Strategic Asset Allocation Value Equities Value Bonds Fixed Income. The Academic Background
|
|
- Cassandra Cain
- 6 years ago
- Views:
Transcription
1 Strategic Asset Allocation Value Equities Value Bonds Fixed Income Strategy Strategic Asset Allocation The Academic Background Strategic asset allocation has a strong academic pedigree and, in making this strategy the foundation for its investment style, Sparinvest acknowledges a debt to all of the great thinkers who have helped to shape and hone the theory behind this method of investing over the last sixty years. Key amongst them are: Harry Markowitz The American academic Harry Markowitz first invented his Modern Portfolio Theory in the 1950 s. He began by looking at the beneficial effects of asset diversification as a means of reducing risk within a portfolio. Taking his observations a stage further, he discovered that by blending together non-correlated assets (that would perform entirely differently in different economic conditions); he could optimise the potential of a portfolio. Markowitz developed the idea of an efficient frontier for investment. This was the point at which an optimal portfolio was reached and no asset could be added or removed that would improve its performance. In 1990, Markowitz was awarded a Nobel Prize for his contribution to investment science. William Sharpe A student of Harry Markowitz, Sharpe s studies further developed Markowitz Portfolio Theory. Sharpe invented the Capital Asset Pricing Model (CAPM), a pricing theory which helps measure a portfolio s systematic risk (beta) and the compensation or returns an investor can expect from it. Sharpe was awarded the Nobel Prize alongside Markowitz in Fama & French Eugene Fama and Kenneth French, jointly extended Sharpe s CAPM into a three-factor model. Fama and French plotted the returns from the US Stock Market for the three decades from 1964 to 1995 on a model that categorized stocks by their size and priceto-book characteristics. The results demonstrated that, above and beyond a stock s beta, size and value were two further factors that could have a positive impact on investment returns. Eugene Fama s 1960 s PhD dissertation also gave rise to the hugely influential Efficient Market Hypothesis which states that at any given time, security prices fully reflect all information available to market participants. Therefore, if a market is efficient, no individual investor should expect to be able to outperform an appropriate benchmark of that market on a sustained basis. In the late 20 th /early 21 st century, numerous academics, including Fama & French, began to consider the momentum factor. The momentum effect was first described by Jegadeesh and Titman in a paper published in They found that recent returns give an indication of future returns. Academics studying momentum have also noticed an effect called short-term reversal whereby a high past-month return is likely to be followed by a poor return for the following month and vice-versa. Sparinvest I Strategic Asset Allocation Strategy Page 1
2 Michael C Jensen whose 1968 paper, The Performance of Mutual Funds in the Period , was the first major study of fund manager performance. It concluded that no mutual fund manager was able to use timing abilities to add value over the long term. Benjamin Graham In addition, we are mindful of the human factor that affects all investments as described in the following quotation from Benjamin Graham: The Investor s chief problem and even his worst enemy is likely to be himself. What is Strategic Asset Allocation? Asset allocation is the process of dividing a portfolio among the major asset classes such as bonds, stocks or cash in order to reduce risk and optimise long-term returns through diversification. The starting point for the process is the investor s risk tolerance level. This not only determines the asset allocation goal for the portfolio at inception but also on an ongoing basis. The ultimate goal is to deliver to the investor an optimal portfolio offering the highest possible return for the lowest risk. The skill of the strategic asset allocator lies in blending instruments that have contrasting behaviour patterns in different economic conditions. Thus each asset is chosen for the beneficial effect that it will have on the portfolio as a whole either because it has the capacity to boost returns or else because its presence in the portfolio will help to neutralize the risks associated with other investments held. Because the value of assets can change depending on market conditions, the portfolio needs to be rebalanced periodically to maintain the right balance of assets for the agreed risk profile. Why is it so Important to Allocate Strategically? Assets can be allocated to a portfolio in one of three ways: Tactically speculation to take advantage of short-term market movements; By stock picking selecting individual securities on their own merits; or Strategically choosing assets of a certain type for their capacity to interact with other portfolio holdings to create a beneficial effect on the whole. Unlike market timing, or the prospects for individual stocks, strategic asset allocation is the only factor affecting investments that can actually be managed successfully over the longer term. It is also by far the most important, as shown by the figure below. Sparinvest Strategic Asset Allocation Strategy Page 2
