Morningstar EnCorr - Software For Asset Allocation

U.S.A.

Morningstar® EnCorr®
Capital markets research and asset allocation modeling.


		Overview


		Who Uses EnCorr


		Asset Allocation


		Portfolio Implementation


		Resampling Benefits


		Charts and Reports


		Data Sets and Investment Types

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Asset Allocation

Morningstar® EnCorr® integrates extensive investment data with proven financial models and advanced asset allocation tools to set the foundation for asset allocation policies. Starting with sound inputs, investment professionals can apply a range of methodologies to decades of real data while developing capital market assumptions. Powerful optimization functionality puts assumptions to the test, allowing users to incorporate their own market insights along with different ways of quickly calculating the efficient frontier and identifying risk. Forecasting tools project possible returns under a variety of economic conditions.

What you can do:

Develop asset allocation inputs

	Select from an extensive library of indexes
	Build expected return estimates with various methodologies including historical, building block, Capital Asset Pricing Model (CAPM), and Black-Litterman methods
	Analyze inputs under various historical economic conditions
	Edit historical monthly data to incorporate custom views of performance, correlation, and standard deviation
	Share capital market assumptions with colleagues

Morningstar<span class="registered">®</span> EnCorr<span class="registered">®</span>

EnCorr helps users develop a reliable set of expectations for returns, risk, and correlations as inputs for building sound asset allocation strategies and optimal portfolios. A large library of indexes is available, representing a broad range of asset classes. Users can choose which leading methodology to apply when creating asset class assumptions, or they can apply their own insights and probability-weighted inputs. When complete, capital markets assumptions can be distributed to colleagues either as updatable or rights-protected files.

Print two frontier area graphs comparing Black-Litterman to historical inputs

Choose from multiple optimization techniques

	Resample mean-variance optimizations (MVO) for more diverse portfolios
	Apply traditional mean-variance optimizations (MVO)
	Use surplus optimization to identify risk-appropriate asset mixes that account for liabilities

EnCorr offers a proprietary resampling technique that applies Monte Carlo-like simulations to capital market assumptions prior to mean-variance optimization (MVO). This technique produces allocations that are much more diverse than those resulting from traditional mean-variance optimization (MVO). EnCorr also offers surplus optimization, also known as liability modeling, which estimates liabilities as a set of future cash flows. (The “surplus” refers to assets minus liabilities.) Surplus optimization in EnCorr helps plan sponsors manage the natural hedge between assets and liabilities to sustain a plan’s net worth.

See the results of resampling in EnCorr

View an efficient frontier in EnCorr

Forecast risk and test scenarios

	Perform “what if” analyses under numerous market and economic conditions
	Calculate log-stable distributions for more conservative wealth predictions
	Run Monte Carlo simulations on multiple portfolios to compare expected returns over time
	Use risk decomposition to quantify how each asset class contributes to the overall risk

With EnCorr, users can stress test asset allocation mixes under varying scenarios and a variety of conditions. Forecasting in EnCorr gives users the option to use log-stable or log-normal distribution assumptions. Studies have shown that log-stable distribution curves better account for market volatility than log-normal distributions by capturing data peaks and outliers or “fat tails.” Applying log-stable distribution assumptions leads to more conservative predictions of asset growth over time. Monte Carlo simulations help project the probability of possible future returns and wealth values over time, either for specific portfolios or in comparisons of multiple portfolios. A risk decomposition feature reveals the percent risk each asset class contributes to the overall risk, which users can view as tables of calculations or graphs. All tables, graphs, and reports are easy to export to Microsoft® Word, Excel®, and PowerPoint® for presenting to clients or colleagues.

View a test scenario in EnCorr

Review the results of a Monte Carlo simulation in EnCorr

Print a simulated funding level graph to see how EnCorr projects returns and liabilities in over/under funded scenarios

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