The Style Analysis determines a portfolio’s various return tendencies. Customized style groupings based on various themes, major market indices or regionally based return indices are used to identify and profile a portfolio’s return sensitivities. Themes such as Growth, Value, EAFE and/or various fixed income indices are examples of portfolio test indices. PIQ uses the returns of seasoned ETFs to track the targeted indices and themes.
The model indicates percentage sensitivity to the selected indices. The model also produces an R-square which indicates the amount of the returns described by the index groups. In this example the portfolio is showing a measurable bias to “Value’, a high sensitivity to the Canadian market and a moderate exposure to fixed income.
In addition to the overall portfolio’s style profile the model also presents individual style sensitivities of the portfolio’s holding. In the example it is easy to see that Agco Corp. (AGCO) “loads” primarily on S&P 500 Value and to a smaller degree MSCI EAFI. In contrast and at the other
end of the graph Abbvie (ABBV) “loads” almost entirely on S&P 500 Growth.
The style indices or return sensitivities are customizable by the user.
Using market ETFs as style descriptors means the choices for style sensitivities are virtually unlimited.