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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

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

Good Strategies for Tough Times

Following recent losses across global equities and concern about downside risk, we take a look at the performance of different investments during the worst quarters in recent decades for stock and bond markets.

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

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.

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.

Trade Publication

The 5% Solution

Institutional investors commonly target 5% real annual returns, or 7% to 8% nominal returns.

Working Paper

Bubble Logic: Or, How to Learn to Stop Worrying and Love the Bull

A bull market produces stories, often absorbed by investors engaged in wishful thinking, that encourage the purchase or retention of stocks or mutual funds. This has led them to bid up stocks so high that even long-term investors will be disappointed.

Working Paper

The Bubble Has Not Popped

Many called the stock market “undervalued” in 2002, based on how far and fast it had fallen over the prior two years. But this 2002 article contends that stocks are not necessarily cheap after the decline.