Motivation and Background

After the shock to the portfolio in March 2020 and the subsequent discretionary response by the active managers motivated the following manager cohort to pursue a largely (90%) systematic portfolio to obtain a replicable decisionmaking process with lower risk of subjectivity and the interference of cognitive biases. Theoretically and empirically motivated strategies that are based on the academic literature were part of the portfolio before. These strategies were weighted inversely by their volatility. However, this was not an integrated approach to obtain an optimally weighted portfolio. To find a non-ad-hoc solution the next manager cohort followed the initial advice by the mentor Prof. Stomper to systematize the systematic portfolio part via the Parametric Portfolio Policy (PPP). The first step was to introduce a risk-factor-based strategy for the equity part of the portfolio. The original goal was to weigh the different strategies of the portfolio in a systematic and integrated way.