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Single fund analysis (SFA) score as a Risk Adjusted Performance Measure
Single fund analysis (SFA) score as a Risk Adjusted Performance Measure
Single fund analysis (SFA) score as a Risk Adjusted Performance Measure
Single fund analysis (SFA) score as a Risk Adjusted Performance Measure
Single fund analysis (SFA) score as a Risk Adjusted Performance Measure
Single fund analysis (SFA) score as a Risk Adjusted Performance Measure
Single fund analysis (SFA) score as a Risk Adjusted Performance Measure
Single fund analysis (SFA) score as a Risk Adjusted Performance Measure
Single fund analysis (SFA) score as a Risk Adjusted Performance Measure
Single fund analysis (SFA) score as a Risk Adjusted Performance Measure
Single fund analysis (SFA) score as a Risk Adjusted Performance Measure
Single fund analysis (SFA) score as a Risk Adjusted Performance Measure
Single fund analysis (SFA) score as a Risk Adjusted Performance Measure
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Single fund analysis (SFA) score as a Risk Adjusted Performance Measure

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  • 1. Performance of the Infiniti Capital Single Fund Analysis Score (SFA) as a Risk Adjusted Performance Measure ( RAPM) By Peter Urbani, CIO, Infiniti Capital
  • 2. The Infiniti SFA Total Score as a RAPM <ul><li>This presentation shows the realised performance of 4 portfolios built from a common data set each using a different Risk Adjusted Performance Measure (RAPM) as the objective function to be maximised. </li></ul><ul><li>Performance is shown on an out-of-sample (ex post) basis and the data set used was a common sample universe of 36 anonymised hedge funds and the portfolios were rebalanced on a quarterly basis. </li></ul><ul><li>The RAPM’s used were the Sharpe, Sortino &amp; Omega ratios and the Infiniti SFA Total Score. </li></ul><ul><li>The SFA Total score produces superior risk adjusted returns (CAGR/ABS(Drawdown)) for the following reasons: </li></ul><ul><ul><li>It imposes a positively skewed distribution on the data during the in-sample optimisation and this shape is stable enough to persist out-of sample (predictive) </li></ul></ul><ul><ul><li>The Sharpe ratio does not differentiate between upside and downside risk </li></ul></ul><ul><ul><li>The Sortino ratio can too easily generate zero downside portfolios in the in-sample period but these do not persist as well out of sample (over-fitting) </li></ul></ul><ul><ul><li>The Omega ratio has the advantage of being distribution independent but still has the downside area of the distribution as its denominator, therefore it does not explicitly try to truncate the left tail as the SFA Score does . </li></ul></ul>
  • 3. Out-of-Sample Returns Note: All returns shown are Gross of any fees
  • 4. Table of Statistics
  • 5. Out-of-Sample Returns 2008 +4.98% +2.58% -0.86% +4.40%
  • 6. Weights through time (Quarterly) The Charts to the Left show the weights through time of each of portfolios (SFA Total, Omega, Sharpe, Sortino ) with quarterly rebalancing of the common universe of 36 funds SFA Total Omega Sharpe Sortino
  • 7. Realised Best-Fit Value at Risk 95% 12 Month rolling Best-Fit Infiniti VaR
  • 8. Portfolio Best-Fit Distributions
  • 9. Best-Fit Distributions The Charts to the Left show the best-fitting distribution for each of the portfolios built using the SFA Total Score, Sharpe, Sortino or Omega ratio’s. Also shown in grey is the best fitting distribution of the Equally Weighted (Benchmark) portfolio. As you can see the SFA portfolio had the most positive skewness and good tail protection.
  • 10. Piecewise Non-Linear Regression The Charts to the Left show the piecewise regressions of each of the out-of-sample portfolios constructed using either the SFA Total Score, Sharpe, Sortino or Omega ratio’s against an Equally Weighted (Benchmark) portfolio. As you can see the SFA portfolio had the best upside capture to downside capture.
