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Alternative Thinking

2015 Capital Market Assumptions for Major Asset Classes

We update our expected returns and review our framework for constructing estimates of long-term expected returns for major asset classes, among other things.

Alternative Thinking

Estimating Long Term Expected Returns

Diversification is underutilized in most institutional portfolios but may improve risk-adjusted returns, active returns and total returns more reliably than concentrated positions.

Alternative Thinking

2014 Capital Market Assumptions for Major Asset Classes

We present our capital market assumptions for major asset classes and explore justifiable frameworks for estimating multi-year expected returns.

Alternative Thinking

Ideas for a Low-Expected-Return World

There are different ways to achieve ambitious real return targets, but we think risk-balanced diversification across well-chosen return sources is the most reliable, strategic approach.

Alternative Thinking

Why Do Most Investors Choose Concentration Over Leverage?

Return-seeking investors must take risks—the question is which to take and to understand the tradeoffs involved. Most investors choose concentration risk, but we present arguments for a different approach.

Alternative Thinking

2017 Capital Market Assumptions For Major Asset Classes

We update our multi-year expected return assumptions for major stock and bond markets. Compared with historical averages of value metrics, we beloieve we are in a low expected return environment.

Alternative Thinking

2016 Capital Market Assumptions for Major Asset Classes

We update our multi-year expected return assumptions for major stock and bond markets, and investigate expected returns for credits and commodities.

Alternative Thinking

Mapping Investable Return Sources to Macro Environments

We explore the empirical relationships between investable strategies (asset classes and style premia) and macroeconomic environments. We find that style premia have meaningfully less macro exposure than do asset classes

Alternative Thinking

Strategic Risk Allocation

We believe investors should broadly diversify and risk balance as a starting point to asset allocation, but perhaps then mildly overweight assets with high Sharpe ratios or good diversification benefits if they can identify these.

Alternative Thinking

Strategic Portfolio Construction

When it comes to portfolio construction, many investors seek guidance on “putting it all together.” We discuss our systematic approach and examine how investor-specific beliefs and constraints can inform and interact with formal optimization methods.