Asset Allocation
Rethinking DC Portfolio Diversification
August 25, 2023
We make the case for an allocation to liquid alternatives as a viable and versatile complement to existing DC portfolios.
Arbitrage
Corporate Arbitrage
May 18, 2023
We introduce the main corporate arbitrage strategies, make the case for a multi-strategy approach, and review the role of a corporate arbitrage allocation within a broader portfolio.
Macroeconomics
Certainly Uncertain
May 16, 2023
We certainly find ourselves in uncertain times – but how uncertain are they? We show macro uncertainty is currently high versus history. We also address whether elevated macro uncertainty is likely to persist, or if we should instead expect a return to the low uncertainty environment. Lastly, we address the implications for investors, both in terms of possible returns to traditional assets, and as to what alternatives might prosper or decline in such an environment.
Trend Following
Economic Trend
May 12, 2023
“Economic trend” capitalizes on the tendency for new information to have a persistent impact on asset prices by positioning in each market on the basis of trends in macroeconomic fundamentals. The strategy has realized consistently attractive risk-adjusted returns over a 50+ year sample, and performance is pervasive across both markets and measures. While it is a close relative of price trend-following, the two strategies are highly complementary.
Equities
Re-Emerging Equities
March 28, 2023
The expected premium for investing in emerging versus developed equity markets is on the upper end of its past 25-year range. At the same time, many of the risks historically associated with emerging markets have secularly declined. We believe there is a strong case for investors to “re-up” their emerging allocations.
ESG Investing
How Portfolios Can Impact the Real Economy
February 6, 2023
To help clarify how investors seeking impact through their financial portfolios can affect the direction of corporate decision making, we analyze the two channels of influence – direct control and changing the cost of capital. We argue that there are no other first-order mechanisms for a financial portfolio to have “impact” beyond these. As a real-world example, we apply these insights to the portfolio “net zero” initiative.
Value
Value: Why Now? Capturing the Comeback in Its Early Innings
Q1 2023
Value has delivered attractive long-term returns but has also weathered difficult short-term periods. While these times are painful for investors, the subsequent recoveries are lucrative for those that stick with the factor. We summarize the evidence for why we believe long/short value continues to be an exceptional go-forward opportunity and how investors can adapt their portfolios accordingly.
Trend Following
Trend-Following: Why Now? A Macro Perspective
November 16, 2022
Trend following is having a banner 2022 amidst a year of turmoil for traditional portfolios, but investors exploring an allocation to trend-following may be wondering if they are “late to the trade,” while also anchoring their expectations to the lean 2010s. We show that both the macroeconomic picture and empirical evidence suggest that strong performance for trend-following may persist, making it a potentially valuable source of diversifying returns during a challenging time for the rest of investors’ portfolios.
Alternative Investing
Building a Better Commodities Portfolio
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
Looking Forward With Historical Carbon Data
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.