Browsing: Asset Allocation

Asset Allocation

Time Versus Volatility in a CDI Approach

Jun 15th, 2021 | Filed under: Featured Post, Manager Selection, Newly Added, Asset Allocation

By Russell Kamp, Managing Director at Ryan ALM There is a lot of volatility in a normal asset allocation in short time frames. We’ve seen this unfold dramatically in a number of cases during the last couple of decades. To reduce this volatility, I often guide our pension clients toRead More


What About Beta? | Learn to Play the Orchestra

Jun 6th, 2021 | Filed under: Featured Post, Manager Selection, Newly Added, Asset Allocation, What About Beta?, Risk Management

By Aaron Filbeck, CFA, CAIA, CIPM, FDP, Director, Global Content Development at CAIA Association Steve Wozniak: “You can’t write code… you’re not an engineer… you’re not a designer… you can’t put a hammer to a nail […] So how come ten times in a day, I read Steve Jobs isRead More


Gump’s Law and the Butterfly Effect

May 6th, 2021 | Filed under: State of the Industry, Access to Alternatives, Featured Post, Newly Added, Asset Allocation, Risk Management

By Alexander Ineichen, CAIA, CFA, FRM At the beginning of 2019, 50 out of 50 economists surveyed by the Wall Street Journal thought that 10-year Treasury yields wouldn’t fall below 2% during the year. They did. Remember: The herd instinct among forecasters makes sheep look like independent thinkers.[1] —Edgar FiedlerRead More


Analyzing 60/40 Portfolios Without Bonds

May 3rd, 2021 | Filed under: State of the Industry, Featured Post, Newly Added, Asset Allocation, Hedge Funds

By Nicolas Rabener, CAIA, of FactorResearch (@FactorResearch) INTRODUCTION John Maynard Keynes famously asked, “When the facts change, I change my mind—what do you do, sir?” If this question was directed at global pension funds and their fixed income allocation, then the answer would have to be, “Not much.” Their averageRead More


Worried About Inflation? Get Real

Apr 23rd, 2021 | Filed under: Featured Post, Newly Added, Asset Allocation, Commodities & Natural Resources

By Keith Black, PhD, CFA, CAIA, FDP, Managing Director, Content Strategy, CAIA Association Last July, we discussed Socially Distanced Inflation with the idea that COVID would have a negative effect on employment and output, which would lead to increased business failures. A record amount of monetary and fiscal stimulus combinedRead More


Enhancing an Income Portfolio with Factor Design

Feb 21st, 2021 | Filed under: Featured Post, Newly Added, Asset Allocation, Risk Management

By Daniel Fang, CFA, CAIA, Lead Portfolio Manager at Emotomy, and Sabrina Bailey, CEO at Emotomy Interest Rates to Stay Lower for Longer Since the Great Financial Crisis, central banks across all major economies have kept interest rates low to stimulate economic growth (See Exhibit 1). This trajectory took aRead More


Keeping Digital Assets Stable with Stablecoins

Jan 28th, 2021 | Filed under: Access to Alternatives, Featured Post, Newly Added, Asset Allocation

By Andrew Keenan, CAIA, CFA, CBP, Assistant Vice President at Credit Suisse INTRODUCTION The recent stratospheric rise of bitcoin and its compatriot altcoins has generated both intrigue and despair as a handful of big-name digital assets reached new apogees in 2021 with respect to price and market capitalization. In theRead More


Strategic Note: Improved Smile-Implied Hedging

Jan 21st, 2021 | Filed under: Featured Post, Newly Added, Asset Allocation, Risk Management

A recent paper by two Canadian scholars looks to improve on the art of smile-implied option replication. Pascal Francois, of the HEC Montreal Department of Finance, and Lars Stentoft, of the University of Western Ontario, Department of Economics, begins with the observation that options can be dynamically replicated using model-freeRead More


The New ESG Guardians: Sovereign Investment Funds to Shape the Future Digital Economy

Jan 12th, 2021 | Filed under: State of the Industry, Featured Post, Newly Added, Asset Allocation, ESG

By Winston Ma, CFA & Esq – Adjunct Professor, NYU School of Law Who holds the power in financial markets? For many, the answer would probably be the large investment banks, big asset managers and hedge funds that are often in the media’s spotlight. But more and more a newRead More


Private Equity and the Leverage Myth

Jan 6th, 2021 | Filed under: Featured Post, Private Equity, Private Debt, Newly Added, Asset Allocation

By William Kinlaw, CFA This article offers commentary and highlights from “Private Equity and the Leverage Myth” by Megan Czasonis, William Kinlaw, Mark Kritzman and David Turkington in The Journal of Alternative Investments. You can read the full paper here.  The private equity market is on an astonishing growth trajectory.Read More


