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Risk Tolerance and Absolute Returns

Managing Risks and Seeking Returns: Striking a Balance

The overarching theme for this list of papers is the dichotomy between the assessment and management of a particular risk tolerance level and the search for alternative sources of return, with a specific emphasis on absolute return strategies.

tightrope risk tolerance

Risk Profiling and Tolerance: Insights for the Private Wealth Manager (CFA Institute, Jun 2018)
This series of research briefs from CFA Institute asks both academics and investment practitioners about risk profiling and how to identify an investor's specific risk profile.

Absolute Return Strategies Under the Microscope (Robeco, 2017)
This white paper by the Robeco Multi-Asset Quant team explains how absolute return strategies work, and how they compare within the multi-asset universe.

Absolute Return Tailored for Risk and Government Budgets (Intech, Jun 2018)
(For compliance reasons, this paper is only accessible in certain geographies)
Intech discusses a case study involving a large European public client that needs to build a bespoke investment solution that meets their funding and risk budgeting requirements.

Can Absolute Return Protect Against the Comeback of Volatility? (Intech, 2018)
(For compliance reasons, this paper is only accessible in certain geographies)
This paper examines the potential efficiency and downside protection benefits of absolute return strategies, also showing that focusing on absolute return outcomes provides more insight than mere categorizations.

Assessing Your Board's Risk Tolerance (Commonfund Institute, 2014)
This paper by the Commonfund Institute explores options that board members and investment committees have in assessing and properly addressing their risk tolerance levels. 

Risk Tolerance and Circumstances (CFA Institute Research Foundation, 2018)
This brief focuses on risk tolerance, defined as the willingness of an investor to take on perceived risk, or the trade-off that an investor is willing to make between the perceived risk and expected return of different investment choices.

The Correlation See-Saw (Axioma, Jun 2018)
This paper analyzes how different correlation regimes have affected the overall risk decomposition and volatility of Axioma’s global multi-asset class model portfolio over time.

Preventative Medicine for Downside Risk (Russell Investments blog, Jun 2018)
The reduction of a portfolio’s allocation to strategic equity can act like preventive medicine, helping to foster a greater amount of downside risk control.

Beyond the FAANGs: Technology Stocks and Downside Protection (AB, May 2018)
(For compliance reasons, this paper is only accessible in North America and South America)
Despite their inherent volatility, technology stocks are often seen as powerful drivers of returns. But many of the companies enabling the technology revolution may also be able to provide downside protection.

The Economic Value of Forecasting Left-Tail Risk (Morningstar, 2018)
Morningstar shows how, by forecasting forward-looking skewness, it is possible to reduce tail risk without giving up returns.

Risk Analysis: What Are the Odds? (Axioma, 2018)
Axioma's Head of Applied Research for APAC focuses on the risk and reward aspect of a risk analysis and how users can incorporate this information in their risk budgeting exercise.

Why Equities for Absolute Return? (Intech Investments, May 2018)
(For compliance reasons, this paper is only accessible in certain geographies)
As the outlook for market-beta returns deteriorates, investors are becoming increasingly focused on investment strategies with absolute return objectives based on alpha.

A Framework for Generating Custom Multi-Asset Class Risk Models (Axioma, 2017)
What constitutes a standard multi-asset class risk model?  On the one hand, the standard model should consist of a parsimonious number of risk factors, but also, it should capture all relevant risk factors for a well diversified portfolio.

Understanding Absolute Return Fixed Income (Mercer, 2015)
Absolute Return fixed income can be a useful diversifier for growth-oriented fixed income portfolios. This paper introduces the strategy and its investment rationale, providing an overview of investment approaches/styles.

Multi-Asset Credit: How a Dynamic Strategy Can Provide Return – and Safety – in Uncertain Times (PineBridge, 2018)
As rates begin to climb, investors are increasingly considering alternative fixed income solutions, such as multi-asset credit (MAC) strategies. PineBridge discusses how MAC can help investors find opportunities in all types of markets.



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