About Portfolio Probe

Portfolio Probe is an idea as well as software.

Portfolio Probe the Idea

Two key parts of the idea are:

  • We (the fund management industry) owe investors our best efforts to make their futures bright.
  • Improved technology and improved use of technology are possible.

Besides the software the other major manifestation of the idea is the Portfolio Probe blog.

Portfolio Probe the Software

Portfolio Probe is developed by Burns Statistics.  Development started in 2002 with the first release of the predecessor of Portfolio Probe in 2003.  There has been continuous development since then.

In 2010 the software acquired the Portfolio Probe name, and the website dedicated to Portfolio Probe was established.  This was a symbol of the maturity that the software had achieved by then.  Improvements and extensions of the functionality continue.

The software is used in financial companies and universities around the world.

Random Portfolios

The most important feature of Portfolio Probe is the generation of random portfolios.  These are a general tool with many uses.

Perhaps performance is the use that will transform fund management the most.  Random portfolios identify performance much more accurately than the more established techniques.  They can be used both before the fact to improve trading strategies, and after the fact to indicate the skill exhibited by a fund.

Approach to Portfolio Optimization

The optimization engine in Portfolio Probe allows approximate solutions to the desired problem.  This is opposed to distorting a problem into the shape of some available mathematical tool.

The freedom for Portfolio Probe is in all of:

  • the utility
  • the constraints
  • the trading costs

In terms of the utility, for example, the information ratio can be maximized without searching for it via multiple optimizations, and distance from an ideal target portfolio can be minimized.

Examples of constraints that can be hard for other optimizers are integer constraints, threshold constraints, and risk fraction constraints.

Quality Assurance

The quality assurance regimen tries to eliminate bugs in Portfolio Probe, but more importantly the software tries to eliminate bugs in the user’s applications.