What About Beta? | Finally, Hindsight Is 2020

Jan 3rd, 2021 | Filed under: State of the Industry, Private Equity, Newly Added, Asset Allocation, What About Beta?, Hedge Funds

By Aaron Filbeck, CFA, CAIA, CIPM, FDP – Director, Global Content Development at CAIA Association Well…we made it. This has been the longest decade year of our lives. Whether it’s been personal or professional circumstances, or simply having been an investor in this market, none of us could escape theRead More


Why STOs are Not ICOs

Dec 27th, 2020 | Filed under: Emerging Asset Classes, State of the Industry, Access to Alternatives, Featured Post, Newly Added, Asset Allocation

Security token offerings are not initial coin offerings. Three scholars affiliated with Erasmus University in Rotterdam explain the difference between the STO and the ICO markets in a new paper, contending that getting the distinction right is “crucial for the study of entrepreneurial finance.” The paper also sheds light onRead More


Using ESG as a Risk Management Tool

Dec 10th, 2020 | Filed under: State of the Industry, Newly Added, Asset Allocation, ESG, Risk Management

In the first half of 2020, a period dominated by the spread of the Covid-19 virus and by the shut-down of economic activity in country after country around the world, investing with an eye to environmental, social, and governance issues proved valuable as a risk management measure, according to anRead More


Strategic Portfolio Construction with Private Equity

Dec 8th, 2020 | Filed under: Featured Post, Private Equity, Newly Added, Asset Allocation

By Giulio Renzi-Ricci, Senior Investment Strategist, Vanguard  Investor interest in private equity has been rising over the last two decades. Today private equity represents a growing opportunity for multiasset portfolios, offering the potential to significantly outperform public investments. In a new research paper, we examine the role private equity canRead More


The New Generation of Behavioral Finance

Nov 26th, 2020 | Filed under: Featured Post, Newly Added, Asset Allocation, ESG, Risk Management, Hedge Funds

Meir Statman, a professor of finance at Santa Clara University and a consultant to Avantis Investors, has focused his scholarly efforts for decades on behavioral finance, and those efforts have given us a recent book on the subject, Behavioral Finance: The Second Generation. In Statman’s view the first generation ofRead More


Measuring the Inflation Risk of Three ‘Inflation-Hedges’

Nov 24th, 2020 | Filed under: Featured Post, Newly Added, Asset Allocation, Risk Management, Commodities & Natural Resources

By Doris Bao, FRM and Alex Botte, CFA, CAIA, Client Solutions Research team at Two Sigma In our previous post on inflation, we covered how the Local Inflation risk factor in Venn, Two Sigma’s risk analytics platform, is constructed and we reviewed its historical performance. The primary conclusion was thatRead More


Starting Early: The Growing Need for Financial Literacy in the United States

Nov 22nd, 2020 | Filed under: State of the Industry, Access to Alternatives, Featured Post, Newly Added, Asset Allocation

Dr. Greg Filbeck, CFA, FRM, CAIA, CIPM, PRM Investors are increasingly looking toward the private markets as an output for their investment dollars to increase risk-adjusted performance. Historically, such direct investment required an investor to qualify as an accredited investor. Recently, guidelines to qualify as an accredited investor have broadenedRead More


Keynes vs. Markowitz ‘Thrilla in Portfolia’

Nov 19th, 2020 | Filed under: State of the Industry, Featured Post, Newly Added, Asset Allocation, Risk Management, Hedge Funds

By Hossein Kazemi, PhD, CFA, CAIA Association, FDP Institute, and Isenberg School of Management Introduction While Keynes vs. Markowitz is not as thrilling as Ali vs. Frazier, it has important implications for investors when selecting funds and investment managers when constructing portfolios.  In this “fight,” we have in one cornerRead More


What Is the Future of Alternatives?

Nov 17th, 2020 | Filed under: State of the Industry, Featured Post, Private Equity, Newly Added, Asset Allocation, ESG, Hedge Funds

By Grant Murgatroyd, senior writer EMEA at Preqin Preqin predicts that alternative assets under management will rise to $17.2 trillion in 2025. We believe the COVID-19 induced slowdown in 2020 will be temporary and lead to a larger, more efficient, and more sustainable industry. Assets under management (AUM) in alternativesRead More


What About Beta? | Save (Us All) for Retirement

Nov 15th, 2020 | Filed under: Manager Selection, Newly Added, Asset Allocation, What About Beta?

