{"id":2355,"date":"2023-06-27T11:17:10","date_gmt":"2023-06-27T11:17:10","guid":{"rendered":"https:\/\/nag.com\/?post_type=case-studies&p=2355"},"modified":"2023-07-05T10:24:21","modified_gmt":"2023-07-05T10:24:21","slug":"morningstar-use-nag-solvers-to-assist-portfolio-construction-and-optimization","status":"publish","type":"case-studies","link":"https:\/\/nag.com\/case-studies\/morningstar-use-nag-solvers-to-assist-portfolio-construction-and-optimization\/","title":{"rendered":"Morningstar Use n<\/i><\/span>AG Solvers to Assist Portfolio Construction and Optimization"},"content":{"rendered":"\n

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Morningstar Use n<\/i><\/span>AG Solvers to Assist Portfolio Construction and Optimization<\/h1>\n \n

Case Study<\/p>\n<\/div>\n\n \n <\/div>\n <\/div>\n <\/div>\n <\/div>\n <\/div>\n<\/div>\n\n\n\n

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Ibbotson Associates is a registered investment advisor and wholly owned subsidiary of Morningstar, Inc. Ibbotson Associates was founded in 1977 by Professor Roger Ibbotson. Rooted in academic research, Ibbotson\u2019s core investment process approaches portfolio construction from the top down, starting at the asset allocation level. Ibbotson provides asset allocation, manager selection and portfolio construction services to financial institutions.<\/p>\n

These services can be used together to create a comprehensive investment solution or separately to enhance an existing program. Since the company\u2019s inception, Ibbotson Associates has worked with many financial institutions providing investment advisory consulting services. Ibbotson currently has approximately 100 client engagements across its investment consulting, fund-of-funds, managed accounts, and plan sponsor consulting business lines.<\/p>\n

Rooted in the seminal academic research of Roger Ibbotson, Ibbotson Associates is an industry leader at providing asset allocation services to investment companies and insurance companies. To maintain this leadership, they continuously improve their capabilities in hopes that they will better serve their investors. As a research-driven business operating in a dynamic, highly competitive field, Ibbotson\u2019s commitment to ongoing research helps ensure that their core competencies as the thought leader in capital market expectations, asset allocation, asset allocation implementation, individual investor advice, combining traditional investments with insurance solutions, and the conversion of theory into practice is maintained.<\/p>\n

The Challenge<\/h3>\n

The Ibbotson Associates proprietary investment methodology creates custom target maturity portfolios for financial institutions serving plans of all sizes in defined contribution markets. The stock-bond mix over time, or glidepath, is set with the optimization techniques to match the unique characteristics of each particular plan’s participants. Factors considered in selecting a glidepath include the existence of a defined benefit plan, employee tenure, employee risk capacity, savings rates, median salaries, and others.<\/p>\n

The Solution<\/h3>\n

Knowing that n<\/i><\/span>AG develops world-class numerical routines for optimization, Morningstar called upon them to provide the n<\/i><\/span>AG Library. The\u00a0optimization techniques in the n<\/i><\/span>AG Library\u00a0are utilised by Morningstar on a daily basis in their portfolio construction products. When observing and analysing portfolios, a quadratic objective function is used to optimize risk and return. The objective function, together with business constraints and other fund analysis is then used by the n<\/i><\/span>AG optimization functions to do the complex mathematics. Different tracking error weights and forward looking alphas are then run through the model to arrive at a frontier giving the selection of the optimal solutions which are then packaged for clients.<\/p>\n

Morningstar has various teams of programmers who write applications in C++, MATLAB\u00ae and other languages for performance and ease.\u00a0<\/p>\n

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\u201cWe have found that the n<\/i><\/span>AG Library is very reliable and is easy to work with, through its extensive documentation and very knowledgeable support team.\u201d said Bo Yuan, Chief Technology Officer of Ibbotson Associates, \u201cn<\/i><\/span>AG offers us powerful optimization techniques and broad environment support. n<\/i><\/span>AG also enables the use of both serial and parallel processor based numerical computation.\u201d<\/p>\n<\/blockquote>\n

