System and method of managing cash and suggesting transactions in a multi-strategy portfolio

• US 20090063365A1
• Filed: 10/24/2008
• Published: 03/05/2009
• Est. Priority Date: 12/19/2005
• Status: Abandoned Application

• Current Assignee: Vestwise LLC
• Original Assignee: Vestwise LLC
• Inventors: Pinkas, Gad
• Application Number:
  US12/289,322
• Publication Number:
  US 20090063365A1
• Time in Patent Office: Days
• US Class Current: 705/36.R
• CPC Class Codes: G06Q 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis

Abstract

According to some embodiments of the present invention, there is provided a system for managing an investment portfolio that is associated with at least two investment strategies, at least one of the investment strategies providing a strategy change in respect of a non-cash position by explicitly or implicitly specifying a recommended change value for the non-cash position, the system comprising: a portfolio management processor, the portfolio management processor is responsive to the strategy change in respect of the non-cash position for calculating a cash allocation for a cash position of an investment strategy providing the change, wherein the cash allocation is based upon: a recommended relative weight for the cash position, the relative weight is provided explicitly or implicitly by the investment strategy providing the change, a relative weight of at least one other cash position, the relative weight is provided explicitly or implicitly by at least one other investment strategy with which the investment portfolio is associated, a specified proportion between the two or more investment strategies with which the investment portfolio is associated, and a value of a cash holding within the investment portfolio; and the portfolio management processor is further responsive to the investment strategy providing the change for calculating a suggested transaction based upon the change value specified explicitly or implicitly by the strategy providing the change in respect of the non-cash position, and based upon the cash allocation calculated for the cash position of the investment strategy providing the change.

Claims

1. A computer system for determining an optimal asset selling or buying vector in respect of assets within an investment portfolio that is associated with a plurality of investment strategies according to a predefined proportion between the strategies, and each one of the plurality investment strategies providing explicitly or implicitly a recommended relative weight with respect to cash and/or non-cash positions, said system comprising:

a cash generating or reinvesting module adapted to obtain each one of the following;

an ideal value for each one of a plurality of positions recommended by at least one of said plurality of strategies, said ideal value is calculated based upon;

a recommended relative weight for its respective position as provided explicitly or implicitly by at least one of said plurality of strategies and said predefined proportion between said plurality of strategies;

a needed cash amount for either cash generation or reinvesting;

an optimizer adapted to;

provide an objective function for scoring an asset selling or buying vector, said objective function is sensitive to a degree by which selling or buying transactions denoted by an asset selling or buying vector affect differences between actual values of a plurality of positions recommended by at least one of said plurality of strategies and corresponding ideal values of said plurality of positions, said objective function inducing an order relation which denotes a relationship between a set of possible asset selling or buying vectors according to their corresponding scores;

generate according to a predefined vector generation procedure one or more asset selling or buying vectors, each denoting one or more selling or buying transactions that if executed are estimated to generate or expend a total amount of cash which approximately matches said needed cash amount;

implement with respect of each generated asset selling or buying vector, a vector scoring and evaluation sequence, comprising;

calculate effects of selling or buying transactions denoted by said vector on asset holdings within said portfolio, to thereby provide an updated estimated value for said asset holdings;

compute an estimated actual value for each one of a plurality of positions recommended by at least one of said plurality of strategies, said estimated actual value for each one of said plurality of said plurality of positions is based at least on an estimated value for an asset holding associated with said position;

compute differences between said actual values of said plurality of positions and corresponding ideal values of said plurality of positions;

compute an overall score for that vector based on said predefined objective function;

determine according to said order relation whether that vector is better than any previously generated vector, and if that vector is better than any previously generated vector designate that vector and its overall score as best; and

said optimizer is adapted to determine whether a stop criterion is met, wherein in case said stop criterion is met, data related to an asset selling or buying vector designated as best is provided as output, and in case said stop criterion is not met, said optimizer is adapted to generate at least one more new asset selling or buying vector according to said predefined vector generation procedure and to repeat said vector scoring and evaluation sequence with respect to said new vector.

2. The system according to claim 1, wherein said optimizer further comprises:

an initial vector generator adapted to generate an initial asset selling or buying vector;

a repair vector generator adapted to search for an asset selling or buying vector which moderately modifies a previous asset selling or buying vector, to thereby provide an asset selling or buying vector that is better, according to said order relation, than a previous asset selling or buying vector.

3. The system according to claim 1, wherein said optimizer further comprises:

a stochastic vector generator adapted to generate an asset selling or buying vector by using at least a random number generation, said stochastic vector generator is configured to be triggered in response to said repair vector generator failing to provide an asset selling or buying vector that is better, according to said order relation, than a previous asset selling or buying vector.

