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The Institutional Investor's Toolbox

  • Posted by: ,  Chief Executive
  • 23 October 2018
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Unpacking the Unique Toolset of the Investment Manager

What sort of tools should investors and portfolio managers carry within their proverbial toolbox? The ability to mitigate downside risk via factor indices or options strategies? Dynamic techniques for optimizing portfolio allocations?  An understanding of the investment implications of specific VIX levels?

If you answered 'all of the above' then consider yourself lucky, as the below list of papers unpacks all of these tools and more.

investor tools

How technology will revolutionize asset management (AB, 2018)
(For compliance reasons, this paper is only accessible in North America and South America)
In the world of fixed income investing, machines will soon enable humans to evaluate risks and opportunities more quickly, to act faster, and to capture more alpha during the trading and portfolio management process.

Step Optimization and Portfolio Design (Jacobi, 2018)
Jacobi describes a step optimization technique whereby changes are made to portfolio allocations in incremental steps, and shows how this is an improvement upon traditional optimization processes.

Understanding the Diversity of Options Strategies (Swan Global, 2018)
Swan Global Investments presents a comprehensive review of options and options strategies, including an explanation of synthetics and other derivatives. 

Beyond Liquidity: Optimizing Product Selection (Greenwich Associates Study, 2018)
(For compliance reasons, this paper is only accessible in the United States)
Greenwich Associates reviews the practice of instrument selection by portfolio managers, finding that few managers have the intra-day capability to capture alpha via a systematic instrument selection process. 

Comparing ETFs and Futures for a Fully Funded Investor (State Street Global Advisors, 2018)
(For compliance reasons, this paper is only accessible in the United States)
This paper looks at differences between ETFs and futures, examining their structure, pricing mechanics, transparency of costs, variability of costs, and implementation considerations.

Managing equity portfolio volatility by harnessing the volatility risk premium (Eaton Vance, 2018)
(For compliance reasons, this paper is NOT accessible in the United States and Canada)
Options strategies, swap strategies, or futures strategies that seek to manage the volatility risk premium may allow investors to generate equity-like returns while mitigating risk.  

A Practitioner’s Guide to Reading VIX® (S&P Dow Jones Indices, Dec 2017)
This paper is a primer on the CBOE's VIX index, and an introduction to the larger document titled 'Reading VIX: Does VIX Predict Future Volatility?' 

Seasonal Investing: Does it work? (DWS, Oct 2017)
(For compliance reasons, this paper is only accessible in the United Kingdom)
Sell in May and go away' is the old adage.  In this article, DWS discusses the seasonality of equity returns. 

The Long and the Short of It: The Quant Shorting Advantage (QMA)
QMA describes how short selling can allow investors to find alpha in often overlooked places, explains the three main categories of shorting-enabled equity products, and highlights the benefits of a systematic quantitative process.

Factor Indexes and Factor Exposure Matching (FTSE Russell, 2018)
In this 36-page paper, the authors build out several different diversified portfolios with matching factor exposures, in order to test whether it is these exposures that are driving risk/return outcomes. 

Institutions Turn to ETF's for Bond Market Liquidity - Greenwich Associates Study (BlackRock, 2018)
(For compliance reasons, this paper is only accessible in the United States)
Investors in Europe and the United States have turned to ETFs in order to combat issues with fixed income illiquidity, high trading costs, and difficulties in sourcing securities.  

Intech Equity Market Stress Monitor: 3Q18 Quarterly Report
(For compliance reasons, this paper is only accessible in certain geographies)
Intech looks at equity market strain in Q3 2018 across five global equity markets via a collection of risk metrics.           

The complete downside protection toolkit (Fidelity International, 2018)
(For compliance reasons, this paper is only accessible in the UK & Europe)
Fidelity examines the pros and cons of four methods of downside risk mitigation and three types of hedging strategies.

Defense Beyond Bonds: Defensive Strategy Indices (S&P Dow Jones Indices, 2018)
In a rising rate environment, an overlay of long/short positions in factor indices could be a better defensive strategy than traditional fixed income. 

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