1. Does Behavioral Risk Index impact portfolio decision?
No, it does not impact the client’s asset allocation. Portfolio decisions are primarily driven by the client’s risk tolerance and time horizon.
2. Do you track changes to risk tolerance results and risk appetite questionnaire, specifically identifying who made the changes?
You can see it when you navigate to Risk & Behavioral Profile page, select History beside the questionnaires.
3. Is it possible to choose a specific security extension for other securities, aside from the default security extension you have?
We can configure a custom security extension, where a given security is extended by another security. For requests, email support@andesrisk.io. Click here for more information.
4. Do you use the holding positions from the inception date for running the analytics?
For running the analytics, we use holding positions from the inception date.
5. Do you have rolling risk and rolling returns charts?
On the Models page, we show rolling risk and rolling returns on the Risk Monitor tab.
6. Do you customize the IPS?
For customization information, see this page.
7. In the performance attribution, does the securities reflect the periods when they were held or when it was first acquired?
Performance attribution is a security-level attribute and will be reflected even if you have not held the security for, for example, three years. However, there is a limitation: for tactical models, the analysis looks at the security in the most recent snapshot, or your current holdings.
8. Can I choose my own target asset allocation instead of your canned models?
Yes, you can set your own model portfolios in the target asset allocation.
9. Is it possible to generate the IPS without taking the risk tolerance test?
To finalize the IPS, ensure that both the Investment Time Horizon and Target Asset Allocation are specified.
10. Do you convert Nitrogen Risk Number to Andes Risk Platform?
To convert the Nitrogen Risk Number to the Andes Risk platform, we divide the Risk Score by 5 to determine the model portfolio’s volatility.
Click here for more information.
11. Does the account or portfolio keep track of any subsequent changes?
The account or portfolio updates to reflect the latest positions in your account. It also stores position history, which you can access by clicking “Export to CSV” to view and track changes.
12. What is the impact of the capital market assumption on my model?
The Target Return and Target Volatility, also known as Capital Market Assumptions, represent the projected return and volatility of your model over the next 3–5 years. They play a crucial role in determining the risk band in the Risk Tolerance Test, which is influenced by the target volatility you have set.
Please click here for more information about Risk Bands.
13. Why my portfolios doesn't have analytics?
You can manually calculate analytics by clicking “Calculate Analytics” on the Portfolio page. A portfolio may not have analytics for the following reasons:
It is a small account. Our proprietary analytics are calculation-intensive, so they are not automatically performed on small accounts. The current threshold for a small account is $50,000 and is subject to change.
The advisor (or someone else) has marked the portfolio as “Do Not Monitor.”
14. When do we use Portfolio Health Check?
- Using Portfolio Health Check to Convert Prospects
- Monitoring Portfolio Performance
- Monitoring Financial Crisis
15. Do I need to run analytics every time I add or remove a security in a portfolio?
Yes, you need to run the analytics again to pull the valid data.
16. Do you pre-populate Capital Market Assumption?
No, we do not pre-populate the capital market assumptions; without them, the RTT will not work. However, if requested, we can enter the capital market assumptions on behalf of the client.
17. What is the formula for 80% confidence upside/downside?
We assume that returns follow a normal distribution, defined by the mean (target return) and standard deviation (target volatility). We use an 80% confidence interval, which corresponds to 1.28 standard deviations:
Upside = Target Return + 1.28 × Target Volatility
Downside = Target Return − 1.28 × Target Volatility
Note that this formula applies when the time period is set to one year. If it is set to six months, the values will be adjusted accordingly.
18. What does the Behavioral Impact do to the account?
Timing the market—trying to get in or out to beat the market. For example, during the downturn in 2000, when the market was declining, some investors attempted to exit. This is why the yellow line began to level off, as they sought protection while the market was falling. However, those who exited often ended up re-entering too late.
19. Is the behavioral impact determined by the questionnaire or this is more general?
Based on the questionnaire, we provide you with a Behavioral Risk Index. For example, if your Behavioral Risk Index is 5—which is relatively on the lower side and indicates more moderate risk—you would have a medium behavioral risk level.
20. Where does the Cap Mkt Assumptions come from?
Capital Market Assumptions are derived from long-term averages. For example, if you believe the next 3–5 years will resemble a specific historical period, you can input your own assumptions. If you do not have specific assumptions, you can use—or stay close to—historical returns and historical volatility when setting your Capital Market Assumptions.
Capital Market Assumptions appear in the Risk Tolerance Test, where the upside and downside are based on these assumptions.