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).
Climate change has become undeniable, and no industry has greater exposure to its risks than the insurance sector. It poses a unique threat to both sides of their balance sheets – to insurers’ assets as well as their liabilities.
The coronavirus pandemic has highlighted the difficulties of managing risk in an increasingly globalised and interconnected world. We explore how organisations can stay resilient through an era of radical change.
Investors have long recognized the importance of liquidity but have struggled to determine how to account for it when forming portfolios. State Street proposes that investors treat liquidity as a shadow allocation to a portfolio. If investors deploy liquidity to raise a portfolio’s expected utility beyond its original…
The income-generating potential of alternatives seems to be largely underappreciated, despite the trend toward larger allocations to alternative asset classes and the need for yield. Investors can enhance their ability to capitalize on the yield and diversification benefits of alternatives by focusing on the risks that drive…
This article studies the impact of carbon risk on stock pricing. To address this, we consider the seminal approach of Görgen et al. (2019), who proposed estimating the carbon financial risk of equities by their carbon beta. To achieve this, the primary task is to develop a brown-minus-green (or BMG) risk factor, similar to…
The SECURE Act’s new requirement for standardized retirement income projections will present new challenges for your DC plan participants, especially when they realize the stream of income their current assets can support. This link between assets and future income will raise the profile of two conflicting considerations:…
The SECURE Act’s new requirement for standardized retirement income projections will present new challenges for your DC plan participants, especially when they realize the stream of income their current assets can support. This link between assets and future income will raise the profile of two conflicting considerations:…
In the face of market volatility, lower-for-longer interest rates, and return expectations for equities and bonds that are well below historic averages, institutional investors are considering real assets to help meet investment objectives.Portfolio optimization using 28 years of returns demonstrated private real assets’…
Today, more than $2.7 trillion (or ~12% of total assets) is invested through model portfolios in the United States alone. Financial advisors, wealth management and asset management firms use models to define the underlying securities, funds and ETFs that many of their retail clients invest in. While models help to improve…
Dynamic risk mitigation strategies seek to provide a capital-efficient way to generate both higher risk-adjusted returns and reduced drawdowns without the cost normally associated with left tail protection. Nearly a decade after it came to prominence, managed volatility continues to be a viable solution for many and performs…
This Report outlines the strategies and investments made by the estimated €960bn Norweign Sovereign Wealth Fund, the largest such entity in the world. There are a host of other publications available covering for example, the history of the fund, how it approaches Responsible Investing, and Risk and Return data for the…
In many of their recent blog posts and webinars,,Qontigo noted how the COVID-19 crisis had disrupted the long-established co-movements and interactions of major asset classes. Some flipped signs, many broke down, and a few remained remarkably stable. In this blog post,they take a look at some of the most notable asset-class…
While global equity markets recovered most of their first quarter losses with a strong rebound, market stress is still evident. In the latest Intech Equity Market Stress Monitor® Report, they share the signs of potential instability – such as historical extremes in capital concentration and correlation of returns – lurking…
While global equity markets recovered most of their first quarter losses with a strong rebound, market stress is still evident. In the latest Intech Equity Market Stress Monitor® Report, they share the signs of potential instability – such as historical extremes in capital concentration and correlation of returns – lurking…
This paper investigates the mean-variance and diversification properties of risk-based strategies performed on style or basis portfolios. EDHEC shows that the performance of these risk strategies is improved when performed on portfolios sorted on characteristics correlated with returns and is highly sensitive to the sorting…
For fundamental investors looking for mispricings, value stocks may be best ignored. This blog post — by Derek Horstmeyer, Morgan Rink and Maximilian Simkins — explores further.
The latest episode of the AIQ podcast explores what we know about complex risks. With what we know now, can we anticipate where the next crisis will emerge?
The SECURE Act’s new requirement for standardized retirement income projections will present new challenges for your DC plan participants, especially when they realize the stream of income their current assets can support. This link between assets and future income will raise the profile of two conflicting considerations:…