By Aaron Filbeck, CFA, CAIA, CIPM We have not been shy in our assessment of the current state of retirement. As we know, defined benefit plans face a tough road ahead as lofty actuarial assumptions have barely budged and regular distributions are hardly being backfilled with contributions. But what aboutRead More


A Renewal of the Value Factor in Equities

Nov 12th, 2020 | Filed under: Featured Post, Newly Added, Asset Allocation, Risk Management

David Blitz, the head of quant research at Robeco, and Robeco researcher Matthias Hanauer have posted a commentary on the value factor. This is one of the classic Fama-French factors. It began life in 1992 as a simple “high minus low” (HML) calculation; the postulation that stocks with high book-to-marketRead More


Markets in the Rear-View Mirror: COVID-19 Collision

Nov 10th, 2020 | Filed under: State of the Industry, Featured Post, Newly Added, Asset Allocation

By Mike Nigro, Managing Director and Head of Client Solutions Research at Two Sigma and Doris Bao, FRM, Quantitative Researcher on the Client Solutions Research team at Two Sigma During recent months, the COVID-19 pandemic has reshaped the world, causing devastating damage to the global economy. The world is nowRead More


OECD Works on Sorting Through the ESG Ratings Systems

Nov 8th, 2020 | Filed under: State of the Industry, Featured Post, Newly Added, Asset Allocation, ESG, Risk Management

A report from the Organization for Economic Cooperation and Development critiques “current market practices” in connection with Environmental, Social, and Governance investing. It says that the bewildering ratings, investment terminology, and individual metrics, “present a fragmented and inconsistent view of ESG risks and performances.” On the bright side, the OECDRead More


Art Investing: Recession and Volatility-Related Case Studies

Nov 2nd, 2020 | Filed under: Featured Post, Private Equity, Newly Added, Asset Allocation

By Arthena’s Art Market Research Team The effects of recessions on fine art prices are, without a doubt, the topic most-opined-about in our industry’s relatively small financial news echo chamber. Any hint of a market slowdown tends to flood our inboxes with an unyielding torrent of analysis, evidenced by theRead More


The Dead vs. the Living Stocks

Oct 29th, 2020 | Filed under: State of the Industry, Featured Post, Newly Added, Asset Allocation

By Nicolas Rabener of FactorResearch (@FactorResearch) INTRODUCTION Walking through financial centers like London or New York in the spring of this year felt in many ways like being a zombie movie. Shops were boarded up, restaurant and cafes closed, and office towers unoccupied. The few people walking outside were quickRead More


The Alternative Imperative, Part II

Oct 25th, 2020 | Filed under: Data Science & AI, State of the Industry, Featured Post, Newly Added, Asset Allocation, Hedge Funds

By Rick Roche, CAIA, Little Harbor Advisors, LLC Part 2 of a two-part series on The Alternative Imperative in the COVID Era. In Part 2, the author tackles notorious technology laggards. This piece transitions to alternative data pioneers (Alt-Venturers) and the 4-1-1 on Alt-Data: Hype or Hope? The author dispelsRead More


Cryptocurrencies: Asset Class or Something Else?

Oct 22nd, 2020 | Filed under: Emerging Asset Classes, State of the Industry, Access to Alternatives, Featured Post, Newly Added, Asset Allocation

By Daniele Bianchi, PhD With the rising prices of Bitcoin and public awareness on blockchain, investors have drawn their attention to cryptocurrency markets, driven by the promise of significant returns compared to the flat or negative yields in more traditional asset classes. But how should investors examine cryptocurrencies in theRead More


Don’t Get Carried Away by Carry

Oct 15th, 2020 | Filed under: Featured Post, Newly Added, Asset Allocation, Hedge Funds

By Nicolas Rabener of FactorResearch (@FactorResearch) INTRODUCTION There are folks in finance who know and folks who don’t know. The latter group often drives the former crazy by abusing terminology. For example, moderators and guests on CNBC talking about momentum and growth stocks as if they were the same thing.Read More


Three Sources of Alpha: A Call for Small Manager Investment

Oct 13th, 2020 | Filed under: Featured Post, Private Equity, Newly Added, Asset Allocation, Risk Management, Hedge Funds, Commodities & Natural Resources

By Karl Rogers, ACE Capital Investments I recently finished a multi-strategy fund of hedge funds build for an institution where I focused on three sources of alpha: small manager, equities and commodities. Small Manager Alpha Given that “small” managers have been found to outperform their larger peers[1], why do manyRead More


How Green is the Cannabis Trade?

