All topics

Risks and Risk Analysis: Mapping today's complex risk landscape

Top Papers on Investment Risks and Asset Allocation

Risk analysis has grown increasingly complex. As investors, there are a plethora of specific risks to account for, not to mention systemic risks that can affect all asset classes concurrently. Yet, the process of managing and mitigating risk is of extreme importance to investors and perhaps one of the most critical aspects of successful portfolio management.   

From known knowns to unknown unknowns, and everything in between — this list of papers presents a scatter plot of risks that we believe are of current relevance to the institutional investment community. 

risk landscape

Risk Strategy: Roll of the dice (Aviva Investors, 2020)

For compliance reasons, this paper is only accessible in certain geographies

How can investors properly account for known unknowns (and unknown unknowns) within risk models? This Aviva Investors article presents a great discussion of uncertainty, risk, black swan events, and scenario planning..

The Shifting Role of Bonds (State Street, 2020)

State Street discusses the historical stock-bond correlation, CAPM, and the projected utility value of low yielding (or even negative yielding) bond allocations over the next five years.

Risk & Reward Q3: Research and Investment Strategies (Invesco, Aug 2020)

For compliance reasons, this paper is only accessible in certain geographies

The featured article in this edition of Invesco's Risk and Reward quarterly magazine is on omission risk and how this type of risk can be addressed within discretionary strategies.

Finding Opportunity in Japan Equity (MFS, Jul 2020)

MFS posits that institutional asset allocators have long been underweight Japan equities and they may need to revisit some of their fundamental assumptions about this market.

Podcast: Why low rates are here to stay (Janus Henderson, Aug 2020)

For compliance reasons, this paper is only accessible in the United States and Canada

Should investors be worried about inflation risk? In this podcast, a panel from Janus Henderson talks about credit markets, the inflation outlook, and why rates are likely to be lower for longer.

A Regime Change in Sector Volatility (S&P Dow Jones Indices, Jul 2020)

This blog article from S&P Dow Jones Indices contains a sector-specific discussion of risk-on and risk-off trades, discussing recent shifts in sector volatility and the low volatility index.

The Concentration Rule’s Impact on Growth Performance (Qontigo, Aug 2020)

The SEC's concentration rule states that an active mutual fund's top four holdings can't comprise more than 25% of the portfolio. But what is the true impact of this weight cap, and how often has it been reached historically?

The Resilience of Private Risk Capital (Aswath Damodaran, Jul 2020)

Professor Damodaran's most recent article contains an interesting discussion of both public and private risk capital, and what happens during typical (and atypical) risk-on/risk-off environments.

2020 Perspectives on Diversification (All About Alpha blog, Aug 2020)

Can a diverse, global portfolio be both effective and efficient? Or does diversification fail when its most needed? This article looks at the recent performance of diverse portfolios and examines previous large drawdowns.

Interest Rates, Market Power, and Financial Stability (VoxEU, Aug 2020)

What are the pros and cons of low interest rates? Do they truly foster financial stability? This VoxEU article looks at low rates in markets with high vs low competition.

Fact and Fiction about Low-Risk Investing (2020)

This paper discusses five truths about low-risk investing and attempts to dispel five rumors, including that low-risk investments only work on small-cap stocks and are very sensitive to transaction costs.

Anatomy of a Liquidity Crisis: Corporate bonds in the COVID-19 crisis (2020)

The authors look at the specifics of corporate bond liquidity during the onset of the COVID-19 crisis. They also discuss the effectiveness of the PDCF and SMCCF at stabilizing credit markets.

New Financial Instruments for Managing Longevity Risk (2020)

Besides low yields, one of the biggest reasons for transferring DB pension obligations is longevity risk. This paper looks at buyouts, longevity swaps, and other options for risk transfer to insurance buyers.

Financial Stability Report (Bank of England, Aug 2020)

This Bank of England report provides updates on systemic risk by reviewing the stability of the UK banking system.