54 Optimizing Optimization
Our experience with optimizers stems from our association with BITA Risk.
BITA Risk provides leading private banks and wealth managers with tools
to support client acquisition and retention, through risk profiling, suitability
assessment, investment proposal generation, and portfolio monitoring and
reporting. In addition to this, institutional investment houses across the world
use our applications and risk models for portfolio optimization, quant strat-
egy research, risk analysis, and reporting. Our services include the following
services discussed below but BITA Risk is also actively engaged in consultancy
projects in areas such as risk and quantitative analytics across the globe.
3.1.1 BITA Star(TM)
BITA Star helps wealth managers understand their clients ’ true attitude to risk,
and provides tools to support asset/product suitability screening, portfolio con-
struction, investment proposal generation, and the ongoing monitoring and
reporting of portfolio risk.
3.1.2 BITA Monitor(TM)
A sophisticated risk-monitoring tool that supports compliance with the FSA’s
Treating Customers Fairly Management Information (TCF MI) guidelines — a
bespoke yet rapidly deployed solution, used stand-alone or as part of BITA Star.
3.1.3 BITA Curve(TM)
BITA Curve provides a “ quant ” workbench including optimization, analysis
and risk reporting, and data management. This enables users to create and test
new strategies, analyze, manage, and report on a portfolio using their own uni-
verse of data. BITA Curve gives fund managers unparalleled flexibility, access
to data, integration with analytics libraries, and control.
3.1.4 BITA Optimizer(TM)
Developed over the last 14 years, with innovative derivative versions — Robust
Charity and Gain Loss (GLO (TM) ) — BITA Quadratic Optimizer is known for its
flexibility, speed of processing, and capacity to handle large complex problems.
This chapter is prefaced with an introduction to optimization in the context
of portfolio construction illustrated with a number of applications. Section 3.3
describes mean – variance optimization, which is the most widely implemented
optimization methodology. In Sections 3.4 – 3.6, issues with this now standard
technique are identified and alternative methodologies described together with
their associated benefits. This exploration completes with implementations of
the innovative (GLO) Gain/Loss Optimizer , also implemented by BITA Risk,
to address these inherent challenges.
Section 3.7 discusses the application of optimization to charity and endow-
ment investments, which invest in perpetuity in comparison to the shorter-term