White papers and commentaries explaining our investment strategies.
Over a 40-year working life, Defined Contribution (DC) savers try to maximize two basic investment outcomes: wealth accumulation and wealth preservation. However, these objectives present a basic tradeoff: for many retirement savers, the investments designed to promote wealth accumulation (equities) are different than the investments designed to promote wealth preservation (e.g., cash, bonds).
This paper provides a general framework for optimal portfolio choice with frictions and multiple time-varying signals about expected returns.
We discuss how active equity managers can raise expected returns of their portfolios by relaxing the long-only constraint.
A Factor-Based Approach in Fixed Income Markets
Amy Pocino Kelly and Julie Stapel, both experienced ERISA attorneys and partners with law firm Morgan, Lewis and Bockius, LLP, sat down with Robert Capone, Head of Defined Contribution and Sub Advisory at AQR, to discuss fiduciary due diligence considerations for defined contribution (DC) plans when including alternative asset classes and strategies into a DC plan.
This issue updates our multi-year expected return assumptions for major stock and bond markets, and investigates methods for estimating expected returns for credits and commodities. Compared with historical averages of value metrics, we are still very much in a world of low expected returns.
In this issue of the DC Solutions Series, the authors focus on the need for TDFs to better protect against losses during equity drawdowns and to better diversify their asset allocations.
The authors investigate Active Share, a measure meant to determine the level of active management in investment portfolios, and conclude that neither theory nor data justify the expectation that it might help investors improve their returns.
This paper shows that many reasonable rebalancing processes may achieve similar benefits of maintaining a portfolio’s risk characteristics, but also that price momentum effects can benefit some processes more than others.
Many investors worry that defensive stocks are so expensive that it can be hard to realize a good return on them. The authors find that they are not particularly expensive today, and contend that valuations may be of limited use in seeking to predict strategy returns.