Presented byGunjan BanatiVISUALIZING THEWORLD OF MUTUALFUNDSFUNDS
Recently joined ; a value-oriented, small-cap investment advisor based inNYC.Founded 40 years ago by Chuck Royce;HI, I’M G...
What is a mutual fund?A mutual fund is a regulated collective investmentvehicle that pools money from many investors topur...
GROWTH IN THE MUTUAL FUNDINDUSTRY10,000.0012,000.0014,000.00Total net assets (Billions of dollars)Number of fundsAs of 12/...
With $11.6 trillion in assets andOver 7600 mutual funds withOver 22,000 share classes andOver 6000 statistical and qualita...
To identify funds with superior andconsistent long-term performanceUnderstand the risk profile of each strategyand the mar...
Mutual fundinvestment style wasstandardized byMorningstar andclassifies fundsMUTUAL FUNDS HAVE STYLEclassifies fundsaccord...
The style box is a very simple, holdings based,point in time snapshot of how a fund isinvested.You might want to know how ...
The most common method of evaluatingperformance is through calendar year returns.VISUALIZING PERFORMANCEFew investors will...
Trailing returns ending last month or lastquarter are the most commonly available andeasily comparable results.These arbit...
Given that investors will buy and sell at any timethroughout any given year, we think it makes senseto examine performance...
3-year rolling returns calculate all of the three-year periods, starting not only in January, butalso in February, March, ...
Isn’t the world different now?How will portfolios endure in the current marketenvironment?INVESTING IN TODAY’S MARKETEvalu...
In this presentation we walked through a few ofthe statistical and visualization techniques onecan use for selecting mutua...
Analytics in Financial Services - Behavioral Finance Event - Data Visualization - Visualizing the World of Mutual Funds
Analytics in Financial Services - Behavioral Finance Event - Data Visualization - Visualizing the World of Mutual Funds
Analytics in Financial Services - Behavioral Finance Event - Data Visualization - Visualizing the World of Mutual Funds
Analytics in Financial Services - Behavioral Finance Event - Data Visualization - Visualizing the World of Mutual Funds
Analytics in Financial Services - Behavioral Finance Event - Data Visualization - Visualizing the World of Mutual Funds
Analytics in Financial Services - Behavioral Finance Event - Data Visualization - Visualizing the World of Mutual Funds
Analytics in Financial Services - Behavioral Finance Event - Data Visualization - Visualizing the World of Mutual Funds
Analytics in Financial Services - Behavioral Finance Event - Data Visualization - Visualizing the World of Mutual Funds
Analytics in Financial Services - Behavioral Finance Event - Data Visualization - Visualizing the World of Mutual Funds
Analytics in Financial Services - Behavioral Finance Event - Data Visualization - Visualizing the World of Mutual Funds
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Analytics in Financial Services - Behavioral Finance Event - Data Visualization - Visualizing the World of Mutual Funds

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Gunjan Banati, Fund Research & Analytics at Royce & Associates, presented on how she uses visualization tools to improve decisions about asset allocation and fund selection. Ms Banati Manages investment research operations including identifying, analyzing and monitoring recommended mutual funds and alternative investments.

Theme: Using quantitative methods and visualization within her company to decide which investments to recommend. Visualizations are then used to communicate the recommendations to clients so they believe in what is being recommended.

Topic: The analytics of mutual fund research, meaning the methods used to evaluate mutual fund recommendations using quantitative methods combined with visualizations.

Bio: Gunjan Banati, Fund Research & Analytics at Royce & Associates. Ms Banati was previously at Allegheny Financial Group where she managed all aspects of the investment research operations including identifying, analyzing and monitoring recommended mutual funds and alternative investments.
LinkedIn: www.linkedin.com/pub/gunjan-banati/3/380/9a6

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Analytics in Financial Services - Behavioral Finance Event - Data Visualization - Visualizing the World of Mutual Funds

