Analytics in Financial Services - Behavioral Finance Event - Data Visualization - Visualizing the...
-
Upload
fitzgerald-analytics-inc -
Category
Economy & Finance
-
view
1.137 -
download
3
description
Transcript of Analytics in Financial Services - Behavioral Finance Event - Data Visualization - Visualizing the...
![Page 1: Analytics in Financial Services - Behavioral Finance Event - Data Visualization - Visualizing the World of Mutual Funds](https://reader034.fdocuments.us/reader034/viewer/2022051818/54c1ac5a4a795950088b4594/html5/thumbnails/1.jpg)
Presented by
Gunjan Banati
VISUALIZING THE
WORLD OF MUTUAL
FUNDSFUNDS
![Page 2: Analytics in Financial Services - Behavioral Finance Event - Data Visualization - Visualizing the World of Mutual Funds](https://reader034.fdocuments.us/reader034/viewer/2022051818/54c1ac5a4a795950088b4594/html5/thumbnails/2.jpg)
�Recently joined ; a value-
oriented, small-cap investment advisor based in
NYC.
�Founded 40 years ago by Chuck Royce;
HI, I’M GUNJAN BANATI!
Founded 40 years ago by Chuck Royce;
one of the pioneers of small-cap value
investing.
�My role: Fund Research and Analytics
�Previously at ; a boutique
financial planning firm based in Pittsburgh, PA.
�My role: Director of Research
![Page 3: Analytics in Financial Services - Behavioral Finance Event - Data Visualization - Visualizing the World of Mutual Funds](https://reader034.fdocuments.us/reader034/viewer/2022051818/54c1ac5a4a795950088b4594/html5/thumbnails/3.jpg)
�What is a mutual fund?
�A mutual fund is a regulated collective investment
vehicle that pools money from many investors to
purchase securities.
�Most mutual funds are “open-ended”, meaning
THE BASICS
�Most mutual funds are “open-ended”, meaning
investors can buy or sell shares of the fund at any
time.
�There are 4 main categories of funds; money market
funds, fixed income funds, equity funds and hybrid
funds.
�In this presentation we will focus only on equity
mutual funds.
![Page 4: Analytics in Financial Services - Behavioral Finance Event - Data Visualization - Visualizing the World of Mutual Funds](https://reader034.fdocuments.us/reader034/viewer/2022051818/54c1ac5a4a795950088b4594/html5/thumbnails/4.jpg)
GROWTH IN THE MUTUAL FUND
INDUSTRY
10,000.00
12,000.00
14,000.00
Total net assets (Billions of dollars)
Number of funds
As of 12/31/2011 Mutual Fund assets reached
$11.6 trillion invested in over 7600 funds.*
0.00
2,000.00
4,000.00
6,000.00
8,000.00
1940 1950 1960 1970 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
$11.6 trillion invested in over 7600 funds.*
*Data provided by the Investment Company Institute
![Page 5: Analytics in Financial Services - Behavioral Finance Event - Data Visualization - Visualizing the World of Mutual Funds](https://reader034.fdocuments.us/reader034/viewer/2022051818/54c1ac5a4a795950088b4594/html5/thumbnails/5.jpg)
�With $11.6 trillion in assets and
�Over 7600 mutual funds with
�Over 22,000 share classes and
�Over 6000 statistical and qualitative data
THE MUTUAL FUND INDUSTRY
�Over 6000 statistical and qualitative data
points available for each of these portfolios
�We need visualization techniques to help
analyze, develop and communicate decisions
effectively.
![Page 6: Analytics in Financial Services - Behavioral Finance Event - Data Visualization - Visualizing the World of Mutual Funds](https://reader034.fdocuments.us/reader034/viewer/2022051818/54c1ac5a4a795950088b4594/html5/thumbnails/6.jpg)
�To identify funds with superior and
consistent long-term performance
�Understand the risk profile of each strategy
and the markets in which they will
OBJECTIVES OF MUTUAL FUND RESEARCH
and the markets in which they will
outperform and underperform
�Understand how to incorporate the fund
into a client’s portfolio (asset allocation
model)
![Page 7: Analytics in Financial Services - Behavioral Finance Event - Data Visualization - Visualizing the World of Mutual Funds](https://reader034.fdocuments.us/reader034/viewer/2022051818/54c1ac5a4a795950088b4594/html5/thumbnails/7.jpg)
�Mutual fund investment style was standardized by Morningstar and classifies funds
MUTUAL FUNDS HAVE STYLE
classifies funds according to market capitalization (vertical axis) and growth & value factors (horizontal axis).
![Page 8: Analytics in Financial Services - Behavioral Finance Event - Data Visualization - Visualizing the World of Mutual Funds](https://reader034.fdocuments.us/reader034/viewer/2022051818/54c1ac5a4a795950088b4594/html5/thumbnails/8.jpg)
�The style box is a very simple, holdings based,
point in time snapshot of how a fund is
invested.
�You might want to know how this has changed
VISUALIZING STYLE
�You might want to know how this has changed
over time.
�You might want to look at a return’s based
holdings analysis.
�This statistical technique deconstructs the
fund’s returns using style based indexes.
