US008352347B2

(12) Ulllted States Patent (10) Patent N0.: US 8,352,347 B2 Howard et al. (45) Date of Patent: Jan. 8, 2013

(54) INVESTMENT CLASSIFICATION AND lsfhiffipa a a eese

TRACKING SYSTEM USING DIAMOND 6,484,151 B1 110002 o,shaughnessy RATINGS 6,968,317 B1 11/2005 Wallace et a1.

6,983,257 B2 * 1/2006 Gatto ........................ .. 705/36 R

(75) Inventors: C. Thomas Howard, Littleton, CO 7,590,582 B2 * 9/2009 Dunne ..... .. 705/36 R (US); Andrew Howard, Castle Rock, 7,610,230 B2 * 10/2009 Festog et al. 705/36 R CO (Us) 7,644,011 B2 * 1/2010 Shkedy .... .. 705/7.38

7,668,773 B1 * 2/2010 Pruitt ......................... .. 705/36T

(73) Assignee: AthenaInvest,Inc., GreenWoodVillage, 31' 705/36R CO (US) 7,877,309 B2 * 1/2011 Gatto et a1. ............... .. 705/36 R

7,941,359 B2 5/2011 Tanner

( * ) Notice: Subject to any disclaimer, the term of this i gfandenbefgef et a1~ ~~~~~ ~~ ~ - egerstrom $12318 llssixgelideggoé adlusted under 35 2005/0075962 A1* 4/2005 Dunne ..... .. 705/36

- ~ ~ ( ) Y ays- 2006/0074785 A1 * 4/2006 Festog et a1. .................. .. 705/35

2006/0080227 A1 4/2006 Boglaev (21) Appl. N0.: 12/648,615 2006/0085247 A1 * 4/2006 Gatto et a1. ................... .. 705/10

2008/0288386 A1 * 11/2008 Ferris .......... .. 705/35

(22) Filed; Dec 29, 2009 2009/0186689 A1* 7/2009 Hughes et al. ................ .. 463/25

(Continued) (65) Prior Publication Data

OTHER PUBLICATIONS US 2010/0169237 A1 Jul. 1, 2010

(60)

(51)

(52) (58)

(56)

Related US. Application Data

Provisional application No. 61/141,185, ?led on Dec. 29, 2008, provisional application No. 61/146,931, ?led on Jan. 23, 2009, provisional application No. 61/237,981, ?led on Aug. 28, 2009.

Int. Cl.

G06Q 40/00 (2012.01) US. Cl. ......................... .. 705/36 R; 705/35; 705/37

Field of Classi?cation Search ............. .. 705/35i37

See application ?le for complete search history.

References Cited

U.S. PATENT DOCUMENTS

5,371,807 A 5,806,048 A 5,812,987 A 5,941,945 A 6,055,517 A *

12/1994 9/1998 9/1998 8/1999 4/2000

320

Soter, D. (2000). Implementing an effective ?nancial strategy. AFP Exchange, 20(1), 36-40. Retrieved from http://search.pr0quest.c0m/ d0cvieW/225974310?acc0untid:14753.*

(Continued)

Primary Examiner * Olabode Akintola

Assistant Examiner * Abhishek Vyas

(74) Attorney, Agent, or Firm * Sheridan Ross PC

(57) ABSTRACT

The present invention is directed to an asset classi?cation system based on investment strategy. The system determines a number for performance measures and strategy classi?ca tions. These measures indicate, in one con?guration, an extent to Which a security or manager is outperforming or attempting to outperform a benchmark and hoW successful

300 j ) s04

Effjjfg 3 al' the security or manager has been based on historic perfor Luskin et a1‘ mance data. Aditham et al. Friend et a1. .............. .. 705/36 R 23 Claims, 42 Drawing Sheets

33_@ r 3407

Sewer : 360

Memory 364 348 \ Manager Performance

Module Module Biggie

Portfolio Total Manager Solution

Investment / Module Module Raking

itlméul'ant 372 Consistency a arms \\ ostrtztbegy strategy 380 Database

Distributed a 555 T'acker - Module 352 Prooessmg 390

Module 384 Platform .

