SCR Calculator User Manual

Run Optimisation

Once both 'Current' and 'New' tabs were imported and 'Settings' entered appropriately, go to the 'Run' tab and click the 'Run Optimisation' button. After a couple of seconds (actual time depending on the level of complexity of constraints entered and the speed of your computer, but usually does not exceed 1 minute), a quick message will be displayed telling if the optimisation has succeeded.

• If the optimisation succeeded, the before/after comparison of the objective metric will be displayed, e.g.:
  
• If the optimisation failed, a technical error code will be displayed. The error code usually does not give too much useful information, because the failure is usually caused by constraints being too tight as a collective set and the optimiser cannot tell which one constraint item was the last straw on the camel's back. The user needs to loosen one or several constraints progressively until the optimisation works. It will be a trial-and-error process, so it is recommended that constraints be set rather loosely initially and gradually tightened.

The layout of the tab is almost exactly the same as the 'Current' and 'New' tabs, except:

• The datatable represents the optimised portfolio. There is an extra column '% Weight Old' alongside the '% Weight' column. (Note that if in 'Settings' you enetered a target portfolio weight different from 100%, the '% Weight' column here will sum up to that percentage figure rather than 100. This is for ease-of-comparison purpose.)
• In the lower left corner, the several controls are specific to the optimisation:
  • Portfolio Turnover displays the actual turnover from the current portfolio to the optimised portfolio.
  • Gain/Loss Crystallised displays the actual realised P&L from the turnover. It should fall in between the user-defined limits.
  • Amount Sold represents the percentage figure of assets sold. There is a listbox of sold items beheath.

Usually some iterations are needed bofore an ideal optimised model portfolio emerges. You can flip back to the 'Settings' tab to change some constraint inputs and return to the 'Run' tab and click 'Run Optimisation' again; and repeat this process as many times as necessary.

The optimised model portfolio will still be somewhat different from the finalised portfolio to be constructed, since manual inspection and changes are inevitable; but a portfolio built with the optimiser first usually presents more balanced characteristics than one that's entirely built by hand.