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Feature Overview: Asset Growth Simulator
Feature Overview: Asset Growth Simulator
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Written by Kyle Reinhardt
Updated over a week ago

Rev. Date December 11, 2023

What is the purpose of Asset Growth Simulator?

Asset Growth Simulator was designed to help subscribers estimate how portfolios and investments might grow in value over time.

Please note that the Asset Growth Simulator is currently only available in Studio and Report Lab. To access Studio or Report Lab, please reach out to your Client Solutions representative. Additional fees may apply.

How does it work?

Asset Growth Simulator projects the value of an investment or portfolio at various confidence levels given the portfolio’s forecasted risk and return. The simulation assumes a starting hypothetical portfolio value of $10,000 for illustrative purposes.

Exhibit 1: Logarithmic Scale

Exhibit 2: Linear Scale

The Asset Growth Simulation chart is fully configurable (see Exhibit 3): up to 5 lines can be displayed at different return percentiles to reflect the range of potential growth over a configurable time horizon (up to 30 years). The asset growth can be visualized on either a logarithmic scale (see Exhibit 1) or a linear scale (see Exhibit 2).

Exhibit 3: Block Configuration

As noted above, the Asset Growth Simulator uses the portfolio's or investment's forecasted risk and return in its calculations. Thus, please note that any changes to your workspace’s factor forecast settings will also impact the results of the asset growth simulation.

Is this the same as a Monte Carlo simulation?

The Asset Growth Simulator uses a closed form analytical solution. Using equivalent parameters, the output of this model produces similar results to a Monte Carlo simulation.

What are the assumptions of the simulation?

  • The Geometric Brownian Motion has a closed form analytical solution:

  • The portfolio’s return follows a random walk. The expected returns of the portfolio are independent of the value of the process (NAV).

  • The volatility is constant.

  • The path of NAV is continuous.

  • All dividends are reinvested.

  • No capital contribution or withdrawal to and from the portfolio.

What are the data requirements for me to be able to use the Asset Growth Simulator?

Asset Growth Simulator can currently only be used for portfolios or investments with monthly or daily data frequencies, and requires at least 1 year of performance data. For quarterly data, the Asset Growth Simulator can be used after the data is interpolated.

This document highlights certain aspects of this feature. As an overview, it does not discuss all material facts or assumptions. Please see Important Disclosure and Disclaimer Information.

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