SimCorp Launches Improved Axioma Worldwide Equity Factor Risk Model, Helping Investors Navigate Market Uncertainty

SimCorp, a leading global financial technology company, today announced the launch of the next generation of its Axioma Worldwide Equity Factor Risk Model. The new model is designed to help portfolio managers and risk managers construct portfolios that can better withstand market volatility.

By combining SimCorp’s proprietary research on factors with the latest academic findings on factor effectiveness, the model assists investors in uncovering hidden portfolio risks. It maintains the ease of use characteristic of a parsimonious model while featuring improved volatility calculation methodology. These enhancements allow faster detection of abrupt market direction changes or significant rotations between stock groups.

“With the impact of tariffs and the trade war causing uncertainties worldwide, investors are rightfully concerned” said Melissa Brown, Head of Investment Decision Research, SimCorp. “The difference between success and struggle often comes down to how well and quickly you understand and manage your risk. While conventional factor risk models may miss critical exposures affecting portfolio performance, the Axioma Worldwide Equity Factor Risk Model is designed to help portfolio managers construct better and more resilient portfolios, drawing on the latest research on factor effectiveness.”

The Axioma Worldwide Equity Factor Risk Model introduces several new factors that are significant in today’s market environment for a more comprehensive risk assessment. One of these is the Non-linear Residual Factor, which uses machine learning to uncover hidden factor interactions not detected by a standard, linear model. The identification of higher-order relationships between factors gives managers additional explanatory power to what was once considered residual risk.

How portfolio and risk managers can use the model: 

• Neutralize exposure to ‘hidden’ risks using the Non-linear Residual Structure factor. 

• Create a portfolio to follow the ‘smart money’ through exposure to Sentiment-theme factors. 

• Produce lower-risk Momentum portfolios with less upside sacrifice. 

• Generate theoretically cleaner ‘Quality’ exposure through exposure to Profit Quality and Investment factors. 

• Enhance the upside of Minimum Variance and Low-Volatility portfolios by reducing Downside Risk. 
• Add positive Sentiment to Value portfolios to mitigate ‘value traps.’ 

The Axioma Worldwide Equity Factor Risk Model suite includes fundamental and statistical risk models as standard, which are available in a variety of horizons.

The models are flexible and can be accessed through the enterprise portfolio risk management system, Axioma Risk, or delivered as a flat file. This flexibility makes them easy to use as input for portfolio construction tools or risk management platforms. This combination of advanced analytics and flexible delivery options enables portfolio managers to better navigate volatile markets.