Going Under the Hood of Models-Only Programs

This is a summary of a session from the Money Management Institute’s Fall Solutions Conference that was held in October 2013 in New York City.

Moderator: Heeren Pathak, CTO, Vestmark

Panelists:

• Nancy Camarata, VP, Managed Accounts, Neuberger Bermann
• Anthony DiGangi, VP, Director of Managed Accounts Operations, Fred Alger Management
• David Laskar, Executive Director and Portfolio Manager, Morgan Stanley Wealth Management Private Portfolio Group
• Curt Overway, President and Portfolio Manager for Natixis Global Asset Management’sManaged Portfolio Advisors

Are some asset classes better suited for use in models-only programs?

Asset classes that are more liquid are usually easier to trade in a model, Lasker observed.  Communication is important here since some assets can become illiquid for short periods of time and the managers need to know when there are problems implementing model changes, he stated.

While some strategies are more challenging, most obstacles can be overcome so that they can be included in a model, Overway commented.  Fixed income is a good example, since the models are often provided in the from of a list of characteristics instead of individual securities.  This entails more communication between the Natixis overlay management group and the model manager about which securities would be acceptable in the model portfolio, he pointed out.