4. The system according to claim 2, wherein said initial vector generator is adapted to generate a preliminary asset selling or buying vector and then to generate one or more additional vectors using iterative steps, and wherein said initial vector generator is adapted to search at each iterative step, for a set of one or more increments and/or decrements by a predefined value to one or more elements of a previously generated asset selling or buying vector, to thereby generate an asset selling or buying vector resulting from applying the a selected set of increments and/or decrements to a previously generated asset selling or buying vector;

and also to determine whether a stop criteria for concluding an initialization of an asset selling or buying vector is met.

5. The system according to claim 4, wherein said stop criteria for concluding an initialization of an asset selling or buying vector includes a condition that said initial asset selling or buying vector denotes one or more selling or buying transactions that if executed generate or expend cash in an estimated total amount which approximately matches said needed cash amount.

6. The system according to claim 4, wherein said initial vector generator is adapted to select from a plurality of asset selling or buying vectors which are a result of applying a set of increments and/or decrements by a predefined value to one or more elements of a previously generated asset selling vector, that asset selling or buying vector which is best amongst said plurality of asset selling or buying vectors according to said order relation.

7. The system according to claim 2, wherein said repair vector generator is adapted to search for said asset selling or buying vector which moderately modifies a previous asset selling vector, based on incrementing one or more elements of said previous asset selling or buying vector by approximately a predefined quantity and/or decrementing one or more other elements of said asset selling or buying vector by approximately a predefined quantity.

8. The system according to claim 7, wherein said repair vector generator is adapted to select from a plurality of asset selling or buying vectors which moderately modify a previous asset selling vector, an asset selling or buying vector that is better amongst said plurality of asset selling or buying vectors according to said order relation.

9. The system according to claim 1, wherein said optimizer is adapted to compute an overall score for an asset selling or buying vector further based on an objective function that includes a measure of a volatility or variance related to differences between actual value and corresponding ideal value of positions recommended by at least one of said plurality of investment strategies, wherein said measure of a volatility or a variance is in respect of an asset selling or buying vector and is based on said updated estimated values for asset holdings calculated according to the effects of selling or buying transactions denoted by said vector.

10. The system according to claim 9, wherein said optimizer is adapted to compute an overall score for an asset selling or buying vector based on said objective function that includes a measure of a volatility or a variance, and a calculation of said objective function with respect to said asset selling or buying vector is further based upon an average of said differences between an actual value and a corresponding ideal value of said positions.

11. The system according to claim 10, wherein said objective function, that includes a measure of a volatility or a measure of variance, is based upon a totaling of a plurality of squares of distances, each one of said plurality of squares of distances is associated with a position and is calculated based upon a difference between an ideal value and a corresponding actual value of said position and said average of said differences between actual and ideal values of said positions.

12. The system according to claim 1, wherein said optimizer is adapted to compute an overall score for an asset selling or buying vector further based on an objective function that includes a measure of a degree of position imbalances related to a sum of squares or a sum of absolute values of differences between an actual value and a corresponding ideal value of positions that are associated with at least one of said plurality of investment strategies, wherein said degree of positions imbalances is calculated in respect of an asset selling or buying vector based on said updated estimated values for asset holdings calculated according to the effects of selling or buying transactions denoted by said vector.

13. The system according to claim 1, wherein said cash generating or reinvesting module is adapted to determine said needed cash amount based on a reinvestment value, and said reinvestment value is based on a totaling of a plurality of differences between an actual value and a corresponding ideal value of one or more non-cash positions that are recommended explicitly or implicitly by at least one of said plurality of investment strategies, and wherein said optimizer is adapted to generate said one or more asset buying or selling vectors, each denoting one or more asset buying or selling transactions which if executed are estimated to expend approximately said needed cash amount.

14. The system according to claim 13, wherein said reinvestment value is based on a totaling of a plurality of differences between an actual value and a corresponding ideal value of one or more non-cash positions, each of which said one or more non-cash positions has an ideal value that is greater than that position'"'"'s corresponding actual value.

15. The system according to claim 1, wherein said cash generating or reinvesting module is adapted to determine said needed cash amount based on a reinvestment value, and said reinvestment value calculation is based upon a value of a cash holding within said portfolio and a totaling of one or more ideal values of one or more cash positions, each one of said one or more cash positions is recommended, explicitly or implicitly, by an investment strategy with which said portfolio is associated, and wherein said optimizer is adapted to generate one or more asset buying vectors, each one of said asset buying vectors denoting one or more asset buying transactions which if executed are estimated to expend approximately said needed cash amount.

