ESG Investing

Supply Chain Climate Exposure

To manage climate risks, investors need reliable climate exposure metrics, but such risks may be difficult to measure, particularly along the supply chain. Using broadly accessible data, we propose an intuitive metric that quantifies the exposure a company has to customers and suppliers. Our metric is related to scope 3 emissions and captures the strength of economic linkages as well as the overall climate exposure of a firm’s customers and suppliers.

Alternative Investing

Building a Better Commodities Portfolio

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.

ESG Investing

Looking Forward With Historical Carbon Data

Increasingly many allocators are interested in computing their portfolio’s carbon footprint. We show that historical emissions data are useful despite a substantial 1-2 years’ lag typically to when investment portfolios are built.

Alternative Investing

Time to Diversify – But into What?

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.

Portfolio Risk and Performance

When Stock-Bond Diversification Fails

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.

Fixed Income

What Drives Bond Yields?

In this overview of the various factors that influence government bond yields, we show that both in theory and in the data, non-monetary policy factors drive significant variation in yields, particularly at longer maturities. Despite the exceptionally low yield environments we have witnessed, fundamentals continue to drive bond markets.

ESG Investing

(Car)Bon Voyage: The Road to Low Carbon Investment Portfolios

We discuss how an investment portfolio could dramatically reduce its carbon footprint, potentially even achieving a ‘net zero’ carbon footprint. We discuss the pros and cons of techniques to achieve carbon reduction goals, including security selection, shorting high carbon footprint companies, and trading instruments such as carbon offsets and carbon permits.

Macroeconomics

It’s Not a Bound; It’s an Opinion

In the second paper of our “Bonds Today” series, we review the popular belief that bond yields are too close to zero to fall much further and then explain why we disagree.

Asset Allocation

Don’t Hate the Asset; Hate the Constraint

What role do bonds play in a portfolio today? We explain why it all depends on investors’ ability to own them in a capital efficient way.

Portfolio Risk and Performance

Tail Risk Hedging: Contrasting Put and Trend Strategies

The sharp market fall and speedy recovery during the eventful first half of 2020 has kept tail risk hedging topical: investors have both fresh memories of a painful loss and renewed fears of a repeat. We try to offer a balanced overview of the strengths and weaknesses of direct and indirect tail hedging strategies.