User guide: Build a portfolio

Summary

Portfolio creation via "Build new portfolio"

About

The portfolio creation page allows users to flexibly specify rules for building a portfolio. This includes universe construction via: currencies, benchmarks (for portfolio optimisation and universe construction purposes), countries, sectors, regions, market cap, trading volumes, etc. It also includes targets such as maximise alpha, minimise risk, minimise transaction costs, etc. Finally it includes rules such as maximum stock weights, relative stock weights, tracking error constraints, etc. The portfolio creation page also has a YAML editor, which provides users a code-like interface for additional granular control.

Sequence of steps

  1. Users must first enter a currency
  2. Users must enter a benchmark, the benchmark is used for any subsequent benchmark tracking targets or constraints. Furthermore, the benchmark is used for analytics including attribution analytics.
  3. User must define an investment universe, the following filters exist (of which at least one is required):
    1. The investment universe can start based on a benchmark.
    2. Next, countries, sectors and regions can be either be explicitly included or explicitly excluded.
    3. Next, a market cap cutoff can be applied (to remove small stocks below the amount specified).
    4. Next, a trading volume filter applies (to remove stocks that have a trading volume below a specified amount).
    5. Other filters exists e.g. business involvement and sustainability.
    6. A final stock count estimate is further provided.
  4. Users must define an investment goal:
    1. Rules-based goals include: equal weight portfolios, market cap weight portfolios or any other user specified weights.
    2. Optimizer-based goals include: maximising the AI signal, minimising (absolute risk), minimise tracking error (against a benchmark or portfolio), minimizing transaction costs.
  5. User must define any further rules:
    1. Equity allocation (between +100% and greater than 0%), i.e. long-only with leverage up to 1x.
    2. Max weight per stock.
    3. Max and minimum relative weight per sector versus a benchmark (e.g. max +5% sector overweight of Tech versus the S&P500)
    4. As above but on a per country basis.
    5. Max tracking error versus a benchmark.
    6. Minimum level of dividend yield across the portfolio.
  6. Users can subsequently test the configuration to prior to setting up a backtest.
  7. Users also have access to the YAML configurator for a code-like interface for additional granular control.
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