White Paper

Time to Diversify – But into What?

Q4 2021

The last 10 years were exceptional for traditional stock/bond portfolios. But with stock market valuations near all-time highs and bond yields near all-time lows, prospective returns look bleak. We make the case for diversifying out of equities and explain the valuable role liquid alternative strategies can play.

Alternative Thinking

The Stock/Bond Correlation

Q2 2022 - Portfolio Solutions Group

For the past two decades, the stock/bond correlation – a fundamental detriment of risk in traditional portfolios – has been consistently negative. However, this hasn’t always been the case, and a positive stock/bond correlation could reappear due to macroeconomic changes. In this article, we assess the broad implications this would have for investors and set out practical steps to prepare for such an outcome.

Alternative Thinking

It Was the Worst of Times: Diversification During a Century of Drawdowns

September 26, 2018

We use nearly 100 years of data to evaluate the effectiveness of diversifying investments during the worst of times for most portfolios and find that attempting to tactically avoid equity sell-offs is likely to disappoint.

White Paper

When Stock-Bond Diversification Fails

October 27, 2021 - Ashwin Thapar Thomas Maloney Alfie Brixton

The events of 2020 to 2021 have increased uncertainty around the future path of inflation. We review how different inflationary outcomes can impact investor portfolios and evaluate what assets and strategies may enhance portfolio resilience to inflation.

Journal Article

Portfolio Protection? It’s a Long (Term) Story…

April 23, 2020 - Nicholas McQuinn Ashwin Thapar Daniel Villalon

Investors have a natural urge to protect their portfolios from sudden crashes, even though bad outcomes that unfold over longer periods are more detrimental to reaching long-term goals. We show risk-mitigating and diversifying strategies have added value more consistently than options-based hedging over the more important, longer drawdowns.

White Paper

Trend Following and Rising Rates

May 12, 2015 - Lasse H. Pedersen Brian K. Hurst Yao Hua Ooi Erik Stamelos

Can trend followers benefit from the impact of rising yields on asset class returns? We explore a simple trend-following strategy during rising rates and find that the strategy may benefit investors when markets experience gradual, persistent changes

White Paper

Understanding Alternative Risk Premia

March 13, 2018 - Ing-Chea Ang Sarah Jiang Thomas Maloney Scott Metchick

With its many potential benefits, including generally low-to-no correlation to a traditional 60/40 or hedge fund portfolio, we believe an ARP strategy may serve as a core alternative solution in investors’ portfolios.

White Paper

Building a Better Commodities Portfolio

April 22, 2022 - Yao Hua Ooi Thomas Maloney Alfie Brixton

Interest in commodities is rising again, thanks to their tendency to be particularly strong diversifiers during periods of rising or volatile inflation. We review what a “best-in-class” commodity portfolio looks like by exploring three potential enhancements to a passive approach to the asset class.

White Paper

Can Risk Parity Outperform If Yields Rise?

July 1, 2013 - Brian K. Hurst Michael A. Mendelson Yao Hua Ooi

Risk parity investing is not, as some critics say, simply “leveraging bonds.” The evidence suggests that a risk parity portfolio may improve long-term risk-adjusted returns relative to traditional, equity-centric portfolios.

Journal Article

Why Not 100% Equities

December 1, 1996 - Cliff Asness

In a 1994 article “College and University Endowment Funds: Why Not 100% Equities?” Richard H.

Journal Article

International Diversification Works (Eventually)

May 1, 2011 - Cliff Asness Roni Israelov John M. Liew

Critics of international diversification observe that it does not protect investors against short-term market crashes because markets become more correlated during downturns.