On 18 September, Scotland will vote in a referendum on whether to break away from the United Kingdom. The ‘Yes’ to independence campaign is led by the Scottish Nationalist Party (SNP) and its wily leader Alex Salmond. The ‘No’ camp is run by a motley collection of UK politicians under the banner of ‘Better Together’,…
Most endowed institutions seek to provide continued (or growing) financial support for their operations while at the same time preserving the endowment’s value for the future. At its core, a spending policy is designed to balance the needs of both current and future generations, though getting the right balance can be a challenge. The precipitous…
Growth/Value, Market Cap, and Momentum Jun Wang, Robert Brooks, Xing Lu, and Hunter M. Holzhauer, The Journal of Investing, Spring 2014 Some researchers have questioned the ability to implement momentum strategies without substantially diminishing the related returns. The authors investigate this issue by using indexes to implement their style-based momentum strategy and conclude that a…
This question has been asked since 2009, and despite the unwavering unanimity of economists and market watchers that sovereign bond yields are once again set to rise—the latest Wall Street Journal survey, for example, shows 100% of economists expect the US ten-year yield to rise by the end of 2014 (average forecast: 3.04%), June 2015…
On July 23, the SEC voted in a set of long-debated reforms to the rules governing money market funds (MMFs). The reforms, which will take effect in 2016 to allow managers and investors time to adapt, are aimed at preventing a replay of the dangerous 2008 run on MMFs triggered when the Reserve Primary Fund…
“Low-Risk Investing Without Industry Bets” Clifford S. Asness, Andrea Frazzini, and Lasse H. Pedersen, Financial Analysts Journal vol 70(4): 24–41 Some investors assume that the attractive risk-adjusted returns of investing in low-beta stocks have been driven by a structural bias toward defensive industries. The authors, all principals at AQR, seek to dispel this notion by…
Advice in Brief Comparisons to 2007 are growing. A key distinction today is that policy rates in most developed economies remain near zero. With little inflationary pressure, this cycle could last another several years. This is neither a time to be ramping up nor pulling back risk taking. It is a time for diversification, modest…
Ominously familiar warning signs beg the question of whether a replay of 2007 is at hand; the answer is complicated Recent market activity has seemingly combined some of the excesses of 1999 with those of 2007. On a more general level, investors have grown more bullish and volatility across asset classes has collapsed. In contrast…
“Asset Allocation: Risk Models for Alternative Investments” Niels Pedersen, Sébastien Page, and Fei He, Financial Analysts Journal vol. 70, no. 3 (May/June 2014): 34–45 Investors frequently use factor-based approaches to asset allocation to improve portfolio diversification and implement economic views. The characteristics of alternative asset classes, however, can make it difficult to map them to…
Foreword The impact of fossil fuels on climate change is an important topic on the minds of many investors. We have been a part of many discussions with our clients about the decision to divest fossil fuel investments. There are thoughtful and passionate arguments on both sides of the issue, and we have a deep…