MSCI Open Optimizer
MSCI Open Optimizer is an open, flexible optimization library, specifically designed to help solve portfolio management challenges.

Its algorithms utilize multiple optimization engines from MSCI and 3rd parties to create index tracking portfolios, manage asset allocation, implement tax-aware
strategies, and other objectives of portfolio managers.

Key benefits• Built for Portfolio Management — The solver’s extensive feature set empower portfolio
managers with economically meaningful results. It incorporates proprietary solvers
developed by MSCI’s optimization research team and solvers created by leading
optimization experts.

Constraint-aware roundlotting ensures the portfolio rules are satisfied while creatinground lots and include threshold constraints. Other features include risk parity portfolio
construction (also known as equal risk weighting) and transaction cost control throughfixed costs, thresholds, and maximums on the number of names.

• Continuous Innovation — MSCI continues to support client needs as the investment
landscape grows increasingly complex by delivering innovative white papers on
optimization.

• Transparency in Optimization — By providing constraint shadow costs reports, solution
introspection, and frontier analysis MSCI Open Optimizer provides users with moretransparency and intuition around optimization results.

• Flexible Integration — An intuitive programming API, available in C++, Java™, C#, andPython™, provides easy integration with most libraries within statistical tools such as
MATLAB™, and R. In addition, an XML and Protobuf interface allows flexible creationand management of optimization data and parameters regardless of programminglanguage.

• Industry Acceptance — MSCI Optimizer engine powers Barra Aegis, BarraOne, andBarra PortfolioManager, which are used by a wide range of institutional investors. MSCIOpen Optimizer features direct and easy consumption of Models Direct files, reducing
onboarding and support costs. The MSCI Optimizer is used in the construction of many
MSCI Indexes including the MSCI Global Minimum Volatility Indexes.

• Investable Optimal Portfolios — MSCI Open Optimizer moves beyond mean-varianceoptimization through support for advanced mandates and alternative portfolio
construction techniques.

Limiting the number of assets in optimized passive portfolios
0.8
0.7

Cumulative return

0.6
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0.2
0-0.1
-0.2

Objective Function
Feasible BorderRoundlot Solutions

Benchmark (MSCI World)

Portfolio with 10 Assets

Portfolio with 100 Assets

Portfolio with 1000 assets

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Key features

Long-Short Hedging Basket Creation• Comprehensive portfolio construction control for constraints and objectives• Constraints on leverage for longs, shorts, and turnover that can be definedindependently by side• Risk parity portfolio construction• Minimize small trades or positions with precise control on thresholds• Set a maximum on the number of assets help at portfolio or at a group level• Enforce trades to round lots either during or after optimization• Penalize the residual alpha in optimization to correct alpha and risk factor
misalignment• Lower bounds on long or short groups even when the problem becomes non-convex
Tax-Aware Optimization• Bounds on long- and short-term gross gains or losses for tax arbitrage• Tax lotting, with HIFO, LIFO, and FIFO trading rules• Multiple options for handling wash sales• Limit the number of trades/longs/shorts/buys/sells

Asset Allocation• Apply fixed transaction costs per trade in addition to piecewise-linear and non-linear
transaction costs, specific to each asset• Risk parity portfolio construction• Enhance long/short optimization with new leverage constraints, roundlotting,additional paring constraints, and non-convex risk constraints• Add multiple risk terms to the objective function• Includes futures, ETFs, currencies, and other alternative assets

Technical Highlights• APIs are available in C#, C++, Java™, and Python™

• Prioritize soft bounds and constraints to increase likelihood of feasibility• Control the optimality tolerance• Library can be incorporated into statistical packages of MATLAB™, and R with
examples included• Maximize the information ratio and/or Sharpe ratio• XML and Protobuf interface for problem creation or maintenance• Multiple-Period Optimization to obtain a set of optimal portfolios for each of thespecified periods• Package is available for 64-bit machines running Microsoft Windows® and Linux®
environments• Multiple-Account Optimization to simultaneously optimize several accounts andcontrol not only the individual account constraints but also asset exposure, trade size
and turnover of all accounts• Multiple thread-safe for use in distributed grid computing• Complete package includes programmers’ references, tutorials, and working sample
code for all supported development languages• MSCI Open Optimizer has minimal baseline system requirements

About MSCIMSCI is a leading provider of critical decision support tools
and services for the global investment community. With
over 50 years of expertise in research, data and technology,
we power better investment decisions by enabling clientsto understand and analyze key drivers of risk and returnand confidently build more effective portfolios. We create
industry-leading research-enhanced solutions that clientsuse to gain insight into and improve transparency acrossthe investment process.
To learn more, please visit www.msci.com.

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