Oct 12th, 2020 | Filed under: Featured Post, Newly Added, Asset Allocation

Last week we looked at recent developments in the state-legal marijuana markets. Among the observations we made there, these three stand out: Marijuana is becoming an essential business and a permanent feature of the landscape, surviving crises and helping the portfolios of investors do the same; The major players areRead More


What is Becoming Manifest about Cannabis?

Oct 4th, 2020 | Filed under: State of the Industry, Featured Post, Newly Added, Asset Allocation

Consumers in the United States are expected to purchase US$10 billion in state-legal cannabis by the end of this year. This makes it a new emerging growth market at a time when so many other markets are contracting or failing altogether under the weight of the pandemic and other economicRead More


Retirement’s Mid-Life Crisis

Sep 22nd, 2020 | Filed under: State of the Industry, Featured Post, Private Equity, Newly Added, Asset Allocation, Hedge Funds

By Rob Croce, PhD – Managing Director and Portfolio Manager at Mellon & Aaron Filbeck, CAIA, CFA, CIPM – Associate Director of Content Development at CAIA Association In 2000, United States 10-year government bonds rates were 6% and the median U.S. public pension plan had an actuarial return assumption ofRead More


Emerging Market Debts (or Funds) as a Weakened-Dollar Bet

Sep 15th, 2020 | Filed under: Featured Post, Newly Added, Asset Allocation

A new report by the William Blair Funds illustrates why some investors may see emerging-markets debt as a good play over the near future, especially if the assets of the funds are denominated in the local currency. That is a play on dollar weakness. The report uses the JPMorgan GovernmentRead More


The Case for Redefining the Risk-free Asset

Sep 13th, 2020 | Filed under: Featured Post, Newly Added, Asset Allocation, Risk Management

The quantitative analysis of markets, and of the performance of fund managers, is in large part the mathematical treatment of various (often contested) metrics of risk. Let us bring two points about risk into collision. First, over more than three decades scholars have debated the “equity premium puzzle.” Why doRead More


AI, What Have You Done for Me Lately?

Sep 10th, 2020 | Filed under: Data Science & AI, State of the Industry, Access to Alternatives, Featured Post, Newly Added, Asset Allocation, Hedge Funds

By Nicolas Rabener of FactorResearch (@FactorResearch) INVESTING IN AI VERSUS AI INVESTING “AI will probably most likely lead to the end of the world, but in the meantime, there’ll be great companies.” – Sam Altman If investors are looking for that one great AI company that will also end theRead More


From impact intention to impact management: Are you ready for the change?

Sep 7th, 2020 | Filed under: State of the Industry, Newly Added, Asset Allocation, ESG

By Sara Olsen and David Pritchard of SVT Group and Yuwei Shi of Middlebury Institute of International Studies at Monterey *Please take a moment to complete the brief survey at the conclusion of this article. Every investment generates or destroys social and environmental value, aside from financial return. One ofRead More


Regulatory Bread and Circuses 

Aug 31st, 2020 | Filed under: State of the Industry, Access to Alternatives, Newly Added, Asset Allocation, What About Beta?

By Bill Kelly, CAIA Association CEO Pictured above is the bust and the borrowed line of Juvenal, a Roman poet from the late first century. His cynical reference to bread and circuses was simply to say: feed and entertain the masses and they will forget what they wanted in the first place. The announcement this week from the SEC regarding their final ruling on amendments to the definition ofRead More


The calm before the (next) storm?

Aug 27th, 2020 | Filed under: Featured Post, Newly Added, Asset Allocation

By Kara O’Halloran, FS Investments The dog days of summer are upon us. While August has historically brought volatility to markets, equities in 2020 appear to have shrugged off their typical late-summer doldrums, posting solid gains to start the month. However, some warning signs are flashing of possible bumps ahead.Read More


IS DOWNSIDE RISK PRICED IN CRYPTOCURRENCY MARKET?

Aug 23rd, 2020 | Filed under: Emerging Asset Classes, Access to Alternatives, Featured Post, Newly Added, Asset Allocation, Risk Management

By Victoria Dobrynskaya, PhD, associate professor of Finance at National Research University Higher School of Economics Looking at the whole cryptocurrency market through the prism of standard multi-factor asset-pricing models reveals that there is a significant heterogeneity in the exposure to the downside market risk across coins, and that aRead More


EUROPEAN GREEN DEAL: TOWARDS A ZERO-CARBON URBAN ENVIRONMENT

Aug 20th, 2020 | Filed under: State of the Industry, Featured Post, Newly Added, Asset Allocation, ESG

Part 1 of a multi-part series: The Role of the EU, National Governments & Local Authorities By Christos Angelis, CAIA – Director at Masterdam INTRODUCTION In light of the exciting developments in the European Union regarding the European Green Deal (EGD)[1] presented in the end of 2019, it would beRead More


