Once you knew where the holes were, then you could find actual bonds to fill them. Then, investment teams tried to quantify where gaps existed within portfolios using generic securities. With an Excel spreadsheet and a couple (or perhaps several) cups of coffee, you could produce an allocation tool that placed bonds into portfolio(s), so long as they didn’t have a negative impact. Portfolio optimization has evolved substantially over time.

Finally, you can compare the different methodologies for choosing bonds for your accounts.Įvolution of portfolio optimization for bond managers You can also use the Black-Litterman model based portfolio optimization, which allows the benchmark portfolio asset weights to be optimized based on investor's views.In this blog, you can explore how optimizing portfolios has evolved and what it means to be a true portfolio optimizer – and what does not count. Portfolio asset weights and constraints are optional. The required inputs for the optimization include the time range and the portfolio assets. Of portfolios constructed using the optimized asset weights may vary from the given performance goal. The optimization result does not predict what allocation would perform best outside the given time period, and the actual performance The optimization is based on the monthly return statistics of the selected portfolio assets for the given time period. Maximum Drawdown – Find the portfolio with the minimum worst case drawdown with optional minimum acceptable return

Omega Ratio – Find the portfolio that maximizes the Omega ratio for the given minimum acceptable return Sortino Ratio – Find the portfolio that maximizes the Sortino ratio for the given minimum acceptable return Kelly Criterion – Finds the portfolio with the maximum expected geometric growth rate Information Ratio – Find the portfolio that maximizes the information ratio against the selected benchmark Tracking Error – Find the portfolio that minimizes the tracking error against the selected benchmark Risk Parity – Find the portfolio that equalizes the risk contribution of portfolio assets

Mean Variance Optimization – Find the optimal risk adjusted portfolio that lies on the efficient frontierĬonditional Value-at-Risk – Optimize the portfolio to minimize the expected tail loss This portfolio optimizer tool supports the following portfolio optimization strategies:

What is portfolio optimization