Ibbotson Associates also make use of n<\/i><\/span>AG\u2019s expert Support Service, which enables them to have contact with the Technical Team that develops the n<\/i><\/span>AG Library. n<\/i><\/span>AG experts are able to advise on the best n<\/i><\/span>AG solution for Ibbotson\u2019s complex optimization issues. With n<\/i><\/span>AG\u2019s software and support Ibbotson are able to maximise their portfolio construction and optimization.\u00a0<\/span><\/p>\n <\/div>\n <\/div>\n<\/div>\n\n\n

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<\/div>\n\n \n n<\/i><\/span>AG Library learn more <\/i><\/a> <\/div>\n <\/div>\n <\/div>\n <\/div>\n <\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Knowing that n<\/i><\/span>AG develops world-class numerical routines for optimization, Morningstar called upon them to provide the optimization solvers needed for their work. <\/p>\n","protected":false},"author":8,"featured_media":2357,"parent":0,"menu_order":0,"template":"","meta":{"content-type":"","footnotes":""},"post-tag":[45,27,18,21,42],"class_list":["post-2355","case-studies","type-case-studies","status-publish","has-post-thumbnail","hentry"],"yoast_head":"\nMorningstar Use NAG Solvers to Assist Portfolio Construction and Optimization - nAG<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/nag.com\/case-studies\/morningstar-use-nag-solvers-to-assist-portfolio-construction-and-optimization\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Morningstar Use NAG Solvers to Assist Portfolio Construction and Optimization - nAG\" \/>\n<meta property=\"og:description\" content=\"Knowing that NAG develops world-class numerical routines for optimization, Morningstar called upon them to provide the optimization solvers needed for their work.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/nag.com\/case-studies\/morningstar-use-nag-solvers-to-assist-portfolio-construction-and-optimization\/\" \/>\n<meta property=\"og:site_name\" content=\"nAG\" \/>\n<meta property=\"article:modified_time\" content=\"2023-07-05T10:24:21+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/nag.com\/wp-content\/uploads\/2023\/06\/portfolio-analysis.jpeg\" \/>\n\t<meta property=\"og:image:width\" content=\"1000\" \/>\n\t<meta property=\"og:image:height\" content=\"667\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:site\" content=\"@NAGTalk\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/nag.com\/case-studies\/morningstar-use-nag-solvers-to-assist-portfolio-construction-and-optimization\/\",\"url\":\"https:\/\/nag.com\/case-studies\/morningstar-use-nag-solvers-to-assist-portfolio-construction-and-optimization\/\",\"name\":\"Morningstar Use NAG Solvers to Assist Portfolio Construction and Optimization - nAG\",\"isPartOf\":{\"@id\":\"https:\/\/nag.com\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/nag.com\/case-studies\/morningstar-use-nag-solvers-to-assist-portfolio-construction-and-optimization\/#primaryimage\"},\"image\":{\"@id\":\"https:\/\/nag.com\/case-studies\/morningstar-use-nag-solvers-to-assist-portfolio-construction-and-optimization\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/nag.com\/wp-content\/uploads\/2023\/06\/portfolio-analysis.jpeg\",\"datePublished\":\"2023-06-27T11:17:10+00:00\",\"dateModified\":\"2023-07-05T10:24:21+00:00\",\"breadcrumb\":{\"@id\":\"https:\/\/nag.com\/case-studies\/morningstar-use-nag-solvers-to-assist-portfolio-construction-and-optimization\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/nag.com\/case-studies\/morningstar-use-nag-solvers-to-assist-portfolio-construction-and-optimization\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/nag.com\/case-studies\/morningstar-use-nag-solvers-to-assist-portfolio-construction-and-optimization\/#primaryimage\",\"url\":\"https:\/\/nag.com\/wp-content\/uploads\/2023\/06\/portfolio-analysis.jpeg\",\"contentUrl\":\"https:\/\/nag.com\/wp-content\/uploads\/2023\/06\/portfolio-analysis.jpeg\",\"width\":1000,\"height\":667,\"caption\":\"Indicators including volume analysis for professional technical analysis on the monitor of a computer. 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