Research Notes
Risk Parity & Pension Portfolios: A Perfect Match
Geek Level: Read Time: The Speed Read: Growth sleeves within a pension’s asset-liability framework are built with the intention of improving funded status, but depending on the path of different macroeconomic drivers, these portfolios can lead to adverse outcomes due to risk mismatches. Key risks in future pension liabilities include growth (both wage and economic), […]
Research Notes
Make Sure the Free Lunch Isn’t Moldy
Speed Read: The concept of diversification has a long history and is often considered “the only free lunch” in investing. The benefits of diversification are well studied in academic literature, but in practice, correlations between traditional assets like stocks and bonds can change, affecting the effectiveness of diversification. The correlation between U.S. stocks and U.S. […]
Research Notes
“Peeky” Blinders
When individuals have uncertainty about a specific product or idea, they will often look to what their peer group is doing to help them decide. Social proof is a behavioural bias that can lead to decision making errors. By embracing a process-driven research flow to guard against behavioural biases and data peeking, Viewpoint can distinguish between true and false alpha.
Research Notes
Plot Twist: Your Bond Portfolio May Be Riskier Than You Think
Geek Level: Read Time: The Speed Read: Bonds are traditionally thought of as risk-free or safe-haven assets. However, fixed income investments have unique risks relating to their sensitivity to interest rate fluctuations. Sensitivity to interest rates movements means that bonds are not risk-free, especially if not held until maturity. Modified duration measures the sensitivity of […]
Research Notes
Rising From the Ashes
Geek Level: Read Time: The Speed Read: Diversification is the first line of defence for an investment portfolio. Utilizing a risk-parity engine for portfolio construction creates a portfolio that reduces the severity of drawdowns while increasing expected returns. Volatility scaling to tactically adjust the portfolio’s gross exposure acts as a stabilizing force in time of […]
Research Notes
Rewiring Your Amygdala: The Practical Application of Trend in an Investment Portfolio
Geek Level: Read Time: When an individual contemplates whether they want to make an investment, generally the first thoughts revolve around return expectations. If I am willing to invest in a company, either through debt or equity, what is my expected return, and is the return enough for me to feel comfortable with the risk […]
Research Notes
Death to the 60/40! Long Live the 60/40!
The traditional 60/40 balanced portfolio is no stranger to coming under fire. Many pundits have decreed the death of the balanced portfolio, arguing that a low yield environment will prove insurmountable and bonds will no longer be able to provide necessary diversification for investor portfolios. This proclamation has yet to be proven correct, and in the investment […]
Research Notes
Know When to Hold’em, Know When to Fold’em
In Part 1 of this blog series, we illustrated how applying a prudent amount of leverage to a risk parity strategy allows investors to harvest a “diversification premium,” potentially leading to a more efficient outcome for investors who require a risk and return profile similar to global equity markets. The risk parity strategy accepts the underlying […]
Research Notes
One Size Doesn’t Fit All: Assessing Suitability in the Context of Uncertainty
My previous posts on volatility have covered what volatility is, why volatility matters, and how different constraints affect an investor’s ability to tolerate risk in the form of volatility. This installment in our volatility series will aim to provide a framework that helps to quantify an investor’s ability and willingness to take risk based on constraints and the […]