Process Alpha Videos Archive
The Sherpa team regularly hosts webinars, seminars and speaks at industry events on portfolio construction topics. You can also find our Process Alpha videos on the Sherpa Funds Tech Process Alpha YouTube channel. Subscribe to our channel for updates or follow our Archive page here.
Process Alpha Videos
Webinar YouTube Links
- How Good Is Your Portfolio?
- How Good Is Your Portfolio? – Part 2, Ex-Ante Analysis
- How Good Is Your Portfolio? – Part 3, Putting it all Together
- What Does Your “Best” Portfolio Really Mean?
- Does Your Long/Short Equity Portfolio Deliver the Risk Your Investors Want?
Video Overview Descriptions
The first in our “How Good Is Your Portfolio?” series introduces the concept of assessing your portfolio results against “Candidate Portfolios” to determine if your portfolio is good.
First we introduce the basic concept of using portfolio constraints to define the universe of potential eligible Candidate Portfolios you COULD construct. Then we show how analyzing a large number of Candidate Portfolios can help separate the impact of good asset selections from good portfolio construction decisions. Finally we show how to determine if your portfolio construction is consistently good by comparing against other eligible outcomes.
The second “How Good Is Your Portfolio?” webinar introduces the Risk Quality Score and the Risk Quality Graph visualization.
This webinar focuses on Sherpa’s core drivers of a well-constructed portfolio – the Risk Quality Score of an asset and its downside Co-Movement. We define the Risk Quality Score as a measure of the bet quality of a given asset and think about the implications for portfolio construction. Then we bring in the asset’s downside Co-Movement and portfolio constraints to show how these measures impact asset weighting in a well-built portfolio. We introduce the Sherpa Risk Quality Graph to give PMs a tool to quickly visualize the composition of their portfolio. Finally we show how different types of portfolio composition produce very different results.
Check out our blog here for a brief introduction to the Risk Quality Graph.
Our third and final “How Good Is Your Portfolio?” webinar combines the Candidate Portfolio and Risk Quality Graph tools to illustrate how PMs can determine the amount of risk they want ex-ante to drive better results.
During this session we provide a quick overview of the Candidate Portfolio and Risk Quality Graph tools. Then we explore how ex-ante risk preference and portfolio composition impacts ex-post results. Using a sliding scale Risk Number and the Risk Quality Graph we show how a PM can finetune their Expected Risk and Expected Return. Combining these tools gives a useful process to determine how much risk you want to take, that you’re taking it well, and that its giving the “good” results you expect.
Building on the concept of Candidate Portfolios from our previous videos, this webinar discussed how to evaluate potential portfolios to find the “best” portfolio to implement your ideas.
In this webinar we break down how to define the “best” portfolio into (1) How do we evaluate a portfolio? and (2) What market data set(s) should we evaluate the portfolio on? We introduce a risk tolerance-based asymmetric utility function that can be used to measure the utility of P&L against the PMs unique risk profile. Then we discuss how to generate many forward-looking market data sets that reflect underlying uncertainty in the alpha in the PM’s picks and the stability of the market covariance structure. Evaluating potential candidate portfolios using the utility function method against the defined universe of uncertain market data evolutions lets us find a robust “best” portfolio that is good per the PM’s risk tolerance against many possible futures.
The first of our “Risk You Want” webinars creates a range of possible equity long/short portfolios to show the impact of changing risk objectives on portfolio outcomes.
The idea of taking “More of the Risk You Want, Less of the Risk You Don’t” is core to the Sherpa portfolio construction approach. In this session we show how varying risk objectives lead to different portfolios that meet different investor requirements. First we create 4 portfolios reflecting widely used equity long/short strategies. Then we examine the ex-ante risk factor exposures and ex-post risk attribution to see how well the portfolios take the desired risk. At the same time we look at how those levels of risk translate into returns. Finally we discuss controlling for residual factor risks and varying the level of risk within the market neutral strategy.
6. Understanding the Problem – What Are You Good At? link
Before you can effectively bring quantitative methods to bear solving the portfolio construction problem you must understand the inputs to the problem. This session is the first Process Alpha focused on understanding the inputs to the problem.
In this session, we look at different methods to analyze a PM’s idea quality to inform their portfolio construction decisions. We look at ways to think about how robust the PM’s asset selection, asset scoring and idea persistence are to determine how best to capture their alpha. Then we identify how those findings can inform different approaches to portfolio construction that deliver substantially different portfolios. Finally we show how a systematic process can then delivers dramatically improved results by better understanding the alpha inputs.