![Page 9: Analytics in Financial Services - Behavioral Finance Event - Data Visualization - Visualizing the World of Mutual Funds](https://reader034.fdocuments.us/reader034/viewer/2022051818/54c1ac5a4a795950088b4594/html5/thumbnails/9.jpg)
![Page 10: Analytics in Financial Services - Behavioral Finance Event - Data Visualization - Visualizing the World of Mutual Funds](https://reader034.fdocuments.us/reader034/viewer/2022051818/54c1ac5a4a795950088b4594/html5/thumbnails/10.jpg)
![Page 11: Analytics in Financial Services - Behavioral Finance Event - Data Visualization - Visualizing the World of Mutual Funds](https://reader034.fdocuments.us/reader034/viewer/2022051818/54c1ac5a4a795950088b4594/html5/thumbnails/11.jpg)
![Page 12: Analytics in Financial Services - Behavioral Finance Event - Data Visualization - Visualizing the World of Mutual Funds](https://reader034.fdocuments.us/reader034/viewer/2022051818/54c1ac5a4a795950088b4594/html5/thumbnails/12.jpg)
![Page 13: Analytics in Financial Services - Behavioral Finance Event - Data Visualization - Visualizing the World of Mutual Funds](https://reader034.fdocuments.us/reader034/viewer/2022051818/54c1ac5a4a795950088b4594/html5/thumbnails/13.jpg)
�The most common method of evaluating
performance is through calendar year returns.
VISUALIZING PERFORMANCE
�Few investors will ever buy mutual funds on
New Year’s Eve and then sell them exactly 1
year later.
![Page 14: Analytics in Financial Services - Behavioral Finance Event - Data Visualization - Visualizing the World of Mutual Funds](https://reader034.fdocuments.us/reader034/viewer/2022051818/54c1ac5a4a795950088b4594/html5/thumbnails/14.jpg)
�Trailing returns ending last month or last
quarter are the most commonly available and
easily comparable results.
�These arbitrary periods drive investor
decisions and flows everyday.
![Page 15: Analytics in Financial Services - Behavioral Finance Event - Data Visualization - Visualizing the World of Mutual Funds](https://reader034.fdocuments.us/reader034/viewer/2022051818/54c1ac5a4a795950088b4594/html5/thumbnails/15.jpg)
�Given that investors will buy and sell at any time throughout any given year, we think it makes sense to examine performance over a larger series of dates.
�Rolling returns are our preferred measure because
ROLLING RETURN METHODOLOGY
�Rolling returns are our preferred measure because they offer an accurate and in-depth picture of a portfolio’s performance.
�Rolling returns account for the fact that investors typically did not invest at the beginning of the current three- or five-year period but instead are in fact investing over many periods.
![Page 16: Analytics in Financial Services - Behavioral Finance Event - Data Visualization - Visualizing the World of Mutual Funds](https://reader034.fdocuments.us/reader034/viewer/2022051818/54c1ac5a4a795950088b4594/html5/thumbnails/16.jpg)
�3-year rolling returns calculate all of the three-
year periods, starting not only in January, but
also in February, March, April, etc.
�Similarly, a 5-year rolling return accounts for all
ROLLING RETURN EXPERIENCE
�Similarly, a 5-year rolling return accounts for all
of the five-year returns beginning at a given
inception date and advancing one month
sequentially.
�This method allows an investor to evaluate the
consistency of a fund’s performance over time.
![Page 17: Analytics in Financial Services - Behavioral Finance Event - Data Visualization - Visualizing the World of Mutual Funds](https://reader034.fdocuments.us/reader034/viewer/2022051818/54c1ac5a4a795950088b4594/html5/thumbnails/17.jpg)
![Page 18: Analytics in Financial Services - Behavioral Finance Event - Data Visualization - Visualizing the World of Mutual Funds](https://reader034.fdocuments.us/reader034/viewer/2022051818/54c1ac5a4a795950088b4594/html5/thumbnails/18.jpg)
![Page 19: Analytics in Financial Services - Behavioral Finance Event - Data Visualization - Visualizing the World of Mutual Funds](https://reader034.fdocuments.us/reader034/viewer/2022051818/54c1ac5a4a795950088b4594/html5/thumbnails/19.jpg)
![Page 20: Analytics in Financial Services - Behavioral Finance Event - Data Visualization - Visualizing the World of Mutual Funds](https://reader034.fdocuments.us/reader034/viewer/2022051818/54c1ac5a4a795950088b4594/html5/thumbnails/20.jpg)
![Page 21: Analytics in Financial Services - Behavioral Finance Event - Data Visualization - Visualizing the World of Mutual Funds](https://reader034.fdocuments.us/reader034/viewer/2022051818/54c1ac5a4a795950088b4594/html5/thumbnails/21.jpg)
� Isn’t the world different now?
�How will portfolios endure in the current market environment?
INVESTING IN TODAY’S MARKET
�Evaluating Market Cycle Performance is one way to see how funds will perform in different markets
�Focusing on Down Capture and Down Market performance in particular
![Page 22: Analytics in Financial Services - Behavioral Finance Event - Data Visualization - Visualizing the World of Mutual Funds](https://reader034.fdocuments.us/reader034/viewer/2022051818/54c1ac5a4a795950088b4594/html5/thumbnails/22.jpg)
![Page 23: Analytics in Financial Services - Behavioral Finance Event - Data Visualization - Visualizing the World of Mutual Funds](https://reader034.fdocuments.us/reader034/viewer/2022051818/54c1ac5a4a795950088b4594/html5/thumbnails/23.jpg)
![Page 24: Analytics in Financial Services - Behavioral Finance Event - Data Visualization - Visualizing the World of Mutual Funds](https://reader034.fdocuments.us/reader034/viewer/2022051818/54c1ac5a4a795950088b4594/html5/thumbnails/24.jpg)
� In this presentation we walked through a few of the statistical and visualization techniques one can use for selecting mutual funds.
�When evaluating performance we focused on historic performance trends, please keep in
CONCLUSION & Q&A
historic performance trends, please keep in mind that past performance is not necessarily indicative of future results.
�There is also a large component of qualitative research that goes into fund selection, which we did not touch upon.