This Use Case demonstrates the practical application of Premialab Pure Factors® in conjunction with equity factor models to assess and manage associated risks. Premialab Pure Factors® capture the market factor implementation consensus across various asset classes, while eliminating model-specific interference.
We showcase two use cases. To highlight:
Benchmarking vendor implementations of specific equity styles
Detecting non-equity risk in equity portfolios.
In the first use case, we compare different implementations of the US Value factor, highlighting the significant differences in performance during the COVID-19 crisis. We analyse the performance and risk of a particular ETF against Premialab Pure Factors® and a widespread value implementation.
The second use case focuses on detecting non-equity exposures in equity portfolios using Premialab’s factor model, which demonstrates how factors contribute significantly to the variance explained, particularly in relation to non-equity risks in risk management.
Overall, both use cases highlight the value of Premialab Pure Factors® in ensuring alignment with consensus implementations and detecting non-equity risks, enhancing the accuracy and effectiveness of risk assessment and management in investment strategies.