3 100% 80% 91.5% 60% 40% 20% 0% Strategic asset allocation 4.6% Stock-picking 1.8% Tactical asset allocation (timing) The impact of asset allocation on return variation. Based on a study by Brinson, Hood & Beebower of 91 large USbased pension funds from 1973 to 1986, updated in A related study undertaken by Sparinvest and based on all Returns Based Style Analysis on European based equity funds delivered similar results. How is it Possible to Manage Risk? The investor is wise who diversifies. Wars, coups d état, interest-rate movements and recession all represent sources of unavoidable, systematic risk to securities markets. They can affect a broad range of securities if not the entire market and can only be avoided by being out of the system or mitigated by hedging. But, whilst every stock-market investment carries a risk of loss of capital, diversification helps to disperse and reduce the non-systematic risks involved with investment in individual shares simply by adding other shares to the portfolio. Thus if one company announces a drop in profits, the short-term negative effect on its share price is neutralised within the portfolio by the performance of the remaining, unaffected investments. Company Risk Sector Risk Country Risk But we can t eliminate all investment risk To reduce the risk of investing in a single sector, we invest in other sectors. To reduce the risk of investing in a single country, we invest in other countries. The remaining market risk will be what decides the risk and return attributes of the portfolio. To reduce the risk of investing in a single company, we invest in more companies. Strategically Constructed Portfolios Portfolios must be constructed strategically, using knowledge of asset correlations and volatility. The figure below shows how the dynamic effect of holding two different asset types that are not affected by the same economic factors and that behave as independently of each other as possible is to drag down their combined risk, but leave their performance prospects unimpaired. Sparinvest Strategic Asset Allocation Strategy Page 3
4 Expected return 2 Equities 1 Blending together assets with a low correlation to each other can either reduce portfolio risk (1) or improve expected returns (2) Bonds Volatility (the main cause of loss of capital) Replicating such dynamics throughout the portfolio will achieve the highest return at the lowest risk, an investment goal known as the efficient frontier. An optimal portfolio is one that sits on the efficient frontier. In other words, its composition cannot be improved. The Fama/French Factors As a strategic asset allocator, it is impossible to ignore the research findings of the academics, Eugene Fama and Kenneth French. Their famous study on the returns from the US stock market, published in 1996, investigated the style factor and concluded that investors were likely to be better compensated for risk if their investment portfolios were skewed towards those companies occupying the value and the small-cap sectors of the market. Fama & French subsequently researched international market data and found the same effect. A Study of Excess Returns US Market % Small Cap 4.5% 9.0% 7.2% -2.2% 3.4% -0.2% Growth 5.2% Value -1.1% Large Cap 1.8% Based on Value-weighted data for US market over a period of 40 years, the matrix shows the results of an annual division of the universe into 25 portfolios based on style exposure. Thus each portfolio is ranked according to the size and price-to-book-ratios of the companies that it theoretically invests in. Data source: Kenneth French CRSP database. Calculations: Sparinvest Academic study has added a further dimension (risk factor) to the familiar Fama French matrix namely momentum. Sparinvest Strategic Asset Allocation Strategy Page 4
5 In order to create optimal portfolios, therefore, it is important to consider not just the allocation between asset types but also the way in which the style factors such as size and price-to-book and momentum can impact upon performance. The Sparinvest Approach to Strategic Asset Allocation Strategic asset allocation has become fashionable within the investment industry. This is hardly surprising when the academic evidence in its favour is so convincing. However, strategic asset allocation is a rigorous and often counterintuitive discipline. Very few asset managers find that they are able to subscribe to it completely because the temptation to believe that they can anticipate market behaviour is so strong. Sparinvest is different. The strategy of strategic asset allocation has dominated both our corporate philosophy and the thinking behind the development of our entire product range for more than a decade. Until we discover scientific evidence to show that market movements can in some way be predicted, we genuinely dismiss the strategy of tactical allocation. Market timing and security selection are obviously important The problem is that nobody achieves long term success in the former and almost nobody in the latter. Asset allocation is the only factor affecting your investments that you can actually influence. William Bernstein, The Intelligent Asset Allocator Why Sparinvest Dismisses Tactical Allocation We agree with Bernstein s comment. The graph below shows the growth in value of $1 invested in the US S&P 500 stock market in 1926 until 2006, compared with a risk-free investment in Treasury Bills. It clearly demonstrates the superior performance potential of equities compared with bonds. However, the third column highlights the perils of trying to time the market. In this case, the best months of stock market performance accounted for only 4% of the total period. Dipping in and out of the market would not only have increased transaction costs, it would also have increased the likelihood of missing those periods where the market was delivering the most substantial profits. How much has 1 Dollar grown from 1926 to 2006? Source: Ibbotson Associates At Sparinvest, we believe that a constant exposure to the market will deliver more consistent returns over time than an investment approach that attempts to predict market movements. If we can t add value for investors by applying an active approach, then we prefer to achieve this exposure at a lower cost by means of passively-managed funds. Sparinvest Strategic Asset Allocation Strategy Page 5
6 A Common Sense Approach American Equities Annual Return Inflation Real Return America as an emerging market 7.1% 0.1% 7.0% America during industrialisation 7.2% 0.6% 6.6% America as a mature market 10.2% 3.1% 6.9% Return over two centuries 8.3% 1.4% 6.9% (A similar rate of return occurred post Civil War from ) Dot com boom years (ended spectacularly in 2002) 17.3% 3.3% 13.6% 13.8 % 3.2% 10.5% Source: John C. Bogle, Common Sense on Mutual Funds Provided that investors are realistic in setting their goals for long-term investment, we believe that Sparinvest s prudent, strategic approach can help them to achieve a more stable and satisfactory return than they are likely to achieve with the tactical approach taken by other investment managers. Returns Distribution on Sample Portfolios Using strategic asset allocation, Sparinvest is able to create an optimal portfolio to deliver a specific annualised return or to remain within a given risk profile. The figure below calculates the return distribution from a portfolio designed for a risk-tolerant investor. 40% 30% 20% 10% 0% -10% -20% Disaster Terrible Poor year Average Good Excellent Sensational Each of the vertical columns shows a wide range of possible outcomes ranging from sensationally good to disastrously bad that might occur over the time period indicated. Note how the volatility in average annual returns diminishes with each year that the portfolio is held. The figure below shows the returns distribution and volatility range that might be expected for the risk-tolerant investor compared with the risk-averse investor. What is clear here is the fact that the higher the return that is sought, the greater the degree of volatility that must be expected. Sparinvest Strategic Asset Allocation Strategy Page 6