16. The system according to claim 1, wherein said cash generating or reinvesting module is responsive to a suggested transaction or to a recommended change value that is provided in respect of one or more positions that are explicitly or implicitly recommended by at least one of said plurality of investment strategies with which said portfolio is associated, for determining said needed cash amount based on said suggested transaction or said recommended change value and further based on a value of a cash holding within said investment portfolio.

17. The system according to claim 2, wherein said stochastic vector generator is further adapted to generate said asset selling or buying vector using also one or more increments and/or decrements by a predefined value and with respect to one or more elements of a previously generated asset selling or buying vector.

18. A method of determining an optimal asset selling or buying vector in respect of assets within an investment portfolio that is associated with a plurality of investment strategies according to a predefined proportion between the strategies, and each one of the plurality investment strategies providing explicitly or implicitly a recommended relative weight with respect to cash and/or non-cash positions, said method comprising:

obtaining each one of the following;

an ideal value for each one of a plurality of positions recommended by at least one of said plurality of strategies, said ideal value is calculated based upon;

a recommended relative weight for its respective position as provided explicitly or implicitly by at least one of said plurality of strategies and said predefined proportion between said plurality of strategies;

a needed cash amount for either cash generation or reinvesting;

providing an objective function for scoring an asset selling or buying vector, said objective function is sensitive to a degree by which selling or buying transactions denoted by an asset selling or buying vector affect differences between actual values of a plurality of positions recommended by at least one of said plurality of strategies and corresponding ideal values of said plurality of positions, said objective function inducing an order relation which denotes a relationship between a set of possible asset selling or buying vectors according to their corresponding scores;

generating according to a predefined vector generation procedure one or more asset selling or buying vectors, each denoting one or more selling or buying transactions that if executed are estimated to generate or expend a total amount of cash which approximately matches said needed cash amount;

implementing with respect of each generated asset selling or buying vector, a vector scoring and evaluation sequence, comprising;

calculating effects of selling or buying transactions denoted by said vector on asset holdings within said portfolio, to thereby provide an updated estimated value for said asset holdings;

computing an estimated actual value for each one of a plurality of positions recommended by at least one of said plurality of strategies, said estimated actual value for each one of said plurality of said plurality of positions is based at least on an estimated value for an asset holding associated with said position;

computing differences between said actual values of said plurality of positions and corresponding ideal values of said plurality of positions;

computing an overall score for that vector based on said predefined objective function;

determining according to said order relation whether that vector is better than any previously generated vector, and if that vector is better than any previously generated vector designate that vector and its overall score as best; and

determining whether a stop criterion is met, wherein in case said stop criterion is met, providing data related to an asset selling or buying vector designated as best as output, and in case said stop criterion is not met, generating at least one more new asset selling or buying vector according to said predefined vector generation procedure and repeating said vector scoring and evaluation sequence with respect to said new vector.

19. The method according to claim 18, wherein said implementing a vector scoring and evaluation sequence further comprises:

generating an initial asset selling or buying vector; and

searching for an asset selling or buying vector which moderately modifies a previous asset selling or buying vector, to thereby provide an asset selling or buying vector that is better, according to said order relation, than a previous asset selling or buying vector.

20. The method according to claim 19, wherein said implementing a vector scoring and evaluation sequence further comprises:

generating an asset selling or buying vector by using at least a random number generation, said stochastic vector generator is configured to be triggered in response to said searching for an asset selling or buying vector which moderately modifies a previous asset selling or buying vector failing to provide an asset selling or buying vector that is better, according to said order relation, than a previous asset selling or buying vector.

21. The method according to claim 19, wherein said generating an initial asset selling or buying vector further comprises:

generating a preliminary asset selling or buying vector and then to generating one or more additional vectors using iterative steps; and

searching at each iterative step for a set of one or more increments and/or decrements by a predefined value to one or more elements of a previously generated asset selling or buying vector, for thereby generating an asset selling or buying vector resulting from applying a selected set of increments and/or decrements to a previously generated asset selling or buying vector.

22. The method according to claim 21, wherein said determining whether a stop criterion is met, further comprises implementing a condition that said initial asset selling or buying vector denotes one or more selling or buying transactions that if executed generate or expend cash in an estimated total amount which approximately matches said needed cash amount.

23. The method according to claim 21, wherein generating a preliminary asset selling or buying vector, further comprises selecting from a plurality of asset selling or buying vectors which are a result of applying a set of increments and/or decrements by a predefined value to one or more elements of a previously generated asset selling vector, that asset selling or buying vector which is best amongst said plurality of asset selling or buying vectors, according to said order relation.

