Portfolio Management Research

Practical Applications of Endowments in the Casino: Even the Whales Lose at the Alts Table: https://lnkd.in/ejFDDVfS By Richard Ennis Practical Applications: - The rapid growth of alts over the past two decades has made it harder for investors to achieve results that outperform passive or traditional investments and strategies. - Alternative investments may now provide lower returns compared with traditional investments or passive investing strategies due to higher costs and changes in the alternative investment markets. - Larger endowments have performed better than their smaller counterparts, but this is likely due to the larger endowments taking greater risks. #EndowmentPerformance #InvestmentRisk #HigherEducationFinance #PortfolioManagement #AlphaAndBeta

Practical Applications of On Risk Parity Performance: https://lnkd.in/eifZUJ4V By Émerson Filho, CFA & Raquel M. Gaspar Practical Applications: - Asset allocation strategies based on risk parity tend to outperform strategies based on MVT over time horizons of 10 years.  - Asset allocation strategies based on RP tend to produce more-balanced portfolios than strategies based on MVT do.  - RP allocation strategies offer the advantage of not requiring estimates of expected returns. #RiskParity #PortfolioManagement #MultiAssetStrategies #InvestmentHorizon #ModernPortfolioTheory

Practical Applications of Using Participant Data to Improve Target-Date Fund Allocations: https://lnkd.in/epW-BJbb. By... Zhenyu Li & Anthony Webb Practical Applications: - Traditional TDFs, based only on retirement date, can limit portfolio performance since many participants lack the expertise to manage allocations effectively. - Semi-personalized TDFs, using participant data like salary and savings rates, offer better results than self-managed portfolios. - Gathering more information on participants' households, such as spousal incomes, can further enhance TDF performance. However, this is less effective for households with high income uncertainty. This approach helps administrators optimize retirement outcomes by tailoring strategies more closely to individual needs. #data #targetdatefundallocations #TDFs #portfoliomanagement

Our Top Pick Article 'Alpha Now, Taxes Later: Tax-Efficient Long-Only Factor Investing' by Yin Chen & Roni Israelov is here: https://lnkd.in/ec7wSiSw The authors demonstrate rebalancing methods that capture the majority of a portfolio’s potential factor exposure (and its #associatedalpha) without realizing #netcapitalgains. This works for several slow-moving factors and offers an effective active solution for even the most tax-averse investors. Featured: The Journal of Investing October 2024, 33 ( 6) 12 - 33 #portfoliomanagement #investmentanalysis #taxalpha

Practical Applications of Have Alternative Investments Helped or Hurt?: https://lnkd.in/eEqWGDXk By Richard Ennis US public-sector pension funds’ exposure to #alternativeinvestments (alts) has been strongly associated with reduced #alpharelative to traditional investments since the 2008 global financial crisis (GFC). Public pensions invest about 30% of their assets in alts, which tend to have much higher costs than publicly traded investments. There has been little study of alts’ impact on #pensionfund performance, so the author designed a study to fill that void. Practical Applications: · Since the GFC of 2008, US public sector pension funds have realized a negative alpha of approximately 1.2% per year. · Pension funds’ exposure to private equity has neither helped nor hurt, but their exposure to real estate and hedge funds has significantly reduced performance. · It may not be worthwhile for pension funds to keep investing in alternative investments. #alts #publicpensions #alternativeinvestment

Practical Applications of Is Bloomberg’s Credit Default Swaps Model Superior in Predicting Defaults?: https://lnkd.in/evZirpPe By Seung Hun Han from KAIST, Karyl B. Leggio & Yoon S. Shin from Loyola University Maryland Sellinger School of Business and Management Bloomberg’s 5-year model credit default swap (#CDS) spreads are a better indicator of corporate (industrial) #defaultrisk than Standard & Poor’s credit ratings. The 5-year model CDS spreads particularly outperform in predicting defaults of investment grade–rated #corporatebonds, for which S&P credit ratings provide little predictive power. Practical Applications: · Bloomberg’s 5-year model CDS spreads significantly outperform S&P credit ratings in predicting defaults of investment-grade industrial corporates.  · Both Bloomberg’s 5-year model CDS spreads and S&P credit ratings are strong predictors of nominal spread.  · Bloomberg’s 5-year model CDS spreads are more timely than S&P credit ratings. #CreditRisk #BloombergCDS #InvestmentGrade #FinancialAnalysis

Don't miss out on PMR's most-read content for September... Explore the top research among our members, featuring insights from The Journal of Portfolio Management and The Journal of Financial Data Science. Stay informed with the latest in portfolio management and investment strategies. #PortfolioManagement #InvestmentStrategies #Research

Our Top Pick Article 'Addressing a Misnomer: A Primer to Unlocking Value in ESG' by Cary S. Krosinsky, Andrew Siwo & Andrew Spieler, PhD, CFA, FRM, CAIA is here: https://lnkd.in/efqb8i-t The authors explain that #ESG scores (sometimes called #ESGratings) are not standardized and can differ among providers. They recommend that investment managers disaggregate the factors when interpreting ESG scores and apply discerning judgement in using ESG data. Featured: The Journal of Impact and ESG Investing Fall 2024, 5 ( 1) 9 - 13 #ESGscores #portfoliomanagement #investmentanalysis

Practical Applications of Personalized Target-Date Funds: https://lnkd.in/ewXyMUfz. By Kobby Aboagye, Sébastien Page, Louisa Schafer & James Tzitzouris, Ph.D. at T. Rowe Price. Personalized target-date funds (TDFs) offer better risk-adjusted retirement spending compared to standard TDFs, according to a March 2024 study by T. Rowe Price researchers in The Journal of Portfolio Management. The study's utility-based model incorporates individual factors like age, salary, and account balance to customize asset allocations. This personalization helps optimize lifetime consumption, increase wealth, and reduce risk. Even without customization, TDFs offer age-appropriate portfolios, but personalization further enhances their benefits for retirement planning. Practical Applications: · TDFs are appropriate retirement savings options for most investors. Self-allocation often leads to inappropriate portfolio construction, which can be avoided by using TDFs instead. · TDFs can be successfully personalized using data from the recordkeeper, bypassing the need for individual input. Variables such as current age, salary, employee deferral rate, employer match rate, and account balance are all supplied by the recordkeeper, so individuals do not need to actively participate in the investment process. · Personalized TDFs result in higher risk-adjusted retirement spending than current offerings. TDFs should evolve to incorporate several individual characteristics beyond only age. #TDFs #portfolioconstruction #targetfunddates

Our Top Pick Article 'Direct Indexing Myths and Facts' by Edward N.W. Aw, DBA, CFA, John Jiang, Ph.D., CFA, FRM, Gregory Y. Sivin, DBA, CFA & Hong Xie from Bessemer Trust is here: https://lnkd.in/eFWwPpU2 The authors recommend #directindexing using separately managed accounts (SMAs) to achieve the benefits of tax-loss harvesting. They assert that it is practical to maintain a reasonable tracking error while obtaining the tax-less benefit. Featured: The Journal of Beta Investment Strategies Fall 2024, 15 ( 3) 10 - 19 #InvestmentStrategies #TaxLossHarvesting #CustomInvesting #SMAInvesting #IndexingInnovation