Risk and Portfolio Construction - Articles & White Papers
White papers and articles on portfolio construction and risk management for investment managers. Maintaining an appropriately diversified portfolio, managing portfolio risk, and controlling the risk/reward characteristics of a fund are essential basics for money managers. Academic papers on portfolio optimization are particularly helpful in this regard. The most frequently downloaded... research in this section relates to reports on measuring investment risk, for instance: analysis of the time horizon over which risk is best estimated, and using risk factors as building blocks for portfolio diversification. Papers on tracking error have been well received as have papers on tail risk and fat tails. A number of articles in this section argue the case for concentrated portfolios and a need for more active management. Surveys on risk management and risk management systems have proved popular, enabling members to understand the risk practices employed by their peers. Other research on portfolio risk in this section includes papers on low volatility investing, equity risk premia, risk parity, models for forecasting asset class risk and the capital asset price model (CAPM).
While there is appetite from investors and asset owners to address ESG considerations as part of the portfolio design process, there are clearly also challenges for multi-asset investors in doing so. In Section 1 of this paper we outline why the integration of ESG data with other whole-of-fund data and assumptions is a key…
The exercise of translating a specified future investment objective into a strategy to be implemented in the present requires vision. It necessitates the ability to effectively evaluate today’s opportunities, conceptualize the risks that may materialize across an investment horizon, and implement a plan to manage those risks…
The longest equity bull market in history, persistently low interest rates and increased longevity have sparked renewed interest in defensive equity investing. Defensive equity strategies now comprise a mature category, which demands a fresh look: what is a defensive equity strategy, why does it deliver, what are the risks,…
The longest equity bull market in history, persistently low interest rates and increased longevity have sparked renewed interest in defensive equity investing. Defensive equity strategies now comprise a mature category, which demands a fresh look: what is a defensive equity strategy, why does it deliver, what are the risks,…
Timberland and farmland assets have been used and tracked as components of institutional portfolios for over two decades, establishing a strong historical record of performance, low to moderate risk, and favorable diversification characteristics. While investors have generally treated timberland and farmland as separate…
The latest version of Invesco's Risk & Reward publication covers a whole host of themes including active bond returns, insights on active (ESG) engagement, pension reform in China, low volatility anchoring, equal weighting in sector portfolios, and more.
The latest version of Invesco's Risk & Reward publication covers a whole host of themes including active bond returns, insights on active (ESG) engagement, pension reform in China, low volatility anchoring, equal weighting in sector portfolios, and more.
Gold is a highly liquid yet scarce asset, and it is no one’s liability. It is bought as a luxury good as much as an investment. As such, gold can play four fundamental roles in a portfolio: a source of long-term returns, a diversifier that can mitigate losses in times of market stress, a liquid asset with no credit risk that…
What, Exactly, Is a Factor? According to BlackRock, as of June 2018 there was $1.9 trillion invested in factor-based strategies—a figure expected to grow by nearly 80% to $3.4 trillion by 2022. There is no question that these strategies have moved to the forefront of investing, but their growing popularity begs the basic…
Can Strategic Asset Allocations Adapt to Markets? Investors in strategic asset allocation models aren’t immune to market drawdowns. This paper shows a path for potentially changing this experience. By using variable beta strategies, portfolio managers can make their allocation models more dynamic without changing their long-…
Can Strategic Asset Allocations Adapt to Markets? Investors in strategic asset allocation models aren’t immune to market drawdowns. This paper shows a path for potentially changing this experience. By using variable beta strategies, portfolio managers can make their allocation models more dynamic without changing their long-…
Sometimes, the sector composition of an equity portfolio is of primary importance. At other times, single-stock risks are more prominent. Among other things, this paper by S&P Dow Jones Indices assesses the relative importance of sectors in determining the performance of the S&P 500 and its constituents.
Can environmental, social and governance concerns (ESG) fit within a factor-based portfolio? In this article, we tackle two issues: the inconsistency in methodologies for ESG scoring, and ways to integrate ESG considerations into factor portfolios.
Investing in infrastructure has become popular among institutional and private investors in recent years. Investors could be attracted to the potentially long-term, low-risk, and inflation-linked profile that can come with infrastructure assets, and they may find that it is an alternative asset class that could provide new…
Stocks rallied around the globe in the first quarter of 2019, with most indices nearly recouping the steep losses of the previous quarter. Stocks rose as major central banks kept interest rates unchanged, allaying investor concerns of a global economic slowdown. With most US economic indicators on the positive side, some US…
Climate change is a subject that has been largely addressed from both macroeconomic and energetic standpoints. Integration of climate variables and natural capital into the traditional economic framework can appear conflicting with the notion of infinitely growing economies exploiting finite resources, which questions the…
This 300-page book could have been entitled, "everything you ever wanted to know about investment", such is the breadth of topics covered. The author, Paolo Vanini gives readers a thorough grounding in the main players in institutional investment, and how the industry operates. A wide variety of the building blocks of the…
After a long lacklustre period during the 1980s and 1990s, the price of gold has picked up significantly since the new millennium, and central banks, after having steadily reduced their allocation to gold, have resumed their gold purchases. This has been particularly the case for emerging central banks. This paper by Amundi…