24. The method according to claim 19, where said searching for an asset selling or buying vector, further comprises searching for said asset selling or buying vector which moderately modifies a previous asset selling vector based on incrementing one or more elements of said previous asset selling or buying vector by approximately a predefined quantity and/or decrementing one or more other elements of said asset selling or buying vector by approximately a predefined quantity.

25. The method according to claim 24, further comprising selecting from a plurality of asset selling or buying vectors which moderately modify a previous asset selling vector an asset selling or buying vector that is better amongst said plurality of asset selling or buying vectors according to said order relation.

26. The method according to claim 18, wherein said computing an overall score, further comprises computing an overall score for an asset selling or buying vector based on an objective function that includes a measure of a volatility or variance related to differences between an actual value and a corresponding ideal value of positions recommended by at least one of said plurality of investment strategies, wherein said measure of a volatility or a variance is in respect of an asset selling or buying vector and is based on said updated estimated values for asset holdings calculated according to the effects of selling or buying transactions denoted by said vector.

27. The method according to claim 26, wherein said computing an overall score for an asset selling or buying vector based on an objective function, further comprises calculating said objective function based on a measure of a volatility or a variance, and further based upon an average of said differences between an actual value and a corresponding ideal value of said positions.

28. The method according to claim 27, wherein said computing an overall score for an asset selling or buying vector based on an objective function, further comprises totaling a plurality of squares of distances, each one of said plurality of squares of distances is associated with a position and is calculated based upon a difference between an ideal value and a corresponding actual value of said position and said average of said differences between actual and ideal values of said positions.

29. The method according to claim 18, wherein said computing an overall score, further comprises computing an overall score for an asset selling or buying vector further based on an objective function that includes a measure of a degree of position imbalances related to a sum of squares or a sum of absolute values of differences between an actual value and a corresponding ideal value of positions that are associated with at least one of said plurality of investment strategies, wherein computing an overall score for an asset selling or buying vector is further based on said updated estimated values for asset holdings calculated according to the effects of selling or buying transactions denoted by said vector.

30. The method according to claim 18, wherein said obtaining further comprises:

totaling of a plurality of differences between an actual value and a corresponding ideal value of one or more non-cash positions that are recommended explicitly or implicitly by at least one of said plurality of investment strategies giving rise to a reinvestment value;

determining said needed cash amount further based on said reinvestment value, and wherein

said generating one or more asset selling or buying vectors, further comprises generating according to a predefined vector generation procedure one or more asset selling or buying vectors, each denoting one or more selling or buying transactions that if executed are estimated to expend a total amount of cash which approximately matches said needed cash amount.

31. The method according to claim 30, wherein said totaling, further comprises totaling of a plurality of differences between an actual value and a corresponding ideal value of one or more non-cash positions, each of which said one or more non-cash positions has an ideal value that is greater than that position'"'"'s corresponding actual value.

32. The method according to claim 18, wherein said obtaining further comprises:

calculating a reinvestment value based upon a value of a cash holding within said portfolio and a totaling of one or more ideal values of one or more cash positions, each one of said one or more cash positions is recommended, explicitly or implicitly, by an investment strategy with which said portfolio is associated;

determining said needed cash amount further based on said reinvestment value, and wherein,

said generating one or more asset selling or buying vectors, further comprises generating one or more asset buying vectors, each one of said asset buying vectors denoting one or more asset buying transactions which if executed are estimated to expend approximately said needed cash amount.

33. The method according to claim 18, further comprising:

detecting a suggested transaction or a recommended change value that is provided in respect of one or more positions that are explicitly or implicitly recommended by at least one of said plurality of investment strategies with which said portfolio is associated; and

in response to detecting said suggested transaction or said recommended change value, determining said needed cash amount based on said suggested transaction or said recommended change value and further based on a value of a cash holding within said investment portfolio.

34. The method according to claim 20, wherein said generating an asset selling or buying vector by using at least a random number generation, further comprises generating said asset selling or buying vector using also one or more increments and/or decrements by a predefined value and with respect to one or more elements of a previously generated asset selling or buying vector.

