Windham Portfolio Advisor2018-10-24T15:00:14+00:00

Windham Portfolio Advisor

The Windham Portfolio Advisor® (WPA) is a complete portfolio optimization and risk management platform that integrates acclaimed independent research in a unified suite of applications for institutions and wealth advisors. Intuitive workflow allows you to perform complex analysis quickly and easily. Our experienced client services team provides support throughout all stages of implementation to help you integrate the latest portfolio construction innovations into your investment process.

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Asset Allocation

Asset allocation is one of the most important and difficult challenges we face as investors.  The Windham Portfolio Advisor allows you to generate efficient portfolios that meet your investment goals and satisfy your clients’ constraints. The WPA includes a wide range of time series and also gives users the ability to upload their own data. Use the traditional mean-variance approach to optimization or one of many asset allocation methods exclusive to Windham’s software to address unique investor objectives.

Optimization

No one wants to be wrong and alone. For this reason, the WPA offers Mean-Variance-Tracking-Error optimization, which allows you to optimize against both an objective goal and a benchmark. The WPA also offers full-scale optimization which is particularly useful for investors working with highly non-normal asset classes and specific risk preferences.

Capital Market Forecasting

Realistic estimates for return and risk are critical to the portfolio construction process. The WPA allows you to develop sound capital market assumptions for return using CAPM, implied returns, Bayesian analysis (including Black-Litterman) and custom forecasts. Users can examine how assets behave during specific market environments, including periods marked by turbulence, on a before and after tax basis.

Black-Litterman

The Black-Litterman model is a mathematical model for portfolio allocation that combines the theories of modern portfolio theory, the CAPM, and mean-variance optimization. The Black-Litterman model is a method for calculating optimal portfolio weights based on the given inputs.

Risk Management

Too frequently, portfolio risk is oversimplified or misunderstood altogether. Windham’s risk management tools assist you in managing the complexities and true sources of portfolio risk so that you can develop portfolios that are based on realistic expectations and a deeper understanding of your risk exposures.

Within-Horizon Risk

While it’s useful to discuss end-of-horizon goals, such as the one-year bar, the reality is that your clients or investment committee will continue to evaluate performance during the investment horizon. In order to manage client expectations effectively and to avoid unpleasant surprises, you need to be able to discuss any potential losses that could occur along the way. Windham’s measure of Within-Horizon Risk allows you to assess exposure to loss that can occur throughout the investment horizon and not just at its conclusion.

Within-Horizon Risk

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WPA Version Comparison

Factor Analysis

Factor analysis is a powerful technique that can identify and measure common sources of risk and return for managers, asset classes, and portfolios.  Each factor represents an underlying exposure to the market.  Factor analysis goes beyond the asset allocation to identify the underlying exposures to specific sources of risk and return.

Factor analysis can be used in a variety of applications including:

  • Understanding the drivers of manager risk and return
  • Understanding the differences between the factor allocation and the asset allocation
  • Explaining differences in returns across a universe of financial assets
  • Forecasting the expected value of asset returns
  • Stress testing asset class returns
  • Integration with asset allocation process

Stress Testing

Stress testing is an integral step in the asset allocation decision making process and allows us to estimate potential economic loses in different market environments. The Windham Portfolio Advisor provides a variety of stress testing scenarios, including: within-horizon analysis, regime shifts, financial turbulence and external factors, as well as specific historical events. Through stress tests, you can discover portfolio-specific weaknesses and explore ways to strengthen your positions.

Turbulence

The events of the last few years have emphasized the importance of constructing resilient and diversified portfolios. By tracking both high volatility and shifts in correlation, Windham’s proprietary turbulence measures can predict the price movements experienced in turbulent markets more effectively than traditional measures of volatility. Users can then analyze turbulent sub-samples of data to more accurately assess how asset classes will behave during crises. Software clients also have access to the Windham Turbulence IndexTM, our proprietary measure of market turbulence.

Wealth Simulation

By simulating growth over time, Windham helps you evaluate the likelihood of meeting future goals and commitments. Windham’s cash flow simulations account for inflation and planned contributions and withdrawals. Projections are expressed in terms of total wealth and as an annuity.

  • Generate projections of future portfolio value
  • Measure the effects of inflation and periodic contributions or withdrawals
  • Quantify the likelihood of shortfall

The most commonly used simulation method, Monte-Carlo simulation, is a multi-variate normal model to simulate asset returns using the chosen return and risk estimation methods; the equilibrium return estimate, and blended quiet/turbulent risk estimate for example.

Bootstrap simulation offers the advantage of using actual empirical experience to simulate future scenarios capturing non-normal characteristics such as fat-tails. Whereas Monte-Carlo allows use of the turbulence risk estimate, the Bootstrap method can only assume the historical risk estimate.

Custom Reports & Proposals

Windham’s reporting tools generate presentation-quality reports, proposals, and investment policy statements. Include or exclude information on their risk and return profiles, breakdown of asset classes and asset allocation targets, time horizon, rebalancing information, and disclosures. All charts and tables can also be exported to Excel®, Powerpoint®, and Word®. Read our guidelines for producing high-quality investment policy statements here.

Reports

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