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Alternative Thinking

The Hidden Value of Streaky Returns in Stock Portfolios

June 3, 2025 - Portfolio Solutions Group

Streaky return streams - ones that that can perform well or poorly for extended periods - are challenging for investors to comprehend and stick with. Yet, this very "complexity risk” may be what earns investors an additional risk premium, leading to above average risk-adjusted returns.

Alternative Thinking

2025 Capital Market Assumptions for Major Asset Classes

January 16, 2025 - Portfolio Solutions Group

We update our estimates of medium-term (5- to 10-year) expected returns for major asset classes. We also include a discussion on corporate earnings growth: the market consensus is for more strong growth to come – especially in the U.S. But what is a reasonable medium-term forecast for allocators?

Alternative Thinking

Can Machines Build Better Stock Portfolios?

November 7, 2024 - Portfolio Solutions Group

In the second issue of our 2024 Alternative Thinking series, we showed that machine learning techniques can be used to help improve market timing strategies. In this issue, we extend these concepts to constructing stock selection strategies following a similar framework. Our results indicate more complex models utilizing machine learning techniques yield performance improvements relative to a simple, linear approach in the range of 50-100%, suggesting that machine learning can help to build better stock selection portfolios.

Alternative Thinking

Broad Strategic Asset Allocation

September 18, 2024 - Portfolio Solutions Group

This paper presents one justifiable set of inputs and finds that alternatives earn themselves a sizable strategic allocation. Investors are encouraged to compare these results with their own assumptions, constraints and allocations as they look to build a resilient portfolio for long-term investment success.

White Paper

Portable Alpha: Still A Great Solution For Improving Return Outcomes

July 30, 2024 - Portfolio Solutions Group

In the face of lower-than-average expected returns for equities, some investors may be considering adding active management to their equity allocations. However, the evidence supporting active long-only equities has long been underwhelming. We review an alternative approach – portable alpha.

Alternative Thinking

Can Machines Time Markets? The Virtue of Complexity in Return Prediction

May 6, 2024 - Portfolio Solutions Group

Common wisdom has suggested that small, simple models are best suited for market timing applications, given finance’s “small data” constraint and naturally low predictability. However, we show that complex models better identify true nonlinear relationships and therefore produce better market timing strategy performance. We validate this "virtue of complexity" result in three practical market timing applications.

White Paper

A Fresh Look at Multi-Strategy Alternatives

January 26, 2024 - Portfolio Solutions Group

In this short piece, we review the case for multi-strategy alternatives, explaining why liquid, diversifying alternative strategies may have a decisive role to play in the tougher investment environment ahead.

Alternative Thinking

2024 Capital Market Assumptions for Major Asset Classes

January 16, 2024 - Portfolio Solutions Group

We update our estimates of medium-term (5- to 10-year) expected returns for major asset classes. We also include a section on estimating expected returns and risk for private credit, as well as a feature on the key decisions that underpin any capital market assumptions framework.

Key Design Choices in Long/Short Equity

December 5, 2023 - Portfolio Solutions Group

Investors are looking for resilient sources of return in the face of mounting headwinds for equity markets. Long/short and market-neutral equity strategies deserve consideration. We review the case for allocating to long/short equity and address several key choices faced by investors and by managers.

Alternative Thinking

Honey, the Fed Shrunk the Equity Premium

September 5, 2023 - Portfolio Solutions Group

What are the implications of higher interest rates for asset allocation? This article reviews historical patterns and forward-looking expected returns for a range of asset classes, and highlights the role of “cash-plus” liquid alternatives — overlooked beneficiaries of higher cash rates. We show that in a higher-rate world that investors haven’t seen for many years, diversification away from equities may prove to be especially valuable.