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.


Is (Systematic) Value Investing Dead?

Undoubtedly, many systematic approaches to value investing have suffered recently. However, we find the popular suggestion that value investing is dead to be premature. We find expectations of fundamental information have been and continue to be an important driver of security returns.

Fixed Income

(Systematic) Investing in Emerging Market Debt

We extend the analysis of systematic investment approaches to emerging market (EM) fixed income. We find that systematic exposures linked to carry, defensive, momentum and valuation themes are well compensated and lowly correlated in EM markets, and that a systematic approach to EM debt may be a powerful diversifier.

Tax Aware

Tax-Efficient Portfolio Transition: A Tax-Aware Relaxed-Constraint Approach to Switching Equity Managers

For a taxable investor with a highly appreciated equity portfolio, replacing the portfolio manager is likely to trigger substantial tax liabilities. We find that a tax-aware relaxed-constraint post-transition strategy significantly outperforms a traditional tax-agnostic long-only strategy in its ability to preserve and grow the investors after-tax wealth over the long term.

Factor/Style Investing

Fact and Fiction About Low-Risk Investing

Low-risk investing has received a lot of attention over the past decade. An intensive academic debate has spurred, and been spurred by, the growing market for low-risk strategies. This article presents five fact and dispels five fictions about low-risk investing.

Fixed Income

Active Fixed Income Illusions

Across a broad set of popular active fixed income categories, we find that passive exposures to traditional risk premia (especially exposure to credit risk) explain the majority of fixed income manager active returns.

Tax Aware

Lot Layering: The New Frontier for Hedge Fund Partnership Allocations

Despite its unavoidable deficiency caused by current regulations, we believe that lot layering aligns tax and economics more closely than any of the “aggregation” methods presently used by most hedge funds.

Machine Learning

Can Machines "Learn" Finance?

Machine learning for asset management faces a unique set of challenges that differ markedly from other domains where machine learning has excelled. We discuss a variety of beneficial use cases and potential pitfalls for machine learning in asset management, and emphasize the importance of economic theory and human expertise for achieving success through financial machine learning.

Alternative Investing

You Can't Always Trend When You Want

We present a framework for understanding the drivers of trend-following returns and show that recent performance challenges are primarily due to muted moves across global markets rather than a change in trend following’s ability to translate market trends into profits.

Machine Learning

A Data Science Solution to the Multiple-Testing Crisis in Financial Research

In this paper, we present a real example of how multiple testing information can be reported. We use that information to estimate the Deflated Sharpe Ratio of an investment strategy.