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White Paper
An August of Discontent
September 5, 2024
We cover why investors should not shrug off the August market reversal as a blip. In an environment of continued macroeconomic uncertainty, episodes of volatility will likely persist. We discuss the importance of building a well-diversified portfolio that is resilient to a wide range of future economic scenarios.
White Paper
Driving with the Rear-View Mirror
December 5, 2023
U.S. equities enjoyed a banner past decade. To analyze what assumptions investors need to have about the next ten years to expect a repeat performance, we decompose U.S. equity market excess-of-cash returns into four components – dividend yield, real earnings growth, multiple expansion, and the real return on cash.
White Paper
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.
White Paper
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.
Journal Article
A Changing Stock-Bond Correlation
Q1 2023
For the past two decades, the stock/bond correlation – a fundamental detriment of risk in traditional portfolios – has been consistently negative. However, this hasn’t always been the case, and a positive stock/bond correlation could reappear due to macroeconomic changes. In this article, we assess the broad implications this would have for investors and set out practical steps to prepare for such an outcome.
White Paper
What Drives Bond Yields?
July 26, 2021
In this overview of the various factors that influence government bond yields, we show that both in theory and in the data, non-monetary policy factors drive significant variation in yields, particularly at longer maturities. Despite the exceptionally low yield environments we have witnessed, fundamentals continue to drive bond markets.
Journal Article
(Systematic) Investing in Emerging Market Debt
March 4, 2020
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.
Journal Article
Active Fixed Income Illusions
December 17, 2019
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.
Systematic Fixed Income: Introduction
October 9, 2018
Systematic fixed income takes a rigorous, repeatable approach to investing in bonds.
Journal Article
Style Investing in Fixed Income
March 15, 2018
A disciplined, systematic approach to over-/underweight securities based on well-known factors, or styles, such as value, momentum, carry and defensive, can offer alternative sources of outperformance not only within equities but also within fixed income markets.