I want to talk about the transformation of market products into investor solutions.

The Challenge

Traded markets are very big - around US$100 trillion in AUM. There are literally hundreds of thousands of financial products available. All these products have their own risks, returns and interdependence characteristics. How can anyone be expected to invest in any reasonable manner?

• Which products will improve my return and reduce my risk?

• How do these products complement my existing portfolio?

• How do their returns interact with each other?

• How do things change as the broader environment changes?

The result is literally a world of suboptimal investment.

What do investors really want?

As investors, we don't want products. It is too hard. We want solutions that meet our needs (given the investment opportunities and the current state of the markets). Where do we get these solutions?

• Not from bankers whose interests are more aligned with recommending products that maximize their fee revenues rather than your investment performance.

• Not from robo-advisors that only ever seems to suggest the same set of ETFs.

• Not from my neighbor with the CFA who quite likely has an investment portfolio that is in worse shape than mine.

What is the answer?

You will need help. Help from technically competent financial intermediaries with deep domain knowledge, strong technical skills operating within an aligned and transparent framework. These groups will need to perform the following functions:

1. Understand the market - filter all those thousands of products to find the small set of products that dominate all the other products. Then model these products to understand their risk and return characteristics, likely in terms of factors, as well as their dependencies.

2. Understand your position - characterize your current investments and your future goals and liabilities.

3. Transformation - run robust optimization or search algorithms to continuously select and allocate capital to the filtered products to create dynamic solutions that transparently meet your needs.

This is not trivial.

The time of products is over, but the time of solutions is at hand. Let's move forward.

Speak to us about our investment solutions.