Portfolio Risk and Performance

Buffer Madness

May 8, 2025 - Cliff Asness Daniel Villalon

Last month, we posted a short piece critical of options-based strategies such as “defined outcome funds” and “buffered ETFs”. It showed that the vast majority of them failed to deliver either better returns or less-severe drawdowns than a simple combination of passive equities + cash. Since then, we’ve gotten quite a bit of—let’s call it—feedback. My partner Dan, who wrote the original, now writes the devastating response to his predictable critics. My only criticism is he is too kind.

Perspective

Antti Is (Still) Trying to Understand Return Expectations

April 28, 2025 - Cliff Asness

My partner, Antti Ilmanen, is launching a new series, Understanding Return Expectations. The series focuses on how investors actually form their own beliefs about expected returns (which may, or may not, correspond with what he finds reasonable!).

Alternative Investing

Should Hedge Funds Hedge?: Why Some Alts Should Have a Beta of 1.0

March 28, 2025 - Cliff Asness

While uncorrelated alternatives can be beneficial, they often fail to significantly impact the overall portfolio. Here, I argue that adding beta to these alternatives can enhance capital efficiency and improve long-term returns. Ultimately, there is a need for a balanced approach to investing in alternatives, including a combination of aggressive and equitized strategies.

Portfolio Risk and Performance

Rebuffed: A Closer Look at Options-Based Strategies

March 21, 2025 - Cliff Asness Daniel Villalon

Options-based strategies, often labeled with words like “Buffered,” “Overlay,” and “Defined Outcome” have amassed a sizeable chunk of investors’ money, lured by the promise of market-like returns with less risk. These strategies use options to capture the upside or downside of an asset’s returns, and managers who employ a mix of options can tailor an asset’s risk/return profile to align with an investor’s goals. But can they actually deliver?

Asset Allocation

2035: An Allocator Looks Back Over the Last 10 Years

January 2, 2025 - Cliff Asness

Well, sitting here in the year 2035 and looking back at our endowment’s returns for the last decade is not a pleasant task. World markets have been subpar and our performance relative to world markets has been simply terrible. Hard times are never pleasant. But they have one upside. We can learn from them.

Alternative Investing

In Praise of High-Volatility Alternatives

September 4, 2024 - Cliff Asness

This note argues that good higher-volatility alternative investments, that are indeed often very hard to stick with, can be important tools in constructing the best overall portfolio. I think if (a big if) investors can stick with them, they are often a more effective tool than their lower-volatility cousins. Basically, I think they are underutilized

Alternative Investing

The Less-Efficient Market Hypothesis

September 3, 2024 - Cliff Asness

I argue that over the past 30+ years markets have become less informationally efficient in the relative pricing of common stocks, particularly over medium horizons

The President’s Trophy Curse

May 20, 2024 - Cliff Asness

Continuing my occasional foray into sports analytics, in this post I look at the President's Trophy curse. This ubiquitous observation can be summed up as “the winner of the President’s Trophy, awarded for the best record in the regular season, usually doesn’t go on to win the Stanley Cup. Thus, winning the trophy is cursed.” The President’s Trophy winner usually doesn’t win The Cup. It’s true, and yet it’s still really dumb.

Perspective

Cognitive Dissonance

April 1, 2024 - Cliff Asness

My latest covers a few things I would’ve thought were hard for investors to believe at the same time. Experience has proven me quite wrong.

Equities

Why Not 100% Equities

February 12, 2024 - Cliff Asness

Recently, a new paper has been making a big splash in our small pond of academic/quant investing. By “new,” I just mean “recently written,” as much of it ain’t new. In this piece, I offer a concise (relative to my norm) rebuttal, as this is well-trod ground.