  1. 1. Presented byGunjan BanatiVISUALIZING THEWORLD OF MUTUALFUNDSFUNDS
  2. 2. Recently joined ; a value-oriented, small-cap investment advisor based inNYC.Founded 40 years ago by Chuck Royce;HI, I’M GUNJAN BANATI!Founded 40 years ago by Chuck Royce;one of the pioneers of small-cap valueinvesting.My role: Fund Research and AnalyticsPreviously at ; a boutiquefinancial planning firm based in Pittsburgh, PA.My role: Director of Research
  3. 3. What is a mutual fund?A mutual fund is a regulated collective investmentvehicle that pools money from many investors topurchase securities.Most mutual funds are “open-ended”, meaningTHE BASICSMost mutual funds are “open-ended”, meaninginvestors can buy or sell shares of the fund at anytime.There are 4 main categories of funds; money marketfunds, fixed income funds, equity funds and hybridfunds.In this presentation we will focus only on equitymutual funds.
  4. 4. GROWTH IN THE MUTUAL FUNDINDUSTRY10,000.0012,000.0014,000.00Total net assets (Billions of dollars)Number of fundsAs of 12/31/2011 Mutual Fund assets reached$11.6 trillion invested in over 7600 funds.*0.002,000.004,000.006,000.008,000.001940 1950 1960 1970 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010$11.6 trillion invested in over 7600 funds.**Data provided by the Investment Company Institute
  5. 5. With $11.6 trillion in assets andOver 7600 mutual funds withOver 22,000 share classes andOver 6000 statistical and qualitative dataTHE MUTUAL FUND INDUSTRYOver 6000 statistical and qualitative datapoints available for each of these portfoliosWe need visualization techniques to helpanalyze, develop and communicate decisionseffectively.
  6. 6. To identify funds with superior andconsistent long-term performanceUnderstand the risk profile of each strategyand the markets in which they willOBJECTIVES OF MUTUAL FUND RESEARCHand the markets in which they willoutperform and underperformUnderstand how to incorporate the fundinto a client’s portfolio (asset allocationmodel)
  7. 7. Mutual fundinvestment style wasstandardized byMorningstar andclassifies fundsMUTUAL FUNDS HAVE STYLEclassifies fundsaccording to marketcapitalization(vertical axis) andgrowth & valuefactors (horizontalaxis).
  8. 8. The style box is a very simple, holdings based,point in time snapshot of how a fund isinvested.You might want to know how this has changedVISUALIZING STYLEYou might want to know how this has changedover time.You might want to look at a return’s basedholdings analysis.This statistical technique deconstructs thefund’s returns using style based indexes.
  9. 9. The most common method of evaluatingperformance is through calendar year returns.VISUALIZING PERFORMANCEFew investors will ever buy mutual funds onNew Year’s Eve and then sell them exactly 1year later.
  10. 10. Trailing returns ending last month or lastquarter are the most commonly available andeasily comparable results.These arbitrary periods drive investordecisions and flows everyday.
  11. 11. Given that investors will buy and sell at any timethroughout any given year, we think it makes senseto examine performance over a larger series ofdates.Rolling returns are our preferred measure becauseROLLING RETURN METHODOLOGYRolling returns are our preferred measure becausethey offer an accurate and in-depth picture of aportfolio’s performance.Rolling returns account for the fact that investorstypically did not invest at the beginning of thecurrent three- or five-year period but instead are infact investing over many periods.
  12. 12. 3-year rolling returns calculate all of the three-year periods, starting not only in January, butalso in February, March, April, etc.Similarly, a 5-year rolling return accounts for allROLLING RETURN EXPERIENCESimilarly, a 5-year rolling return accounts for allof the five-year returns beginning at a giveninception date and advancing one monthsequentially.This method allows an investor to evaluate theconsistency of a fund’s performance over time.
  13. 13. Isn’t the world different now?How will portfolios endure in the current marketenvironment?INVESTING IN TODAY’S MARKETEvaluating Market Cycle Performance is oneway to see how funds will perform in differentmarketsFocusing on Down Capture and Down Marketperformance in particular
  14. 14. In this presentation we walked through a few ofthe statistical and visualization techniques onecan use for selecting mutual funds.When evaluating performance we focused onhistoric performance trends, please keep inCONCLUSION & Q&Ahistoric performance trends, please keep inmind that past performance is not necessarilyindicative of future results.There is also a large component of qualitativeresearch that goes into fund selection, which wedid not touch upon.

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