Factor/Style Investing

Fact, Fiction and 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.

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.

Machine Learning

Empirical Asset Pricing via Machine Learning

We show how the field of machine learning can be used to empirically investigate asset premia including momentum, liquidity, and volatility.

Factor/Style Investing

Fact, Fiction, and the Size Effect

Despite its long and illustrious history, much confusion about the size effect remains. We examine common claims about the size effect and seek to clarify some of the misunderstanding surrounding it.

Tax Aware

Partnership Allocations and Their Effects on Tax-Aware Fund Investors

We discuss certain accounting principles relevant for investors in tax-aware funds structured as limited partnerships. We present a simple stylized model that illustrates that under such accounting principles new investors do not materially suffer from unrealized gains accumulated in a tax-aware fund.

Tax Aware

Multi-Period After-Tax Reporting: A Practical Solution

We propose an after-tax performance report aimed at enhancing wealth preservation and accumulation for taxable investors.