Portfolio Risk and Performance

Was That Intentional? Ways to Improve Your Active Risk

Investors try to outperform their strategic asset allocation benchmarks by taking active risks. Some of these are intentional, but others are low-conviction or even unintentional, which can be a large part of a portfolio’s total active risk. When it comes to beating a strategic asset allocation benchmark, reducing these unintentional active risks may among the clearest sources of “low hanging fruit”.

Asset Allocation

2020 Capital Market Assumptions for Major Asset Classes (Supplemental Estimates as of March 31, 2020)

This supplement provides a special update to our estimates of medium-term (5- to 10-year) expected returns for major asset classes. This update reflects the large changes in prices for many asset classes due to the impact of COVID-19 in Q1 2020.

Portfolio Risk and Performance

Portfolio Protection? It’s a Long (Term) Story…

Investors have a natural urge to protect their portfolios from sudden crashes, even though bad outcomes that unfold over longer periods are more detrimental to reaching long-term goals. We show risk-mitigating and diversifying strategies have added value more consistently than options-based hedging over the more important, longer drawdowns.

Asset Allocation

2020 Capital Market Assumptions for Major Asset Classes

We update our estimates of medium-term (5- to 10-year) expected returns for major asset classes, and introduce a method for quantifying the expected return on cash.

ESG Investing

Responsible Asset Selection: ESG in Portfolio Decisions

We discuss how Environmental, Social, and Governance (ESG) considerations may be incorporated in a portfolio and how they may affect risk and return outcomes.

Fixed Income

Inversion Anxiety: Yield Curves, Economic Growth, and Asset Prices

We evaluate the ability of the yield curve slope to forecast future economic conditions, as well as returns on stocks and bonds, using over 50 years of data across six countries.

Asset Allocation

2019 Capital Market Assumptions for Major Asset Classes

We update our estimates of medium-term (5- to 10-year) expected returns for major asset classes, including private equity and private real estate.

Fixed Income

The Illusion of Active Fixed Income Alpha

Do fixed income (FI) managers generate alpha? We take a deep dive into the determinants of excess of benchmark returns for a broad set of popular active FI categories.

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.