The scope of the debt markets lends itself to the application of optimization algorithms that can synthesize mass quantities of information more efficiently than human analysts. However, legacy approaches to portfolio optimization designed for the equity markets struggle to account for structural nuances in the bond markets.
Leveraging their fixed income expertise, IMTC’s team developed an optimization module that accounts for bond market idiosyncrasies like illiquidity, high transaction costs and minimum piece sizes associated with individual credits. Users can also codify custom guidelines, targets and constraints across 350+ security- and portfolio-level metrics. This allows users to control for specific exposures while implementing investment strategies in the context of performing optimization exercises.
“A critical component of our optimizer is its scalability. Not only can the module generate trade suggestions in seconds, it can perform these calculations concurrently across thousands of portfolios,” said Casper Stromfeldt, Lead Engineer on the project. The result is a customizable solution that automates the arduous processes of constructing and rebalancing portfolios, investing excess cash and simultaneously prioritizing trade allocations across thousands of accounts.
According to IMTC’s CEO, Erik Zoega, “Firms that expect to remain competitive in the face of downward fee pressure driven by the shift towards passive investment products can’t afford to delay augmenting their teams with decision enhancement and process automation technology. Our clients are arriving at better outcomes in a fraction of the time it previously took to perform these exercises manually.”
View the original press release on our rules-compliant fixed income portfolio optimization module.