Q1 2022
We update our estimates of medium-term (5- to 10-year) expected returns for major asset classes. We also include an analysis that attempts to reconcile ever-lower expected returns with ever-higher realized returns and suggests practical strategic steps to boost portfolio expected returns.
Tax Aware
May 12, 2022
Entrepreneurs and executives holding much of their wealth in a highly appreciated single stock face either the high risk of idiosyncratic volatility and potentially catastrophic losses, or selling stock and facing an immediate, punitive tax burden. This paper evaluates this choice and explains how it relates to classic betting strategies and economic theory, finding tax-efficient techniques might strike the balance between the urgency to diversify concentrated risk and aversion to taxes.
May 6, 2022
See where “Investing Amid Low Expected Returns” has been featured in the press.
ESG Investing
May 1, 2022
To manage climate risks, investors need reliable climate exposure metrics, but such risks may be difficult to measure, particularly along the supply chain. Using broadly accessible data, we propose an intuitive metric that quantifies the exposure a company has to customers and suppliers. Our metric is related to scope 3 emissions and captures the strength of economic linkages as well as the overall climate exposure of a firm’s customers and suppliers.
Alternative Investing
April 22, 2022
Interest in commodities is rising again, thanks to their tendency to be particularly strong diversifiers during periods of rising or volatile inflation. We review what a “best-in-class” commodity portfolio looks like by exploring three potential enhancements to a passive approach to the asset class.
ESG Investing
March 14, 2022
Increasingly many allocators are interested in computing their portfolio’s carbon footprint. We show that historical emissions data are useful despite a substantial 1-2 years’ lag typically to when investment portfolios are built.
February 28, 2022
As equity portfolios appreciate over time, opportunities to harvest losses become few and far between. Whether you’ve been invested in a passive equity portfolio or in a Direct Indexing strategy, you’ve likely found that harvesting losses was much easier in the first few years after inception. Beyond that, not only does harvesting losses become a challenge but even keeping up with index reconstitutions might be difficult without recognizing capital gains. Appreciated portfolios—once a benefit—become a liability later in their life-cycle.
Tax Aware
January 10, 2022
As a result of recent Treasury regulations, investors in investment partnerships, such as hedge funds, might end up recognizing capital gains when they contribute their partnership interests to a charity. We explain how such taxable gains upon charitable contributions arise and quantify how punitive they might be.
Tax Aware
November 17, 2021
With the current proposals for (and the future expectations of) various tax rate hikes, investors with appreciated portfolios might feel like sailing into a storm and wondering, is it still better to defer gains if tax rates were to increase?
Portfolio Risk and Performance
October 27, 2021
The events of 2020 to 2021 have increased uncertainty around the future path of inflation. We review how different inflationary outcomes can impact investor portfolios and evaluate what assets and strategies may enhance portfolio resilience to inflation.
Macroeconomics
October 27, 2021
Financial markets have had a relatively muted reaction to the recent bout of higher than expected inflation. We assess what might explain markets’ sanguine response. We explain why we believe there are factors suggesting a return to low inflation readings is unlikely in the near term, and what the investment implications might be of such a scenario.
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