SCR Calculator User Manual

Version Last modified 2024-3-21

Step 1: Import Allocation

The SAA form is a "multi-instance" form: You can open multiple instances of this form; and they will work independently from each other. But if you close an SAA form, all the data associated with that form will be lost.

The form initially appears quite blank, with only 3 buttons:

There are two alternative methods to import an allocation plan into an SAA form:

  • Method 1: Build a model portfolio in the Model Portfolio form, then click the "Pull Portfolio" button in the SAA form. See below for an inputsheet to the MP form for use. It is also available in the App in Menu-> Help -> Download Demo Inputs -> Spreadsheets for the MP Form -> Model Portfolio Inputsheet. Note that its "FX" tab contains a 120bps hedging cost from USD to EUR; and since US HY is assumed 100% FX hedged, its expected return will be reduced from 8.42 in USD terms (LC) to 7.22 in EUR terms (PC) in the SAA form.

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    Using this method, if you are importing a model portfolio of more than 10 rows, the calculator will ask you if you wish to aggregate by Cat Code or Port Code.

    • Select "No" and the same number of rows will be pulled over.
    • Select "Yes, by Cat Code", and assets will be aggregated by their "Cat" column and "Currency" column values then pulled over.
    • Select "Yes, by Port Code", and assets will be aggregated by their "Port" column and "Currency" column values then pulled over.
    The two aggregation choices are useful when you have a sizable, granular line-level model portfolio set up in the Model Portfolio form, and you wish to summarise them up to a higher level (asset class or sub-portfolio level) before performing a strategic asset allocation optimisation.

  • Method 2: Build an independent allocation spreadsheet with at least five fields (asset class, current allocation, currency, duration, rating) and preferrably an additional column of Expected Return, as shown below. It is also available in the App in Menu-> Help -> Download Demo Inputs -> Spreadsheets for the SAA form -> Allocation Table. Click the "Import Table" button in the SAA form. You can use the "Export Table" button to create such a blank spreadsheet then fill in. This approach is useful when you don't have a model portfolio made in the MP form. Note that we already entered the US HY expected return as its EUR hedged value of 7.22.
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Using either method, the allocation table in the SAA form would look like the following:

The allocation table is fully editable, subject to the following validation checks upon importing and editing:

  • Index and Asset Class must be unique and non-empty
  • User cannot edit 'Total' row
  • Expected Return must be numeric and non-empty
  • Current Allocation, Lower Bound, Upper Bound must be numeric, non-empty and positive
  • Lower Bound must be less than or equal to Upper Bound
  • Annualised Volatility and Duration must be numeric and positive, or empty
  • Currency must be 3-letter currency and non-empty
  • Rating must be within the interpreted rating expressions range
  • Whole table checked upon import

Rows and columns are all drag-and-droppable, except for the "Total" row.

The "Expected Return" values should be based on forward-looking assumptions.

The two asset classes - EUR HY and US HY - have particularly small current allocations. These are actually two new investment strategies that we want to compare and choose, using our SAA tool. The rest asset classes are the client's current allocation.

If you press the "Rating Index" button, the ratings will be translated into a new numerical column "Rating Index" - useful for use in optimisation:

The "Index", "Annualised Volatility", "Lower Bound" and "Upper Bound" columns are auto-added.

"Lower Bounds" for all asset classes default value = 0. "Upper Bounds" for all asset classes default value = twice the current value, rounded to the nearest 5%, and with minimum value = 5%. Review and adjust these two columns to reflect your actual allocation policy.

"Annualised Volatility" will be populated in the next step.

If you prepared additional columns in the spreadsheet (e.g. ESG scores, carbon emission intensity, etc.), they will appear here. Otherwise, you can use the "New Column" button to add ad hoc columns to the table.