7 40% 30% 20% 10% 0% -10% -20% Disaster Terrible Poor year Average Good Excellent Sensational How Does Sparinvest Allocate Assets Strategically? Our booklet Strategic Asset Allocation in short gives a full explanation of how we apply the theory of strategic asset allocation to the portfolios that we manage on behalf of institutional investors. However, strategic asset allocation is also the basis for a range of funds that we offer to retail investors. Creating the best possible portfolio for each investor is a multi-stage process of which the most important aspect is, of course, the selection of assets. But the starting point in each case must be the investor and his/her individual requirements. Once we have determined the investor s risk profile, we can either begin work on creating a bespoke portfolio that will match that profile or else we can make recommendations about how to use our strategic asset allocation fund range to achieve a match. Sample Allocations Fund Range and Asset Allocation Securus Procedo Equitas Fixed Income 75% Equities 25% Fixed Income 35% Equities 65% Equities 100% Match Your Risk Profile Before considering any investment, the investor should first consider what level of risk is acceptable and what time horizon is appropriate: Sparinvest Strategic Asset Allocation Strategy Page 7
8 Longer time horizon / Greater risk appetite Shorter time horizon / Lower risk appetite Securus Procedo Equitas By investing in a combination of funds, most investors can achieve a sensible diversification and a well-behaved core investment to match their own attitude to risk and offset any future liabilities. Once the portfolio is established, the investment process is an ongoing one and has the constant objective of ensuring that the portfolio stays on track and in line with the strategic starting point. Investment Strategy (Process) 1. Screening universe of investments 4. Portfolio maintenance & rebalancing 2. Analysis & risk modeling 3. Selecting individual investments Summary Sparinvest s Strategic Asset Allocation investment objectives are: To offer continuous investment regardless of market movements To offer well-diversified portfolios, invested in a wide range of asset classes To use knowledge of asset correlations and volatility to construct portfolios that are suitable for investors risk appetites and time horizons To emphasize proven outperformance factors (currently size, value and momentum) to seek excess returns To retain portfolio allocations through regular rebalancing. Sparinvest Strategic Asset Allocation Strategy Page 8
9 Notes The mentioned sub-funds are part of Sparinvest SICAV, a Luxembourg-based, open-ended investment company. For further information we refer to the full and/or simplified prospectus and the current annual / semi-annual report of Sparinvest SICAV which can be obtained free of charge at the offices of Sparinvest or of appointed distributors together with the initial statutes of the funds and any subsequent changes to such statutes. Investments are only made on the basis of these documents. Past performance is no guarantee for future returns. Investors may not get back the full amount invested. Investments may be subject to foreign exchange risks. The investor bears a higher risk for investments into emerging markets. The indicated performance is calculated Net Asset Value to Net Asset Value in the fund s base currency, without consideration of subscription fees. For investors in Switzerland the funds representative and paying agent is RBC Dexia Services Bank S.A., Zurich Branch, Badenerstrasse 567, P.O. Box 101, CH-8066 Zurich. Published by Sparinvest, 28, Boulevard Royal, L-2449 Luxembourg Strategy SAA eng Sparinvest Strategic Asset Allocation Strategy Page 9
Investment Advisory Whitepaper
Program Objective: We developed our investment program for our clients serious money. Their serious money will finance their important long-term family and personal goals including retirement, college
More informationStrategic Asset Allocation in short
Strategic Asset Allocation in short Strategic Asset Allocation in short Editors: Michael Albrechtslund, B. Sc. Andreas Graflund, Ph. D. Thomas Bjørn Jensen, M. Sc. Henrik Lind-Grønbæk, B. Sc. Camilla Svendsen,
More informationan investor-centric approach nontraditional indexing evolves
FLEXIBLE INDEXING Shundrawn A. Thomas Executive Vice President Head of Funds and Managed Accounts Group The opinions expressed herein are those of the author and do not necessarily represent the views
More informationan Investor-centrIc approach FlexIBle IndexIng nontraditional IndexIng evolves
FlexIBle IndexIng Shundrawn A. Thomas executive vice president head of Funds and Managed accounts group The opinions expressed herein are those of the author and do not necessarily represent the views
More informationThe benefits of core-satellite investing
The benefits of core-satellite investing Contents 1 Core-satellite: A powerful investment approach 3 The key benefits of indexing the portfolio s core 6 Core-satellite methodology Core-satellite: A powerful
More informationSmart Investment Management Risk-Graded Portfolios
Smart Investment Management Risk-Graded Portfolios Smart Investment Management A new type of discretionary investment manager With over 100 firms in the UK offering discretionary investment management,
More informationWealth Strategies. Asset Allocation: The Building Blocks of a Sound Investment Portfolio.
