SWEDEN - The Swedish buffer fund AP7 has applied the New Frontier Advisors' IT platform for its latest major strategic asset allocation review.
The portfolio overhaul finalised in May, which saw the SEK80bn (€8.8bn) fund putting more into Swedish and emerging market equities as well as private equity, was supported by the patented NFA Asset Allocation suite. [see earlier IPE article: AP7 in major portfolio overhaul]
"New Frontier Advisors' are client-friendly and their tool has a good academic record," Christian Ragnartz, chief analyst at AP7, told IPE.
He confirmed AP7 will continue to use AFN's IT platform for further portfolio optimisation.
Ragnartz said the use of such tools was in line with the fund's strategy, since inception, to outsource services to the best providers in the market.
"As we are only a small team of about 15 people we screen the market for specialists and go for the one we believe is best," Ragnartz added.
He explained NFA's IT platform allowed the user to "adjust it according to own beliefs" such as return correlation and risk.
Ragnartz explained the NFA had done academic research on how to improve the standard portfolio optimisation model drawn up by Harry Markowitz which is allocating funds to stocks to minimize risk for a target rate of return.
NFA noted the processes used with the platform were supplemented "with investment tools developed from modern statistics, investment experience, contemporary financial theory, and proprietary research".
However, Ragnartz noted all these tools - "no matter how good they are" - have to be used "with a great degree of caution because sometimes you only get out what you put in".
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