Russell Investments has just released a free Web-based tool designed specifically for advisors that provides institutional-quality equity risk analysis of clients’ portfolios.
Called the Russell Factor Management Tool (FMT) and available on RussellETFs.com, the online tool, launched on July 5, is powered by market data from Morningstar and risk models from analytics provider Axioma. The tool was tested by dozens of advisors in beta phases.
Cory Haynes, e-business director for Russell ETFs, said advisors can leverage the tool to better understand equity risk and help their clients make decisions around how to control the risk-return factors that influence the stocks in the equity portion of a portfolio. FMT’s “easy-to-navigate steps” facilitate conversations with three phases that walk the advisor through loading the portfolio, isolating the client's equity/cash portion and conducting the risk analysis.
“FMT democratizes institutional tools for advisors,” Haynes said in a phone interview. “We think there’s a benefit to bringing this tool to advisors, even at the individual investor level.”
Restricted to finance professions, FMT allows advisors to import Excel files containing a client’s portfolio data and then modeling equity allocations that include asset class weightings and risk exposure.
In addition, “before” and “after” scenarios can be created using Russell exchange-traded funds. All benchmark indexes used to measure a portfolio’s risk are Russell indexes, but advisors can use any stock, ETF or mutual fund in their models.
Michael Scanlon, director of institutional and RIA sales for Russell ETFs, who also sat in on the interview, noted that the tool “does a really good job of exposing closet indexers.”
Advisors also can use the FMT to:
- Study factor exposures to adjust portfolio allocation with changing market conditions
- Generate a report with graphical representations of factor exposures within a portfolio
- Capture potential excess returns from shifting market trends
- Understand whether the portfolio is over or underweight beta, momentum or volatility relative to the assigned benchmark
- Achieve higher accountability of manager performance in terms of their ability to generate alph
Read How to Detect if Your Fund Manager Is a 'Closet Indexer' on AdvisorOne.