What Covid-19 Teaches Us About Resilience

Aug 18th, 2020 | Filed under: State of the Industry, Featured Post, Newly Added, Asset Allocation, ESG

In late February and early March, we witnessed what the European Corporate Governance Institute calls an “an exogenous and unparalleled” crash, during which the S&P 500 shed one-third of its value, dropping from approximately 3,300 on Feb. 20 to close at 2,200 one month later. This provided a natural experimentRead More


Is the US Stock Market Overvalued? A Back-of-the-Envelope Calculation

Aug 16th, 2020 | Filed under: Featured Post, Manager Selection, Newly Added, Asset Allocation

By Hossein Kazemi, The CAIA Association & The Isenberg School of Management In recent weeks, hundreds of research reports and many more blogs and commentaries have discussed the current valuation of the US stock market.  With the economy in a recession and corporate profits and GDP down by double digits,Read More


Applying Occam’s Razor to Factor Analysis

Aug 12th, 2020 | Filed under: Featured Post, Newly Added, Asset Allocation

By Alex Botte, CFA, CAIA, Vice President, Two Sigma The principle of Occam’s razor states that, in searching for explanations or solutions to problems, “entities should not be multiplied unnecessarily.” If one has various models that arrive at the same outcome, one should choose the one with the fewest assumptions. InRead More


Do You Know Your ABZ’s?

Aug 10th, 2020 | Filed under: State of the Industry, Access to Alternatives, Newly Added, Asset Allocation, What About Beta?

By Bill Kelly, CEO, CAIA Association Perhaps the most prescient definition of alpha is simply undiscovered beta, and if you look at this idea through the quinquagenarian endowment model, you might just see the point. In the good old days, investment performance and alpha were one in the same. Along cameRead More


This May Not Be the Apocalypse After All

Aug 9th, 2020 | Filed under: Featured Post, Newly Added, Asset Allocation, Hedge Funds

From the point of view of the alternative investment world, the dramas associated with the year 2020 may not constitute as apocalyptic a challenge or as paradigmatic a shift as is commonly thought. It may even be considered, in many respects, business as usual (aside from an occasional “murder hornet.”)Read More


Putting 2020 into Perspective: Diversification May Work Better than You Think

Aug 6th, 2020 | Filed under: State of the Industry, Featured Post, Newly Added, Asset Allocation, Risk Management, Hedge Funds

By Rodney Sullivan, CFA, CAIA, Executive Director, University of Virginia Darden School of Business US recessions are typically accompanied by declines in stock market returns and, of course, 2020 has been no exception. We are once again reminded that investing is not easy leaving many investors to wonder how bestRead More


Will the DOL Decision on Private Equity Impact the Democratization of Alternative Investments?

Aug 4th, 2020 | Filed under: Access to Alternatives, Featured Post, Private Equity, Newly Added, Asset Allocation

By Rashad Kurbanov, CEO & Co-Founder at iownit capital and markets Alternative investments have been around for decades and have been a part of institutional investment portfolios for the majority of the time. Institutional investors have increasingly allocated their investment capital to these investments with an expectation that they willRead More


Understanding the Limitations of Liquid Alternatives

Jul 30th, 2020 | Filed under: State of the Industry, Access to Alternatives, Featured Post, Newly Added, Asset Allocation, Hedge Funds

By Shana Sissel, CAIA, Spotlight Asset Group More than a decade ago the world of alternative investments witnessed hedge-fund-inspired Investment Act of 1940 (40 Act) funds appear on the scene. Much like their private alternative counterparts, liquid alternatives offer valuable diversification benefits within traditional portfolios, but it’s important to keepRead More


Hedge Funds and Private Equity—Building Bridges—Or Not

Jul 27th, 2020 | Filed under: State of the Industry, Featured Post, Private Equity, Private Debt, Newly Added, Asset Allocation, Hedge Funds

Alternative investment managers were evolving in the context of changing market conditions even before the Covid-19 pandemic, although the virus has speeded up the process. What is emerging is an alternatives landscape where pure-play hedge funds will be rare. That is one of the conclusions of a new study byRead More


An ‘Alternative’ Safe-Haven

Jul 26th, 2020 | Filed under: Featured Post, Manager Selection, Newly Added, Asset Allocation, Risk Management

By Karl Rogers, ACE Capital Investments Abstract: The sovereign bond market has traditionally been a widely used tool for portfolio construction given its dual characteristics of returning a real yield with a negative correlation to equity markets – providing both a real return expectancy and portfolio protection. Given the zero-lower-boundRead More