Asset Allocation

It Was the Worst of Times: Diversification During a Century of Drawdowns

We use nearly 100 years of data to evaluate the effectiveness of diversifying investments during the worst of times for most portfolios and find that attempting to tactically avoid equity sell-offs is likely to disappoint.

Portfolio Construction

Active and Passive Investing — The Long-Run Evidence

More careful thinking is needed to separate facts from fiction in the hotly contested debate between active and passive investing.

Portfolio Construction

Capital Market Assumptions for Major Asset Classes

We update our medium-term expected returns for major asset classes and explore the historical accuracy of yield-based return estimates.

Fixed Income

The Illusion of Active Fixed Income Diversification

We examine popular active fixed income categories and find that a persistent overweight to high yield credit explains the majority of fixed-income managers’ active returns. We then discuss some key implications for asset owners.

Portfolio Construction

Systematic vs. Discretionary

Systematic and fundamental investing approaches are not opposites. Both pursue the same objective and can be fundamentally-oriented. They can use similar inputs, but in different ways, to try to improve investment performance. Neither is necessarily better than the other.

Asset Allocation

Exploring Rates Sensitivity

Fed tightening has many investors interested in risks surrounding monetary policy, rising yields and inflation.

Asset Allocation

2017 Capital Market Assumptions For Major Asset Classes

We update our multi-year expected return assumptions for major stock and bond markets. Compared with historical averages of value metrics, we beloieve we are in a low expected return environment.

Factor/Style Investing

Superstar Investors

Many famous investors are outspoken about their investment philosophies and use them selectively. We seek to apply their wisdom systematically to determine whether their philosophies, if applied broadly, might still generate “alpha.”

Factor/Style Investing

Style Investing in Fixed Income

Systematic investing is often applied in equity markets but less so in fixed income. Here, we show that classic-style premia—typically applied in stock selection and equity country allocation—could have also work in fixed income markets.

Relaxed Constraint

Relaxed-Constraint Portfolios

Active equity investors may increase expected portfolio returns by relaxing the long-only constraint. The investment community has largely turned away from strategies that short bad stocks, but we find that they may want to take a renewed look.