One of the key tensions in generating alpha is the trade-off between "value" and "momentum". Which of these works best in each asset class and in each market environment? And how do you define these variables?
The Savvy Investor Research Team has curated some of the best white papers on the subject; here is a taster:
1. The Trend is Our Friend: Momentum, Trend Following and Risk Parity in Global Asset Allocation (2014)
The authors assess the effectiveness of applying a methodology of trend following to global asset allocation between bonds, commodities, equities and real estate. They argue that, by combining momentum and value, one can significantly reduce drawdowns and volatility due to trend following, whilst also achieving the higher return levels associated with momentum portfolios.
In this hugely influential 2013 paper, Mebane Faber updates his 2006 white paper with new data from the 2008-2012 period. Overall, Faber finds that the models are successful in real-time, achieving equity like returns alongside bond like drawdowns and volatility.
This 80 page report from KPMG takes a broader perspective of the investment management industry, examining megatrends that they believe will reshape the marketplace over the next 15 years. These include; 1) demographic and social change shifting the needs and requirements of investors, 2) changes to the value chain driven by client demands, 3) the need for operational agility 4) paradigm shifts caused by radical disruption.