T&D switches to EM Applications for low volatility strategy

Leading Japanese asset management firm takes EM Applications FASTVaR risk system for its "smart-beta" low risk strategy fund
By: EM Applications Limited
Peter Ainsworth, MD, EM Applications
Peter Ainsworth, MD, EM Applications
LONDON - May 16, 2017 - PRLog -- T&D Asset Management ("TDAM"), a leading Japanese asset management firm, has agreed to license the EM Applications risk estimation and optimisation system to assist in the management of its "smart-beta" low risk strategy fund. TDAM's decision followed a comparative analysis of the risk forecasts from leading risk system vendors and established that the EMA "FASTVaR" data set produced the optimum risk:return trade-off.

The TDAM Low Risk fund aims to capture the alpha that results from the anomaly whereby higher volatility stocks do not outperform sufficiently well to justify the additional risk involved in holding them. Consequently, a balanced portfolio tilted towards lower volatility stocks is expected to generate superior risk-adjusted returns. The TDAM Low Risk fund aims to deliver excess returns in the medium- to long-term, while maintaining a level of volatility 20-30% below the Market Cap-weighted benchmark index.

Investor interest in "smart-beta" strategies continues to grow as they seek alternatives to generalist market-capitalisation benchmark-based funds. Nomura's 2016/17 review of Japan's Asset Management business concluded that "computerized investment strategies are ascendant among investors seeking to profit from mispricings due to informational inefficiencies", and suggested that active managers needed to utilize technology and computerization to remain competitive, while accepting that the longer the investment horizon the greater the opportunity for the active manager. The TDAM Low Risk fund is designed to combine the best of active and computerized strategies through a three-step process where the investment universe is first constructed to exclude high idiosyncratic risk stocks, the resultant universe is then optimized and finally is subject to regular risk monitoring.

Peter Ainsworth, Managing Director of EM Applications, said: "We are grateful to T&D and to Mr Takahashi for their confidence in our system and we are excited to have the opportunity to work with a firm of such high calibre. T&D's record of strong investment performance and the growth of its assets under management and its commitment to continual improvement shows that it is a company that is going places. We have been especially impressed with its adoption of the latest asset management thinking, efficiently capturing a market anomaly and integrating an understanding of risk into the investment process."

Katsunori Takahashi, Fund Manager of TDAM, said: "We were intrigued when we were told about EMA's FASTVaR risk model as it claimed to generate a forward-looking covariance matrix, theoretically the perfect fit for our low risk optimized strategy. We were very excited when, after extensive testing, it became clear to us that the model delivered on its promise, building reliably low-risk portfolios and outperforming the competing systems we measured it against. Our low risk fund is a key strategy for us as we believe it delivers what many investors are seeking – the potential of superior long-term returns offered by stock market exposure, but with a reduced level of volatility. With EMA's FASTVaR system in place supporting our portfolio construction we feel we are well equipped to satisfy our investors' objectives."


For interview requests, please contact Andrea Krug, tel. 07740 245 867, emapplications@krugcomms.com or Peter Ainsworth, Managing Director, EM Applications Ltd, peter.ainsworth@emapplications.com, + 44 207 148 6092

Notes to Editors

About EM Applications

EM Applications (www.emapplications.com) is a leading supplier of investment risk solutions to financial services companies. By delivering portfolio risk analytics to the fund manager's desk that are tailored to the manager's style and that offer the ability to explore the impact of trading, EMA's risk system is uniquely well suited to helping active managers such as UMJ to integrate risk analysis into their investment process and so enhance the risk-return trade-off.

About T&D Asset Management

T&D Asset Management ("TDAM") is a wholly owned asset management subsidiary of T&D Holdings Inc., which is the T&D Life Group's holding company for its three core life insurance companies: Taiyo Life Insurance Company, Daido Life Insurance Company, and T&D Financial Life Insurance Company. T&D Holdings was established in April 2004 and is listed in the 1st section of the Tokyo Stock Exchange. TDAM provides discretionary investment management and advisory services to both domestic and overseas pensions and institutions, and mutual funds to domestic retail clients. As an integrated asset management company, TDAM offers a wide range of products, from traditional asset classes to alternative strategies, but specializes in the management of Japanese asset classes, while forming strategic alliances with various global asset management companies for non-Japanese asset classes.

Peter Ainsworth, MD, + 44 207 148 6092


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