MPI’s Analysis of Allianz Structured Alpha Provided Key Lessons For Asset Owners
A purely returns-based analysis in 2021 illuminated sources of risk and alpha
SUMMIT, N.J., May 23, 2022 /PRNewswire/ — Markov Processes International, Inc. (“MPI”), a leading independent FinTech provider of software and services for analyzing investment performance and risk, today announced that their September 2021 analysis of the Structured Alpha fund has again been at the forefront of investment reporting this week after Allianz’s recent admission of fraud and the sale of its U.S. asset management business to Voya.
MPI’s original quantitative analysis utilizing its Stylus Pro software, with patented Dynamic Style Analysis (“DSA”), revealed that the fund was effectively selling market crash insurance and putting investors’ money at risk in the case of market collapse. The steady “alpha” that attracted investors, was nothing more than a stream of option premiums as long as markets remained tranquil – but there was little to indicate that investors in the fund would be protected if a significant market downturn were to occur. As such, investors utilizing such an analysis could have anticipated that they might get burned during a big sell-off (and that their apparent alpha was contingent on an insurance bet).
“The purpose of our analysis into Structured Alpha last Fall was not to play Monday morning quarterback, but to show investment analysts how complex strategies that employ derivatives, leverage and highly dynamic trades can still be well explained by returns-based factor analysis. Efficient and cost-effective quantitative analysis and monitoring of investment products should be a central component of any due diligence around such products, as it is for regulators like the SEC, compliance, auditing and risk professionals and institutional investors,” said Michael Markov, CEO and co-founder of MPI.
Markov Processes International Inc. (MPI) is a leading provider of solutions for investment research, analysis and reporting to the global wealth and investment management industry. MPI works with more than 250 client organizations, including pensions and endowments, sovereign wealth funds, global wealth management firms, institutional consultants, regulators, investment advisors and asset managers. Rooted in the principles of transparency, objectivity and efficiency, MPI takes an innovative approach to problem solving in the areas of fund analysis, risk management, asset allocation and reporting to ensure that its clients have the tools to succeed in ever-crowded markets. Follow us on Twitter @MarkovMPI and connect with us on LinkedIn.