www.rfawealth.com Wealth Strategies Asset Allocation: The Building Blocks of a Sound Investment Portfolio Part 6 of 12 Asset Allocation WEALTH STRATEGIES Page 1 Asset Allocation At its most basic, Asset
More informationNATIONWIDE ASSET ALLOCATION INVESTMENT PROCESS
Nationwide Funds A Nationwide White Paper NATIONWIDE ASSET ALLOCATION INVESTMENT PROCESS May 2017 INTRODUCTION In the market decline of 2008, the S&P 500 Index lost more than 37%, numerous equity strategies
More informationInvestment Principles and risk. Learning Outcome 8
Investment Principles and risk Learning Outcome 8 By the end of this learning material you will be able to demonstrate an understanding of the principles of investment planning. 8.1 The Main Approaches
More informationNext Generation Fund of Funds Optimization
Next Generation Fund of Funds Optimization Tom Idzorek, CFA Global Chief Investment Officer March 16, 2012 2012 Morningstar Associates, LLC. All rights reserved. Morningstar Associates is a registered
More informationInvesting Like the Harvard and Yale Endowment Funds
Investing Like the Harvard and Yale Endowment Funds Michael W. Azlen, CAIA Frontier Investment Management Ilan Zermati Frontier Investment Management Introduction The US University Endowment Funds ( US
More informationChapter 5: Answers to Concepts in Review
Chapter 5: Answers to Concepts in Review 1. A portfolio is simply a collection of investment vehicles assembled to meet a common investment goal. An efficient portfolio is a portfolio offering the highest
More informationDemystifying the Role of Alternative Investments in a Diversified Investment Portfolio
Demystifying the Role of Alternative Investments in a Diversified Investment Portfolio By Baird s Advisory Services Research Introduction Traditional Investments Domestic Equity International Equity Taxable
More informationINVESTING LIKE THE HARVARD AND YALE ENDOWMENT FUNDS JUNE Frontierim.com
INVESTING LIKE THE HARVARD AND YALE ENDOWMENT FUNDS JUNE 2016 F Frontierim.com Introduction The US University Endowment Funds ( US Endowment Funds ), such as Harvard and Yale, have been leaders in diversified
More informationCHAPTER 5: ANSWERS TO CONCEPTS IN REVIEW
CHAPTER 5: ANSWERS TO CONCEPTS IN REVIEW 5.1 A portfolio is simply a collection of investment vehicles assembled to meet a common investment goal. An efficient portfolio is a portfolio offering the highest
More informationsample Advisor letterhead June 30, 2004 John Doe 1234 Yonge Street Toronto, Ontario M4T 3R5 RE: CI Portfolio Series Investment Policy Statement
Advisor letterhead June 30, 2004 John Doe 1234 Yonge Street Toronto, Ontario M4T 3R5 RE: CI Portfolio Series Investment Policy Statement Dear John, I am pleased to provide you with your CI Global Balanced
More informationAnswers to Concepts in Review
Answers to Concepts in Review 1. A portfolio is simply a collection of investment vehicles assembled to meet a common investment goal. An efficient portfolio is a portfolio offering the highest expected
More informationRESEARCH GROUP ADDRESSING INVESTMENT GOALS USING ASSET ALLOCATION
M A Y 2 0 0 3 STRATEGIC INVESTMENT RESEARCH GROUP ADDRESSING INVESTMENT GOALS USING ASSET ALLOCATION T ABLE OF CONTENTS ADDRESSING INVESTMENT GOALS USING ASSET ALLOCATION 1 RISK LIES AT THE HEART OF ASSET
More information9 Critical Factors You Must Consider Creating Long-Term Investment Success
Tulett, Matthews & Associates portfolio management 9 Critical Factors You Must Consider Creating Long-Term Investment Success There are 9 critical factors you must consider when thinking about your longterm
More informationMotif Capital Horizon Models: A robust asset allocation framework
Motif Capital Horizon Models: A robust asset allocation framework Executive Summary By some estimates, over 93% of the variation in a portfolio s returns can be attributed to the allocation to broad asset
More informationAiming to deliver attractive absolute returns with style
For professional investors only Aiming to deliver attractive absolute returns with style BMO Global Equity Market Neutral (SICAV) 2 BMO Global Equity Market Neutral (SICAV) Leveraging our proven capabilities
More informationA GUIDE TO INVESTMENT MANAGEMENT FINANCIAL ADVICE & WEALTH MANAGEMENT
A GUIDE TO INVESTMENT MANAGEMENT FINANCIAL ADVICE & WEALTH MANAGEMENT 2017 Learn why our portfolios consistently outperform industry benchmarks. Chartered Financial Advisers 29 years professional experience
More informationR02 Portfolio Construction and Management
R02 Portfolio Construction and Management This section will consider the main strategies that can be used to construct the optimal portfolio for a client s needs together with how those needs can be identified.
More informationAsset Allocation with Exchange-Traded Funds: From Passive to Active Management. Felix Goltz
Asset Allocation with Exchange-Traded Funds: From Passive to Active Management Felix Goltz 1. Introduction and Key Concepts 2. Using ETFs in the Core Portfolio so as to design a Customized Allocation Consistent
More informationpersonal αlpha TM PŮR INVESTING INC. Advanced ETF Strategies
ADVANCED ETF STRATEGIES PŮR INVESTING INC. Advanced ETF Strategies PŮR investing Inc. is registered as a portfolio manager and builds long term investment solutions for DC pension plans and investors while
More informationShort Term Alpha as a Predictor of Future Mutual Fund Performance
Short Term Alpha as a Predictor of Future Mutual Fund Performance Submitted for Review by the National Association of Active Investment Managers - Wagner Award 2012 - by Michael K. Hartmann, MSAcc, CPA
More informationPART TWO: PORTFOLIO MANAGEMENT HOW EXPOSURE TO REAL ESTATE MAY ENHANCE RETURNS.
