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).
PGIM's latest Megatrends paper, “The Future Means Business: Investment Implications of Transformative New Corporate Models,” draws on the insights of more than two dozen PGIM investment professionals across our private and public fixed income, equity, real estate and alternatives managers – as well as a new proprietary…
Cheap stocks have been underperforming for the last 18 months, while expensive stocks are overperforming. In fact, current value performance parallels the Tech Bubble and Global Financial Crisis (GFC). This comes as a surprise to many. We have been living through an extraordinary return environment that has, largely, fallen…
In Wall Street parlance a “tenbagger” is a stock in which you’ve made ten times your money. Investors who talk about tenbaggers tend to be looked at with suspicion. They’re either trying to sell a book or sign people up to a newsletter that promises untold riches. However, investors who talk about tenbaggers in Europe tend…
Several major equity benchmark providers maintain rules-based defensive equity portfolios they call indexes – but they shouldn’t be confused with their cap-weighted counterparts. We take a closer look at what options exist and how they differ, their viability as passive investments and how they might be improved, and how to…
Several major equity benchmark providers maintain rules-based defensive equity portfolios they call indexes – but they shouldn’t be confused with their cap-weighted counterparts. We take a closer look at what options exist and how they differ, their viability as passive investments and how they might be improved, and how to…
This study explores which asset classes add value to a traditional portfolio of stocks, bonds and cash. Next, we determine the optimal weights of all asset classes in the optimal portfolio. This study adds to the literature by distinguishing ten different investment categories simultaneously in a mean-variance analysis as…
Strategists at BlackRock have seen an ongoing shift to index strategies amongst investors, with both distributors and end investors changing their perception of the role and value of index vehicles. They reflect on why indexing matters.
Volatility is usually seen as something bad, as the enemy of long-term performance; but the insights it provides may actually make it more of a tool that can be used to help strengthen portfolio resilience. Specifically, its historical relationship with market drawdowns may offer an effective rebalancing signal, and its…
Diversification is the foundation of modern portfolios, described by Nobel laureate Harry Markowitz as ‘the only free lunch’ for investors. But could the trend towards investing according to environmental, social, and governance (ESG) principles undermine diversification? Our new research explores this important question and…
We may have reached an inflection point in portfolio management. Fewer of the requests we get from institutions are to fill specific, narrow investment mandates. Instead, the conversations we have today with institutional investors are increasingly tied to specific goals — often multi-period challenges whose complexity only…
This study provides an important extension of existing research on the performance of options-based strategies by considering the impact of the inclusion of option-based equity strategies in diversified institutional portfolios. Specifically, the analysis assesses the historical impact of the application of rules-based…
Low-carbon and factor-based investing are two key trends in the global investment management industry. This paper investigates the impact of low-carbon screening on traditional market-cap-weighted portfolios and factor portfolios (quality, value, momentum, and low volatility) across seven Asian markets: Australia, China,…
Sure, you’ve been rebalancing your allocations, but equities often remain the largest source of risk in your portfolio and markets keep reaching new highs. Adding asset classes, changing target weights and making tactical decisions can all help, but there are real limits to diversifying away equity risk. Download this eBook…
Sure, you’ve been rebalancing your allocations, but equities often remain the largest source of risk in your portfolio and markets keep reaching new highs. Adding asset classes, changing target weights and making tactical decisions can all help, but there are real limits to diversifying away equity risk. Download this eBook…
Sure, you’ve been rebalancing your allocations, but equities often remain the largest source of risk in your portfolio and markets keep reaching new highs. Adding asset classes, changing target weights and making tactical decisions can all help, but there are real limits to diversifying away equity risk. Download this eBook…
Correlations between groups of assets and within individual asset classes have changed in unexpected ways thanks to a decade of easy monetary policy. Aviva portfolio managers tell us what impact this has had on the way they manage money.
Insurance investors are grappling with a world bedevilled by complexity. This M&G Investments papers explores how they can adapt their investment strategies for today's world. Though premiums are still growing in aggregate and claims being paid, the business model is coming under strain and the investment management…
This paper tries to forecast exchange rates by comparing forecasting methods that take into account cointegration and methods that do not. The first finding is that taking into account cointegration provides better forecasting results. Furthermore, the factor model with cointegration provides the smallest forecasting errors…
