Blog Post

Advanced XAI Fixed Income Analysis & Reporting: Empowering Advisors To Create Smarter And Faster Investment Strategies

You're reading:

Advanced XAI Fixed Income Analysis & Reporting: Empowering Advisors To Create Smarter And Faster Investment Strategies

Alex Serman • June 18, 2023

As the Feds continue to raise interest rates due to high inflation, it’s no secret that the bond market looks significantly different today than it did a year ago. However, despite recent market changes, fixed income investments are still one of the best ways to provide low-risk long-term sustainability when it comes to diversifying your client’s portfolio. The caveat has been the risks associated with an unknown future of fixed income investments. Here’s a few ways that First Rate and BondIT’s AI technology and advanced fixed income reporting enables wealth managers to view market predictions and probabilities that will help them make smarter and better-informed decisions for their clients.

Anticipate Rating Changes & Move Ahead of the Market

The downgrade and upgrade probabilities of 3,000 corporate and financial issuers worldwide within a 12-month period can be predicted using Explainable AI (XAI) technology. XAI takes traditional AI one step further. While many AI algorithms are complex and difficult to understand, XAI is designed to provide transparency by providing explanations and justifications – such as highlighting what data sets were a critical component in making the prediction.

Users and managers can easily identify trade opportunities ahead of the market with the ability to view and connect this data using smart lists. This allows you to observe buy and sell opportunities while also identifying rating transition probabilities and relative values.

Make Well-Informed Decisions Faster

Not only can XAI technology predict the rating downgrade of a US corporate issuer several months in advance, but it can also help support transparency with clients by providing insight into the drivers behind its risk assessments. This transparent Machine Learning process gives managers the ability to see and effectively communicate which variables contribute to and detract from upgrade and downgrade probabilities – and to what extent.

Tell a Compelling Client Investment Story

The client investment story should always start with good data and always end with the ability to effectively communicate the investment strategy based on that data. A powerful and dynamic investment strategy requires data quality assurance and transparency, from ingestion to communication. With the help of a powerful AI Engine and a team of data experts to ingest structured and unstructured data, aggregate data sets, communicate trends and provide actionable insights, wealth managers are fully equipped to tell a compelling client investment story.

First Rate and BondIT have partnered to provide a proprietary data process that has a proven track-record of outperforming rating agencies’ outlooks by 36%. Automating the portfolio construction and optimization process allows asset managers to scale their service offerings large sets of accounts, increase efficiency, support client engagement long-term relationships, differentiate service offerings, and create better investment decisions faster, which allows them to focus more on growing their business. Contact us to learn more about our partnership and how we can help your firm better predict the future of your client’s fixed income investments.