PART TWO: PORTFOLIO MANAGEMENT HOW EXPOSURE TO REAL ESTATE MAY ENHANCE RETURNS. MAY 2015 Burland East, CFA CEO American Assets Capital Advisers Creede Murphy Vice President, Investment Analyst American
More informationStructured Portfolio Enhancements
Structured Portfolio Enhancements For additional information regarding Symmetry Partners, LLC, Factor Investing, AQR Capital Management, Dimensional Fund Advisors, and the Vanguard Group, please see the
More informationNIFTY Multi-Factor Indices. Multi-factor index strategies provide diversified factor-exposure with varied risk-return profile
Multi-Factor Indices Multi-factor index strategies provide diversified factor-exposure with varied risk-return profile July 2017 Introduction Factor-based investing has gathered popularity amongst the
More informationETF s Top 5 portfolio strategy considerations
ETF s Top 5 portfolio strategy considerations ETFs have grown substantially in size, range, complexity and popularity in recent years. This presentation and paper provide the key issues and portfolio strategy
More informationßetafolio evidence-based model portfolios and client-ready content for financial planners
evidence-based model portfolios and client-ready content for financial planners Intelligent Model Portfolios Betafolio takes the hassle out of advisers investment processes by offering access to evidence-based
More informationStrength Through Structure Strategies for the Goal-Focused Investor
Strength Through Structure Strategies for the Goal-Focused Investor Introduction In a world that offers a bewildering array of investment options, there is a need for an approach that delivers clarity
More informationBUILDING INVESTMENT PORTFOLIOS WITH AN INNOVATIVE APPROACH
BUILDING INVESTMENT PORTFOLIOS WITH AN INNOVATIVE APPROACH Asset Management Services ASSET MANAGEMENT SERVICES WE GO FURTHER When Bob James founded Raymond James in 1962, he established a tradition of
More informationUniversity 18 Lessons Financial Management. Unit 12: Return, Risk and Shareholder Value
University 18 Lessons Financial Management Unit 12: Return, Risk and Shareholder Value Risk and Return Risk and Return Security analysis is built around the idea that investors are concerned with two principal
More informationFactor Investing. Fundamentals for Investors. Not FDIC Insured May Lose Value No Bank Guarantee
Factor Investing Fundamentals for Investors Not FDIC Insured May Lose Value No Bank Guarantee As an investor, you have likely heard a lot about factors in recent years. But factor investing is not new.
More informationFactor Investing: Smart Beta Pursuing Alpha TM
In the spectrum of investing from passive (index based) to active management there are no shortage of considerations. Passive tends to be cheaper and should deliver returns very close to the index it tracks,
More informationInvestment Policy Guidelines & Strategies Within the Context of. The American Law Instituteʼs Restatement of the Law Third: Trusts
Investment Policy Guidelines & Strategies Within the Context of The American Law Instituteʼs Restatement of the Law Third: Trusts Prudent Investor Rule Introduction The purpose of this paper is to summarize
More informationThe Case for TD Low Volatility Equities
The Case for TD Low Volatility Equities By: Jean Masson, Ph.D., Managing Director April 05 Most investors like generating returns but dislike taking risks, which leads to a natural assumption that competition
More information+ = Smart Beta 2.0 Bringing clarity to equity smart beta. Drawbacks of Market Cap Indices. A Lesson from History
Benoit Autier Head of Product Management benoit.autier@etfsecurities.com Mike McGlone Head of Research (US) mike.mcglone@etfsecurities.com Alexander Channing Director of Quantitative Investment Strategies
More informationSmart 401k Investing. Table of Contents. Investing made simple. Brentwood 401(k) Retirement Plan Program
Smart 401k Investing Investing made simple. Brentwood 401(k) Retirement Plan Program Table of Contents Simplify Investing Science Page 2 Using Low Cost Diversification Page 3 Ongoing Participation & Education
More informationCapital Markets (FINC 950) DRAFT Syllabus. Prepared by: Phillip A. Braun Version:
Capital Markets (FINC 950) DRAFT Syllabus Prepared by: Phillip A. Braun Version: 6.29.16 Syllabus 2 Capital Markets and Personal Investing This course develops the key concepts necessary to understand
More informationFactor Performance in Emerging Markets
Investment Research Factor Performance in Emerging Markets Taras Ivanenko, CFA, Director, Portfolio Manager/Analyst Alex Lai, CFA, Senior Vice President, Portfolio Manager/Analyst Factors can be defined
More informationASSET ALLOCATION MADE EASY
ASSET ALLOCATION MADE EASY REACHING YOUR GOALS AT YOUR PACE Most people can rattle off their investment goals: retirement, college tuition, a new house. That s easy. What s harder is successfully reaching
More informationBack to the Future Why Portfolio Construction with Risk Budgeting is Back in Vogue
Back to the Future Why Portfolio Construction with Risk Budgeting is Back in Vogue SOLUTIONS Innovative and practical approaches to meeting investors needs Much like Avatar director James Cameron s comeback
More informationModern Portfolio Theory -Markowitz Model
Modern Portfolio Theory -Markowitz Model Rahul Kumar Project Trainee, IDRBT 3 rd year student Integrated M.Sc. Mathematics & Computing IIT Kharagpur Email: rahulkumar641@gmail.com Project guide: Dr Mahil
More informationBuilding Portfolios with Active, Strategic Beta and Passive Strategies
Building Portfolios with Active, Strategic Beta and Passive Strategies It s a Question of Beliefs Issues to think about on the Active/Passive spectrum: How important are fees to you? Do you believe markets
More informationHow smart beta indexes can meet different objectives
Insights How smart beta indexes can meet different objectives Smart beta is being used by investment institutions to address multiple requirements and to produce different types of investment outcomes.
