We have begun recommending that investors use recent equity market weakness to rebalance portfolios and lift international equity allocations. We have further suggested that investors prioritize shifting allocations toward international equity strategies with a higher allocation to Japan.
There is no simple solution to measure the overall risk of a security or portfolio with one statistic. The author recommends that investors use a variety of measures, including spread duration, rating breakdowns, and the average price of securities in each rating category.
The emerging market corporate bond market has become appropriate for a wider range of investors due to its size, liquidity, and dedicated research platforms. This paper highlights 10 key characteristics of this market segment as well as the fundamental risks and market risks for fixed-income investors.
Studies show that "emerging" hedge fund managers tend to outperform their larger, more established brethren. However, this additional alpha should not blind investors to the need for proper operational due diligence, say the authors, who suggest practical tips to ensure meaningful due diligence and risk mitigation.
The global financial crisis has debunked several myths about liquidity, including that long-term investors do not need short-term liquidity and that short-term investors are a reliable source of short-term liquidity. Instead, the most important source of liquidity is unleveraged contrarian investors who are willing to take the other side of an over...
While most investments are driven by economic supply and demand, the performance of managed futures is driven by market factors, such as price persistence, volatility, and price dislocation. This provides benefits for portfolio diversification in a world of unpredictable market events.
Researchers demonstrate that a portfolio with a specific beta constraint can be improved by moving toward a leveraged bond position. When that is permitted, replacing a specific beta target with an acceptable "beta range" adds the flexibility needed to achieve even better returns.
The style box concept can help investors manage portfolio risk effectively. But thinking outside the box – considering opportunities across the spectrum, exploiting efficiencies from both beta and alpha perspectives, and using large-cap stocks selectively – may give investors a better chance to outperform the market.
The author makes the case for investment in transportation companies, citing increasing global trade, the outsourcing of increasingly complex supply chains to third parties, the rise of e-commerce, the fuel and environmental efficiency of railroads, and infrastructure upgrades of mass transit systems.
Valuation-tilted investment strategies offer many benefits of cap-weighting – broad diversification, low costs, transparency and modest turnover – plus the benefit of the value-premium phenomenon. And unlike traditional passive approaches, these strategies incorporate all stocks, differentiate across the valuation spectrum, and respond to changes i...
Real estate can play an important role in a well-diversified portfolio. Current valuations support allocations to private real estate vehicles versus public real estate vehicles. Furthermore, current risk-return expectations favor investments in opportunistic real estate over core real estate.
Concerns about excess government debt and inflation have increased interest in gold and raised its price. Gold is a commodity that behaves more like a currency, providing no investment return beyond price fluctuation. Gold's high price undermines its protective characteristics, making it more vulnerable to declines as monetary policy normalizes.
Investors buy gold out of fear that the economic and political infrastructure we count on when we buy stocks and bonds is degrading. And gold booms inevitably end with a bust. The better strategy may be to build a reasonably sized position in diversified commodities, including gold; play close attention to sound entry points; and rebalance religiou...
Investors face choices about how much to allocate across the liquidity spectrum of public equity, hedge funds, and private markets. The author outlines the benefits and costs in providing a framework for allocating across those three levels of liquidity when investing in equity markets for commodity producers.
The authors examine a range of topics, including the narrowing gap between returns on different asset classes, signs of the coming economic upturn, the strategy of alternating between risk-on and risk-off modes, inflation and economic crises around the world, performance of specific asset classes, and innovation as China's next growth driver.