Integration Conslsiency Modu'e Measure Module

Adviser SMEQY Rating Alpha lQ Platforms CategonzlrlQ Module Module

324 Module

328 / 398

386 394 344

US 8,352,347 B2 Page 2

US. PATENT DOCUMENTS

2009/0198633 A1 8/2009 Howard et a1. 2009/0271332 A1 10/2009 Lo et a1.

OTHER PUBLICATIONS

Holdings-Based and Returns-Based Style Models Jun. 2003 Paul D. Kaplan, Ph.D., CFA Director of Research Morningstar, Inc.* Soter, D. (2000). Implementing an effective ?nancial strategy. AFP Exchange, 20(1), 36-40.* Generalised Style Analysis of Hedge Funds Vikas Agarwal; Narayan Y. Naik; Version accepted for publication in the Journal of Asset; Management (2000), vol. 1, No. 1, pp. 93-109; JEL Classi?cation: G11, G15, G24.* “Boxes are not Classes” by Howard and Callahan, Investment Advi sor Magazine, Jan. 2006, pp. 1-5. “Fact Sheet: The New Morningstar Style Box Methodology” Morningstar, 2002, pp. 1-2. “Risky Business” by Callahan and Howard, Investment Advisor Magazine, Feb. 2006, pp. 1-8. “Schwab Introduced New Online Mutual Fund Selection and Screener Tools”, Dec. 22, 1999, PR Newswire. “Types of funds/fund objectives”, Oct. 6, 2004, USA Today’s Stock Mutual Fund Report. Albertson, Joshua “Large-Cap Growth is Back”, Nov. 18, 2005. SmartMoney.com. Brown, Stephen J. and GoetZmann, William N., “Mutual fund styles”, Journal of Financial Economics 43 (1997) 373-399. Callahan et al., “Outside the Box”, Investment Advisor, Sep. 2005, pp. 84-88. Cremers et al., “How Active IsYour Fund Manager? A New Measure That Predicts Performance”, available at http://ssrn.com.ab stract:891719. Jan. 15, 2007, 57 pages. Hedge Fund Research, Inc., HFR Strategy De?nitions, Oct. 1 1, 2003, <http://www.hedgefundresearch.com/pdf/HFRiStrategyiDe?ni tions.pdf> accessed via Internet Archive Wayback Machine <http:// www.archive.org>.

Howard “Study Conducted by Tom Howard using Apr. 2007 SBI and Zephyr Databases”, published Sep. 2007, 33 pages. Howard et al., “The Problematic “Style” Grid”, Journal of Investment Consulting, vol. 8, No. 1, Winter 2005-06, pp. 44-56. KacpercZyk et al., “On the Industry Concentration of Actively Man aged Equity Mutual Funds,” 2005, pp. 1-49. Rekenthaler “In Defense of Style Boxes”, Investment Advisor, Jun. 2006, 6 pages. SurZ, “What Good are Style Indexes? (Hint: Think Blend),” PPCA Inc., Jun. 2001, pp. 1-4. Teo et al., “Style effects in the cross-section of stock returns”, Journal of Financial Economics 74 (2004) 367-398. Wermers “A Matter of Style: The Causes and Consequences of Style Drift in Institutional Portfolios”, Jul. 2002, 30 pages. Brown et al., “Analysts can forecast accurately!” The Journal of Portfolio Management, Spring 1990, pp. 31-34. BulldogResearch.comiInvestment Research for Smart investors, at http://www.bulldogresearch.com/, printed Feb. 5, 2001, 31 pages. International Search Report for International (PCT) Patent Applica tion No. PCT/US07/78556, mailed Sep. 24, 2008. Written Opinion for International (PCT) Patent Application No. PCT/US07/78556, mailed Sep. 24, 2008. International Search Report for International (PCT) Patent Applica tion No. PCT/US07/78556, mailed Oct. 6, 2008. Written Opinion for International (PCT) Patent Application No. PCT/US07/78556, mailed Oct. 6, 2008. International Preliminary Report on Patentability for International (PCT) Patent Application No. PCT/US07/78556, mailed Mar. 26, 2009. Written Opinion for Singapore Patent Application No. 200901600-7, mailed Mar. 18, 2010. Of?cial Action for US. Appl. No. 11/854,978, mailed Dec. 10,2008. Of?cial Action for US. Appl. No. 11/854,978, mailed Aug. 6, 2009. Notice ofAllowance for US. Appl. No. 11/854,978, mailed Jan. 26, 2010. Of?cial Action for US. Appl. No. 12/362,824, mailed Jun. 21, 2011.