More informationDIMENSIONAL FUND ADVISORS. Putting Financial Science to Work
DIMENSIONAL FUND ADVISORS Putting Financial Science to Work Dimensional invests differently. We build portfolios based on the science of capital markets. Decades of research guide the way. For more than
More informationBuilding Efficient Hedge Fund Portfolios August 2017
Building Efficient Hedge Fund Portfolios August 2017 Investors typically allocate assets to hedge funds to access return, risk and diversification characteristics they can t get from other investments.
More informationRisk and Return and Portfolio Theory
Risk and Return and Portfolio Theory Intro: Last week we learned how to calculate cash flows, now we want to learn how to discount these cash flows. This will take the next several weeks. We know discount
More informationTechnical Guide. Issue: forecasting a successful outcome with cash flow modelling. To us there are no foreign markets. TM
Technical Guide To us there are no foreign markets. TM The are a unique investment solution, providing a powerful tool for managing volatility and risk that can complement any wealth strategy. Our volatility-led
More informationAN INTRODUCTION TO FACTOR INVESTING
WHITE PAPER AN INTRODUCTION TO FACTOR INVESTING THIS DOCUMENT IS INTENDED FOR INSTITUTIONAL INVESTORS ONLY. IT SHOULD NOT BE DISTRIBUTED TO, OR USED BY, INDIVIDUAL INVESTORS. OUR RESEARCH COMMITMENT As
More informationFactoring Profitability
Factoring Profitability Authors Lisa Goldberg * Ran Leshem Michael Branch Recent studies in financial economics posit a connection between a gross-profitability strategy and quality investing. We explore
More informationHarbour Asset Management New Zealand Equity Advanced Beta Fund FAQ S
Harbour Asset Management New Zealand Equity Advanced Beta Fund FAQ S January 2015 ContactUs@harbourasset.co.nz +64 4 460 8309 What is Advanced Beta? The name Advanced Beta is often interchanged with terms
More informationRisk and Return. Nicole Höhling, Introduction. Definitions. Types of risk and beta
Risk and Return Nicole Höhling, 2009-09-07 Introduction Every decision regarding investments is based on the relationship between risk and return. Generally the return on an investment should be as high
More informationNegative rates threatening European savers: High Yield Value Bonds. Sparinvest
Negative rates threatening European savers: High Yield Value Bonds Sparinvest Investing in High Yield Bonds Henrik Lind-Groenbaek, Chief Investment Officer, Sparinvest Returns as per May 2014 Global Asset
More informationTHE VALUE OF VALUE INVESTING. Stephen Horan, Ph.D., CFA, CIPM Managing Director, Credentialing CFA Institute
THE VALUE OF VALUE INVESTING Stephen Horan, Ph.D., CFA, CIPM Managing Director, Credentialing CFA Institute TODAY S AGENDA Characterize Value Investing Potential Benefits (Real and Imagined) Compare and
More informationTHE ACADEMIC ADVANTAGE
THE ACADEMIC ADVANTAGE The Evidence and Research Behind IFA s Advice for Institutions Corporate Office Index Fund Advisors, Inc. 19200 Von Karman Ave. Suite 150 Irvine, CA 92612-8502 Tel: (888) 643-3133
More informationAdvisor Guide FOR ADVISOR USE ONLY NOT FOR DISTRIBUTION TO CLIENTS
Advisor Guide FOR ADVISOR USE ONLY NOT FOR DISTRIBUTION TO CLIENTS Managed solutions can provide many benefits to your practice. Their convenience allows you to shift your time from portfolio construction
More informationEQUITY RESEARCH AND PORTFOLIO MANAGEMENT
EQUITY RESEARCH AND PORTFOLIO MANAGEMENT By P K AGARWAL IIFT, NEW DELHI 1 MARKOWITZ APPROACH Requires huge number of estimates to fill the covariance matrix (N(N+3))/2 Eg: For a 2 security case: Require
More informationDynamic Smart Beta Investing Relative Risk Control and Tactical Bets, Making the Most of Smart Betas
Dynamic Smart Beta Investing Relative Risk Control and Tactical Bets, Making the Most of Smart Betas Koris International June 2014 Emilien Audeguil Research & Development ORIAS n 13000579 (www.orias.fr).
