Systems and methods for trading actively managed funds
View Patent ↗The invention provides systems and methods for intra-day trading of actively managed exchange traded funds (AMETFs). The invention provides creation and redemption structures for AMETF shares that allow arbitrage, intra-day value estimations for AMETF shares, and hedging portfolios for hedging risks associated with trading AMETF shares, all without requiring disclosure of the specific assets underlying the AMETF.
1. A method for creating a portfolio to model a fund without revealing the fund assets, comprising the steps of:
measuring an exposure of the fund to a set of risk factors by a computer to produce a set of fund sensitivity coefficients, wherein the risk factors comprise a historical time series of price data for a set of securities and each fund sensitivity coefficient indicates the exposure of the fund to one of the risk factors,
storing the fund sensitivity coefficients on computer readable media; and
creating a proxy portfolio by a computer from securities selected from a proxy universe of securities, wherein the proxy portfolio has substantially the same sensitivity coefficients as the fund,
where the fund assets are not disclosed to traders who trade shares of the fund and use the proxy portfolio to price or hedge investments in the fund without knowing the composition fund,
wherein the proxy portfolio does not reveal the fund assets.
2. The method of claim 1 , further comprising the step of:
using computer means to create a hedging portfolio based on the proxy portfolio, wherein the hedging portfolio does not reveal the fund assets.
3. A system for creating a portfolio to model a fund comprising:
computer means programmed to measure an exposure of the fund to a set of risk factors to produce a set of fund sensitivity coefficients, wherein the risk factors comprise a historical time series of price data for a set of securities and each fund sensitivity coefficient indicates the exposure of the fund to one of the risk factors,
the computer means further programmed to create a proxy portfolio from securities selected from a proxy universe of securities, wherein the proxy portfolio has substantially the same sensitivity coefficients as the fund and does not reveal the fund assets,
where traders trade shares of the fund and use the proxy portfolio to price or hedge investments in the fund without knowing the composition of the fund.
4. A system for creating a portfolio to model a fund comprising:
computer means programmed to measure an exposure of the fund to a set of risk factors to produce a set of fund sensitivity coefficients, wherein the risk factors comprise a historical time series of price data for a set of securities and each fund sensitivity coefficient indicates the exposure of the fund to one of the risk factors;
the computer means further programmed to create a proxy portfolio from securities selected from a proxy universe of securities, wherein the proxy portfolio has substantially the same sensitivity coefficients as the fund; and
the computer means further programmed to create a hedging portfolio based on the proxy portfolio, wherein the hedging portfolio does not reveal the fund assets,
where traders trade shares of the fund and use the hedging portfolio to hedge investments in the fund without knowing the composition of the fund.
5. The system of claim 3 , wherein the computer is further programmed with a graphical user interface, including a graphical dial, slide bar, or other graphical indicator for adjusting user inputs, wherein the user inputs are selected from the group consisting of the size of aggregation buckets, database minimum data density requirements, banding time, the number of returns used to build the model, the type of weighting, the percent variation used for eigenvalue and factor culling, and the total number of factors to be used in the model.
6. A data storage device storing software to create a portfolio to model a fund without revealing the fund assets, the software having instructions for causing computer means to execute the steps of:
measuring an exposure of the fund to a set of risk factors to produce a set of fund sensitivity coefficients, wherein the risk factors comprise a historical time series of price data for a set of securities and each fund sensitivity coefficient indicates the exposure of the fund to one of the risk factors,
creating a proxy portfolio from securities selected from a proxy universe of securities, wherein the proxy portfolio has substantially the same sensitivity coefficients as the fund, and wherein the proxy portfolio does not reveal the fund assets,
where traders trade shares of the fund and use the proxy portfolio to price or hedge investments in the fund without knowing the composition of the fund.
7. A method comprising using computer means to select a second set of securities that substantially tracks the returns of a first set of securities over the course of a trading day, wherein the second set of securities serves as a proxy for the first set of securities and market participants use the second set of securities to price the first set of securities without knowing the composition of the first set of securities, and wherein the second set of securities does not reveal the first set of securities.
8. The method of claim 7 , wherein the computer uses a Monte Carlo method to select the second set of securities.
9. The method of claim 7 , wherein the computer uses a risk factor method to select the second set of securities.
10. The method of claim 9 , wherein the risk factor method is an economic risk factor method.
11. The method of claim 9 , wherein the risk factor method is a statistical risk factor method.
12. A method comprising using computer means to select a second set of securities that substantially tracks the returns of a first set of securities over the course of a trading day, wherein market participants use the second set of securities to hedge a position in the first set of securities without knowing the composition of the first set of securities, and wherein the second set of securities does not reveal the first set of securities.
13. The method of claim 12 , wherein the computer uses a Monte Carlo method to select the second set of securities.
14. The method of claim 12 , wherein the computer uses a risk factor method to select the second set of securities.
15. The method of claim 14 , wherein the risk factor method is an economic risk factor method.
16. The method of claim 14 , wherein the risk factor method is a statistical risk factor method.
17. The method of claim 12 , wherein the second set of securities is a hedging portfolio derived from a proxy portfolio generated by a computer means to substantially track the returns of the first set of securities.