  • 11. Bi-Variate Best Fit Copula The Charts to the Left depict the best-fit bi-variate Copula of each of the out-of-sample portfolios constructed using either the SFA Total Score, Sharpe, Sortino or Omega ratio’s as the objective function or risk adjusted performance measure (RAPM) to maximize. Shown here against the common benchmark. As you can see the SFA portfolio had the best zone 2 (upside) to zone 4 ( downside ) dependence. Zone 4 Zone 2
  • 12. Conclusions <ul><li>The SFA Total score produces superior risk adjusted returns (CAGR/ABS(Drawdown)) for the following reasons: </li></ul><ul><ul><li>It imposes a positively skewed distribution on the data during the in-sample optimisation and this shape is stable enough to persist out-of sample (predictive) </li></ul></ul><ul><ul><li>The Sharpe ratio does not differentiate between upside and downside risk </li></ul></ul><ul><ul><li>The Sortino ratio can too easily generate zero downside portfolios in the in-sample period but these do not persist as well out of sample (over-fitting) </li></ul></ul><ul><ul><li>The Omega ratio has the advantage of being distribution independent but still has the downside area of the distribution as its denominator, therefore does not explicitly try to truncate the left tail as the SFA Score does . </li></ul></ul>For further information or to download a free trial of the Infiniti Analytics Suite which was used to generate these results please go to: www.infiniti-analytics.com
  • 13. Disclaimer <ul><li>The information and opinions in this presentation were prepared by the Infiniti Group (collectively “Infiniti”).  This presentation is provided for information purposes only.  It is not an offer or solicitation to enter into any agreement or contract with Infiniti.  Whilst all reasonable care has been taken to ensure that the facts stated herein are accurate and that the opinions and expectations contained herein are fair and reasonable, Infiniti makes no representation or warranty, express or implied, with respect to the fairness, correctness, accuracy reasonableness or completeness of the information and opinions herein but has obtained the information from sources believed to be reliable.  </li></ul><ul><li>  </li></ul><ul><li>Analyses contained herein are based on assumptions that if altered can change the conclusions reached herein.  Infiniti has no obligation to update, modify or amend this publication or to otherwise notify a reader in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate.  The information is not intended to depict or predict actual investment performance of any financial product and is subject to change without notice.  Any opinions expressed herein reflect Infiniti’s judgment at the date and time hereof and are subject to change without notice. </li></ul><ul><li>  </li></ul><ul><li>Infiniti is not acting and does not purport to act in any way as your advisor.  We therefore strongly suggest that you seek your own independent advice in relation to any legal, tax, accounting and regulatory issues relating to the merits or otherwise of the products and services discussed.  Financial instruments that may be discussed herein may not be suitable for all investors and any investors must make any investment decision using their own independent advisors as they believe necessary and based upon their specific financial situation and investment objectives.  </li></ul><ul><li>  </li></ul><ul><li>If a financial instrument is denominated in a currency other than an investor’s currency, a change in exchange rates may adversely affect the price or value of, or the income derived from, the financial instrument, and any investor in that financial instrument effectively assumes currency risk.  Prices and availability of any financial instruments described in this presentation are subject to change without notice.  Nothing contained herein shall constitute any representation or warranty as to future performance of any financial instrument, credit, currency, rate or other market or economic measure as past performance is not necessarily indicative of future results.  </li></ul><ul><li>  </li></ul><ul><li>The information contained herein is CONFIDENTIAL.  It is intended only for the use of the person to whom this document is given and may not be reproduced or redistributed in whole or in part without the prior written consent of Infiniti.    </li></ul><ul><li>  </li></ul><ul><li>This does not constitute an offer to sell, or the solicitation of an offer to buy, any product.  An offer may only be made by means of the offering memorandum and governing documents of the relevant funds (the “Fund Documents”), which should be read in their entirety.  The information is not intended to be complete or final and is qualified in its entirety by the Fund Documents.  In the event the Information is inconsistent or contrary to the descriptions or terms of the Fund Documents, the terms of the Fund Documents shall prevail.    Infiniti (i) may be a market maker or specialist in securities issued by companies mentioned herein (ii) may act as an adviser, underwriter or lender to companies mentioned herein (iii) may have received or intend to seek compensation for investment services from companies mentioned herein (iv) along with its respective officers, directors and employees may affect transactions and/or hold long or short positions in the underlying securities or related financial products of companies mentioned herein. </li></ul><ul><li>  </li></ul><ul><li>The information contained herein is intended for illustrative purposes only, has been developed internally and has been based on variations of existing funds, managed accounts, simulations, extrapolations of other investment programs, pro forma data or taken from trade and statistical services and other sources that we deem reliable, although no warranty is made that the information is accurate or complete and it should not be relied upon as such. </li></ul><ul><li>  </li></ul><ul><li>Any securities discussed herein may not be suitable for all investors.  Transactions of the type described herein may involve a high degree of risk, and the value of such instruments may be highly volatile.  </li></ul><ul><li>  </li></ul><ul><li>Past performance is not guarantee of, and cannot be construed as an indication of, future results. </li></ul><ul><li>  </li></ul>

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