More informationModule 6 Portfolio risk and return
Module 6 Portfolio risk and return Prepared by Pamela Peterson Drake, Ph.D., CFA 1. Overview Security analysts and portfolio managers are concerned about an investment s return, its risk, and whether it
More informationFTSE ActiveBeta Index Series: A New Approach to Equity Investing
FTSE ActiveBeta Index Series: A New Approach to Equity Investing 2010: No 1 March 2010 Khalid Ghayur, CEO, Westpeak Global Advisors Patent Pending Abstract The ActiveBeta Framework asserts that a significant
More informationSmart Beta and the Evolution of Factor-Based Investing
Smart Beta and the Evolution of Factor-Based Investing September 2016 Donald J. Hohman Managing Director, Product Management Hitesh C. Patel, Ph.D Managing Director Structured Equity Douglas J. Roman,
More informationinvestment guide discipline We help protect and build wealth through a multiasset class approach.
ideas At Brinker Capital, we look beyond the traditional methods of investing to help grow real purchasing power for our clients over the long term. discipline We help protect and build wealth through
More informationJACOBS LEVY CONCEPTS FOR PROFITABLE EQUITY INVESTING
JACOBS LEVY CONCEPTS FOR PROFITABLE EQUITY INVESTING Our investment philosophy is built upon over 30 years of groundbreaking equity research. Many of the concepts derived from that research have now become
More informationEnhancing equity portfolio diversification with fundamentally weighted strategies.
Enhancing equity portfolio diversification with fundamentally weighted strategies. This is the second update to a paper originally published in October, 2014. In this second revision, we have included
More informationInternational Journal of Management Sciences and Business Research, 2013 ISSN ( ) Vol-2, Issue 12
Momentum and industry-dependence: the case of Shanghai stock exchange market. Author Detail: Dongbei University of Finance and Economics, Liaoning, Dalian, China Salvio.Elias. Macha Abstract A number of
More informationETFs. Multifactor Investing. Seeking to build a better index
ETFs Multifactor Investing Seeking to build a better index Three things to know about active and passive investing 1 Active investing has advantages, but requires both skill and discipline The premise
More informationThe Practical Application of Behavioral Finance
The Practical Application of Behavioral Finance July 2, 2013 by Mitchell D. Eichen and John M. Longo Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent
More informationThe Pokorny Group at Morgan Stanley Smith Barney. Your success is our success.
The Pokorny Group at Morgan Stanley Smith Barney Your success is our success. Our Mission With nearly two decades in the brokerage industry, we offer you an insightful and experienced team that is committed
More informationMicro-Cap Investing. Expanding the Opportunity Set. Expanding the Investment Opportunity Set
Micro-Cap Investing Expanding the Opportunity Set Micro-cap stocks present a unique opportunity for long-term investors. Defined as companies whose market capitalizations range from approximately $9 million
More informationHow to evaluate factor-based investment strategies
A feature article from our U.S. partners INSIGHTS SEPTEMBER 2018 How to evaluate factor-based investment strategies Due diligence on smart beta strategies should be anything but passive Original publication
More informationTHE LA RETIREMENT FUND (The Fund) INVESTMENT POLICY STATEMENT SUMMARY
THE LA RETIREMENT FUND (The Fund) INVESTMENT POLICY STATEMENT SUMMARY Last updated April 2017 1. INTRODUCTION This Investment Policy Statement ( IPS ) is a formal statement of the main principles underlying
More informationDimensions of Equity Returns in Europe
RESEARCH Dimensions of Equity Returns in Europe November 2015 Stanley Black, PhD Vice President Research Philipp Meyer-Brauns, PhD Research Size, value, and profitability premiums are well documented in
More informationDiscover the power. of ETFs. Not FDIC Insured May May Lose Lose Value Value No No Bank Bank Guarantee
Discover the power of ETFs Not FDIC Insured May May Lose Lose Value Value No No Bank Bank Guarantee Discover exchange-traded funds (ETFs) Financial television programs and publications continue to give
More informationDirexion/Wilshire Dynamic Asset Allocation Models Asset Management Tools Designed to Enhance Investment Flexibility
Daniel D. O Neill, President and Chief Investment Officer Direxion/Wilshire Dynamic Asset Allocation Models Asset Management Tools Designed to Enhance Investment Flexibility Executive Summary At Direxion
More informationDOES SECTOR ROTATION WORK?
DOES SECTOR ROTATION WORK? What goes around comes around. - Proverb 2 There is a general market wisdom that certain sectors perform well and other sectors perform poorly during different points in the
More informationVideo: GIC Wealth Management Perspectives
GLOBAL INVESTMENT COMMITTEE FEB.8, 2017 Video: GIC Wealth Management Perspectives Video: The Case for Active Management A new video takes a deep dive into the drivers of recent Active Manager underperformance
More informationPortfolio Management
MCF 17 Advanced Courses Portfolio Management Final Exam Time Allowed: 60 minutes Family Name (Surname) First Name Student Number (Matr.) Please answer all questions by choosing the most appropriate alternative
More informationQuantitative Investment: From indexing to factor investing. For institutional use only. Not for distribution to retail investors.