35. A program storage device readable by machine, tangibly embodying a program of instructions executable by the machine to perform a method of determining an optimal asset selling or buying vector in respect of assets within an investment portfolio that is associated with a plurality of investment strategies according to a predefined proportion between the strategies, and each one of the plurality investment strategies providing explicitly or implicitly a recommended relative weight with respect to cash and/or non-cash positions, said method comprising:

obtaining each one of the following;

an ideal value for each one of a plurality of positions recommended by at least one of said plurality of strategies, said ideal value is calculated based upon;

a recommended relative weight for its respective position as provided explicitly or implicitly by at least one of said plurality of strategies and said predefined proportion between said plurality of strategies;

a needed cash amount for either cash generation or reinvesting;

providing an objective function for scoring an asset selling or buying vector, said objective function is sensitive to a degree by which selling or buying transactions denoted by an asset selling or buying vector affect differences between actual values of a plurality of positions recommended by at least one of said plurality of strategies and corresponding ideal values of said plurality of positions, said objective function inducing an order relation which denotes a relationship between a set of possible asset selling or buying vectors according to their corresponding scores;

generating according to a predefined vector generation procedure one or more asset selling or buying vectors, each denoting one or more selling or buying transactions that if executed are estimated to generate or expend a total amount of cash which approximately matches said needed cash amount;

implementing with respect of each generated asset selling or buying vector, a vector scoring and evaluation sequence, comprising;

calculating effects of selling or buying transactions denoted by said vector on asset holdings within said portfolio, to thereby provide an updated estimated value for said asset holdings;

computing an estimated actual value for each one of a plurality of positions recommended by at least one of said plurality of strategies, said estimated actual value for each one of said plurality of said plurality of positions is based at least on an estimated value for an asset holding associated with said position;

computing differences between said actual values of said plurality of positions and corresponding ideal values of said plurality of positions;

computing an overall score for that vector based on said predefined objective function;

determining according to said order relation whether that vector is better than any previously generated vector, and if that vector is better than any previously generated vector designate that vector and its overall score as best; and

determining whether a stop criterion is met, wherein in case said stop criterion is met, providing data related to an asset selling or buying vector designated as best as output, and in case said stop criterion is not met, generating at least one more new asset selling or buying vector according to said predefined vector generation procedure and repeating said vector scoring and evaluation sequence with respect to said new vector.

36. A computer program product comprising a computer useable medium having computer readable program code embodied therein of determining an optimal asset selling or buying vector in respect of assets within an investment portfolio that is associated with a plurality of investment strategies according to a predefined proportion between the strategies, and each one of the plurality investment strategies providing explicitly or implicitly a recommended relative weight with respect to cash and/or non-cash positions, said computer program product comprising:

computer readable program code for causing the computer to obtain each one of the following;

an ideal value for each one of a plurality of positions recommended by at least one of said plurality of strategies, said ideal value is calculated based upon;

a recommended relative weight for its respective position as provided explicitly or implicitly by at least one of said plurality of strategies and said predefined proportion between said plurality of strategies;

a needed cash amount for either cash generation or reinvesting;

computer readable program code for causing the computer to provide an objective function for scoring an asset selling or buying vector, said objective function is sensitive to a degree by which selling or buying transactions denoted by an asset selling or buying vector affect differences between actual values of a plurality of positions recommended by at least one of said plurality of strategies and corresponding ideal values of said plurality of positions, said objective function inducing an order relation which denotes a relationship between a set of possible asset selling or buying vectors according to their corresponding scores;

computer readable program code for causing the computer to generate according to a predefined vector generation procedure one or more asset selling or buying vectors, each denoting one or more selling or buying transactions that if executed are estimated to generate or expend a total amount of cash which approximately matches said needed cash amount;

computer readable program code for causing the computer to implement with respect of each generated asset selling or buying vector, a vector scoring and evaluation sequence, comprising;

computer readable program code for causing the computer to calculate effects of selling or buying transactions denoted by said vector on asset holdings within said portfolio, to thereby provide an updated estimated value for said asset holdings;

computer readable program code for causing the computer to compute an estimated actual value for each one of a plurality of positions recommended by at least one of said plurality of strategies, said estimated actual value for each one of said plurality of said plurality of positions is based at least on an estimated value for an asset holding associated with said position;

computer readable program code for causing the computer to compute differences between said actual values of said plurality of positions and corresponding ideal values of said plurality of positions;

computer readable program code for causing the computer to compute an overall score for that vector based on said predefined objective function;

computer readable program code for causing the computer to determine according to said order relation whether that vector is better than any previously generated vector, and if that vector is better than any previously generated vector designate that vector and its overall score as best; and

computer readable program code for causing the computer to determine whether a stop criterion is met, wherein in case said stop criterion is met, providing data related to an asset selling or buying vector designated as best as output, and in case said stop criterion is not met, generating at least one more new asset selling or buying vector according to said predefined vector generation procedure and repeating said vector scoring and evaluation sequence with respect to said new vector.