important flexibility for price sources resulting in accurate returns and capture of pricing impact • Flexibility to define portfolio-specific price and FX source • Accurate portfolio return uses portfolio price source for all assets – common
Slide 84: Transactions and Holdings
TRANSACTIONS AND HOLDINGS BarraOne Performance Analytics Solution Transactions Combined with Holdings Accurate capture of portfolio return Supplement asset-level attribution with Time weighted rate of return following transactions GIPS recommended calculations Incorporate asset-level transactions, i
Slide 85: Asset-Level Trading Impact Dashboard
ASSET-LEVEL TRADING IMPACT DASHBOARD Trading Impact from differences in traded prices and closing prices Attribution provided in the summary and for drilldown at asset, and group level 85
Slide 86: MSCI
MSCI 86
Slide 87: About MSCI
ABOUT MSCI For more than 40 years, MSCI’s research-based indexes and analytics have helped the world’s leading investors build and manage better portfolios. Clients rely on our offerings for deeper insights into the drivers of performance and risk in their portfolios, broad asset class coverage and
Slide 88: Contact Us
CONTACT US AMERICAS EUROPE, MIDDLE EAST ASIA PACIFIC & AFRICA Cape Town + 27 21 673 0100 China North 10800 852 1032 * Americas 1 888 588 4567 * Frankfurt + 49 69 133 859 00 China South 10800 152 1032 * Atlanta + 1 404 551 3212 Geneva + 41 22 817 9777 Hong Kong + 852 2844 9333 Boston + 1 617 532 0920
Slide 89: Disclaimers and Rights of Use
DISCLAIMERS AND RIGHTS OF USE 89
Slide 90: BofA Merrill Lynch
BOFA MERRILL LYNCH In addition to the terms and conditions of any license agreement for MSCI information, services or products (“MSCI Products”) entered into with MSCI Inc. and/or its affiliates (“MSCI”) by customers (“Customer(s)”), each Customer must comply with the terms and conditions required b
Slide 91: Notice and Disclaimer
NOTICE AND DISCLAIMER This document and all of the information contained in it, including without limitation all text, data, graphs, charts (collectively, the “Information”) is the property of MSCI Inc. or its subsidiaries (collectively, “MSCI”), or MSCI’s licensors, direct or indirect suppliers or