Axioma Advisor - Product Update

The Axioma Backtester™ takes off

The new Axioma Backtester™ is now available to clients. What makes Axioma's Backtester different? For starters, the Axioma Backtester employs innovations that substantially simplify and accelerate the process of constructing, refining and analyzing investment strategies.

"The application's speed and ease of use are two of its biggest features," says Kristen Urquhart, senior product manager. "A backtest is basically a simulation. So speed plays a critical role. You want the ability to run a test, tweak it, and run it again—quickly. And when the backtest is over, you want to be able to easily deploy your results. The Axioma Backtester excels on both counts. Thanks to its innovative design, the Axioma Backtester is fast. And because it is fully integrated with Axioma Portfolio, implementation is easy because clients don't have to jump around from one application to another."

Axioma's open-system flexibility—a philosophy that Axioma applies to its entire product line—is another draw.

"Clients often ask, 'What if I want to use another risk model or some third-party data with Axioma Backtester?' Not a problem. Axioma's open platform allows you use the content of your choice—including, of course, Axioma's own risk models full content offering," notes Urquhart.

Initial set up is both simple and straightforward. "Once you go into the Data Library and set up the data elements—whether it's proprietary, third-party or Axioma data—that set up is retained no matter how many times the application is opened and closed. We also have a cloning capability so users can clone a back test, quickly modify it, and rerun it—all with just a few clicks."

The powerful features of the Axioma Backtester allow both quantitative and fundamental managers to address their toughest questions:

• What is the effect of increasing or decreasing my turnover limits?
• How can I get more return out of my rankings?
• How can I test my investment process over time? Does my strategy perform better in certain market cycles?
• How much would market impact costs erode my net returns?
• How often should I rebalance my strategy?
• How does changing subtle elements of my strategy impact its overall information ratio?
• As a fundamental manager, how would my returns have looked with alternative weighting schemes, e.g. equal weight vs. optimized?
• Which risk model is best for my strategy?
• Is the performance coming from one particular period, or is it consistent through time?
• Can robust optimization improve my investment process?
• What advantages does the Axioma Alpha Factor™ provide? Does it improve information ratios for my strategy?

Though the Axioma Backtester is brand new, enhancements to the product are already being made.

"We're now introducing a prevalidation feature. The prevalidator is essentially a preprocessing check that makes sure the Axioma Backtester has all the data it needs to run a test. It's a feature that can save considerable frustration."

Another enhancement now in the works is a feature for backtesting tax-aware accounts, which will help Axioma Portfolio minimize the effects of capital gains.

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