Quantitative Investment: From indexing to factor investing For institutional use only. Not for distribution to retail investors. 1 What s the prudent portfolio mix? It depends Objective Investment approach
More informationUNIVERSIDAD CARLOS III DE MADRID FINANCIAL ECONOMICS
Javier Estrada September, 1996 UNIVERSIDAD CARLOS III DE MADRID FINANCIAL ECONOMICS Unlike some of the older fields of economics, the focus in finance has not been on issues of public policy We have emphasized
More informationWorld Index. One World. One Investment
HSBC World Index Portfolios For professional clients only A range of Multi-Asset Passive Portfolios World Index. One World. One Investment We understand your business is changing The advisory market is
More informationAll Ords Consecutive Returns over a 130 year period
Absolute conviction, at what price? Peter Constable, Chief Investment Offier, MMC Asset Management Summary When equity markets start generating returns significantly above long term averages, risk has
More informationModels of asset pricing: The implications for asset allocation Tim Giles 1. June 2004
Tim Giles 1 June 2004 Abstract... 1 Introduction... 1 A. Single-factor CAPM methodology... 2 B. Multi-factor CAPM models in the UK... 4 C. Multi-factor models and theory... 6 D. Multi-factor models and
More informationFactoring in Behavior
Factoring in Behavior Mike Fardy, National Sales Manager, CIMA, FlexShares Not For Use with Retail Investors Return (%) Global Equities Performance 300 240 180 120 60 0-60 Dec-08 Dec-11 Dec-14 Dec-17 U.S.
More informationUnderstanding investments. A quick and simple guide to investing.
Understanding investments A quick and simple guide to investing. Irish Life Multi-Asset Portfolio funds are available on investment and pension plans provided by Irish Life Assurance plc. INTRODUCTION
More informationBEYOND SMART BETA: WHAT IS GLOBAL MULTI-FACTOR INVESTING AND HOW DOES IT WORK?
INVESTING INSIGHTS BEYOND SMART BETA: WHAT IS GLOBAL MULTI-FACTOR INVESTING AND HOW DOES IT WORK? Multi-Factor investing works by identifying characteristics, or factors, of stocks or other securities
More informationWe believe skilled active management, underpinned by in-depth research, can create value for clients over the longer term.
Consistency and discipline create opportunities. THE T. ROWE PRICE APPROACH TO ACTIVE MANAGEMENT. We believe skilled active management, underpinned by in-depth research, can create value for clients over
More informationInvestment Philosophy & Investment Management Process
Investment Philosophy & Investment Management Process Introduction If you are looking for a financial strategy and investment approach that is right and meaningful for you personally, it is imperative
More informationTHE REWARDS OF MULTI-ASSET CLASS INVESTING
INVESTING INSIGHTS THE REWARDS OF MULTI-ASSET CLASS INVESTING Market volatility and asset class correlations have been on the rise in recent years, leading many investors to wonder if diversification still
More informationUnderstanding ASSET ALLOCATION
Understanding ASSET ALLOCATION An Educational Guide for Your Financial Future VLC0443-0917 . TABLE OF CONTENTS Get Ready for Retirement... 1 What Is Asset Allocation?... 1 Diversification May Lessen the
More informationELC Advisors, LLC. Efficient Low Cost Wealth Management
ELC Advisors, LLC Efficient Low Cost Wealth Management ELC Advisors, LLC Our principles Clients come first As an RIA, ELC Advisors adheres to the fiduciary standard No misaligned incentives, as with broker
More informationInvestment Process. The Filla Latzke Group at Morgan Stanley. 2 Active or Passive. 3 Navigating Today s Markets. 4 Choosing Investment Managers
2 Active or Passive 3 Navigating Today s Markets 4 Choosing Investment Managers 5 Retirement Income Strategy The Filla Latzke Group at Morgan Stanley Investment Process Active or Passive? We Prefer Active
More informationPersonalized Investment Proposal
Personalized Investment Proposal Client: Mr. Moderate Conservative Prepared on: 11/13/2016 Advisor Name Financial Advisor Advisor Address Advisor City, St zip Advisor Phone Advisor@email.com ATIA Advisor:
More informationISTOXX EUROPE FACTOR INDICES HARVESTING EQUITY RETURNS WITH BOND- LIKE VOLATILITY
May 2017 ISTOXX EUROPE FACTOR INDICES HARVESTING EQUITY RETURNS WITH BOND- LIKE VOLATILITY Dr. Jan-Carl Plagge, Head of Applied Research & William Summer, Quantitative Research Analyst, STOXX Ltd. INNOVATIVE.
More informationUMA Model Portfolios Professional Advice for Your Unified Managed Account
UMA Model Portfolios Professional Advice for Your Unified Managed Account B The introduction of unified managed accounts has helped many investors to consolidate and streamline their investment portfolios.
More informationWhy and How to Pick Tactical for Your Portfolio
Why and How to Pick Tactical for Your Portfolio A TACTICAL PRIMER Markets and economies have exhibited characteristics over the past two decades dissimilar to the years which came before. We have experienced
More informationCHAPTER 17 INVESTMENT MANAGEMENT. by Alistair Byrne, PhD, CFA
CHAPTER 17 INVESTMENT MANAGEMENT by Alistair Byrne, PhD, CFA LEARNING OUTCOMES After completing this chapter, you should be able to do the following: a Describe systematic risk and specific risk; b Describe
More informationInvestment Performance of Common Stock in Relation to their Price-Earnings Ratios: BASU 1977 Extended Analysis
Utah State University DigitalCommons@USU All Graduate Plan B and other Reports Graduate Studies 5-2015 Investment Performance of Common Stock in Relation to their Price-Earnings Ratios: BASU 1977 Extended
More information