Northfield Information Services will license New Frontier Advisors’ patented analytical process, which seeks to improve classical mean-variance analysis for portfolio construction and performance. It is the first time the tool has been licensed for institutional equity portfolio optimization, said Richard Michaud, New Frontier managing director and co-developer of the technology. New Frontier’s license to Northfield is nonexclusive.
Northfield will incorporate the New Frontier process into its optimizer by August, said Dan DiBartolomeo, Northfield president. Northfield has 110 clients that use its optimizer software, including State Street Global Advisors, whose spokeswoman confirmed the relationship.
The New Frontier process attempts to improve confidence in estimating portfolio risk and return. It deals with estimates, which are always prone to error, by reflecting their uncertainty in the model. Also, it ranks the importance of equity trades to determine which are meaningful, thus reducing trading costs — Mr. Michaud said at least 50% of all institutional trades are without benefit.