* cited by examiner

US. Patent Jan. 8, 2013 Sheet 1 0f 42 US 8,352,347 B2

‘ Ef?cient Tangency Frontier Portfolio

§f~

E c><" E in Individual 0: b Assets £9.

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l-Ll Assets

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Rate Line

>

Risk O'p

(Prior Art)

US. Patent Jan. 8, 2013 Sheet 2 0f 42 US 8,352,347 B2

Complementary Strategy Circle

Market Quantitative

Future Gr Economic Conditions

'ndustry Opportunity

Sector Pro?tability

Competitive Position

200 Complimentary Strategy Search Results

Strategies Find Funds Using.... 0 Opportunity I] Same CrtterialI] Custom Criteria 0 Pro?tability IE Same Crtterial] Custom Criteria

0 Back to Complimentary StrategySearoh

FIG. 2

US. Patent Jan. 8, 2013 Sheet 6 0f 42 US 8,352,347 B2

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US. Patent Jan. 8, 2013 Sheet 15 of 42 US 8,352,347 B2

Strategy Database

V Management Module

Select Equity/Manager

l Obtain Prospectus And Other Public, Compliance Approved

Statements L“ 1504

l

input into File Associated With Equity/Manager “1508

l Identify Keywords And Map Each To A Speci?c Element That In Turn Is Associated With A Particular Strategy

\1512

l Assign Equity‘s Primary And

Secondary Strategies

l Request And Receive interpretation

lnput From Manager, Modify Elements And Strategies As

Appropriate \

1520

ll

Create Strategy Database File For input into Platform

Integration Module \1524

7 Select 1528 Next E ui \ q ty 1536

FIG. 1 5

US. Patent Jan. 8, 2013 Sheet 16 0f 42 US 8,352,347 B2

Consistency Rating Management Module

l 1600 Select Equity/Manager —/

l Identify And Scale 1,604

Consistency Components L

Calculate Component Values /_ For Selected Equity/Manager 1608

l Assign Strategy Rating ‘#1612

Create Strategy Rating Consistency Database File for input into f1616 Platform Integration Module

Next Equity?

Select 1624 — Next

Equity 1628

FIG. 16

US. Patent Jan. 8, 2013 Sheet 17 0f 42 US 8,352,347 B2

Integration Module

‘ 1 700 Select Equity/Manager _/

l Retrieve Corresponding

lnfcm'lation In Strategy And 1 704 Strategy Rating Consistency / Databases And Third Party

Databases

Clean And Match Information 1708 From Different Databases

t Determine Additional 1712 Statistics For Selected 1

Equity/Manager l

Create SBI Input Database .. 17,16

Y N

Select 1720 1724 — Next

Equity \ 1 728

FIG. 17

US. Patent Jan. 8, 2013 Sheet 18 0f 42

l

US 8,352,347 B2

Receive Account Selection “1800

l Retrieve Portfolio Information

For Selected Account -———-1 804

l Detennine Asset Classes

Recommended For Planned Portfolio

i Determine Strategies Within Each

Asset Class Recommended For Planned Portfolio

/1a12

jv Analyze Existing Portfolio Compared To Optimum Recommended Portfolio

\-1818

i Allocate 100% Of Value

To Strategies Selected For Planned Portfolio

T Select Equities For Planned Portfolio

l Allocate 100% Of Value To Equities Selected For

Planned Portfolio

FIG. 18