Monte Carlo Simulations: A Journey Down Many Paths

In a previous blog post by Viewpoint Investment Partners, Volatility, A Skewed Reality, Amin Haji, Manager, Research & Analytics, explored the probability of specific wealth targets being achieved over a 20-year period when comparing investments with similar annual returns but differing volatilities. To perform his analysis, he leveraged a simple but powerful tool: Monte Carlo…

Know When to Hold’em, Know When to Fold’em

BLOG SERIES: RISK PARITY

In the second installment of this blog series on risk parity, we are going to dive into how dynamically adjusting the leverage applied to the strategy can result in increased stability of the portfolio’s return profile. Actively adjusting the amount of leverage applied to the portfolio is how the strategy scales the size of its bets based on changes in market risk.

ESG’s Internal Scorecard

Environmental, social, and governance (ESG) metrics for publicly traded companies has become one of the fastest growing movements in the investment management industry. The expectation is that companies who implement strong ESG metrics will become more profitable and valuable over time by improving the interests of society, which should provide investors in these companies with…

The Impacts of Risk Parity Strategies

Ray Dalio’s Bridgewater is the latest celebrity investment management firm to opine that in a low-interest rate environment government bonds not only offer little in the way of value for investors, but that their ability to provide risk reduction during financial stress will be impaired as well. As this article from Bloomberg reports, Bridgewater is…

Order Matters

Many investors, especially those with longer time horizons, tend to overlook the impact that volatility can have on their portfolio. However, the path of returns is not a factor to be ignored and a recent piece by Amy Arnott helps illustrate this point through several examples. She highlights the impact of positive returns early in…

Too Much of a Good Thing?

Throughout history, the world has seen many innovations created to solve problems or improve the quality of peoples’ lives that have instead gone on to cause more harm than good. The phrase “too much of a good thing” has fitting applications in both life and investing. Morgan Housel outlines how philosophies and innovations that are seemingly…

Why “Resulting” is Dangerous in Both Poker and Investment Management

During times of crisis, we often read sensationalist reports about tail risk strategies that result in astronomical returns. However, these strategies aren’t meant to be a standalone solution, but rather a small part of a diversified portfolio. Tail risk hedging is a type of insurance and, as with any type of insurance, it’s important to…

Is It Really That Easy?

All too often we encounter a scenario seemingly so straightforward, observe another who makes something appear so natural, or judge a problem appearing to have an obvious solution. As it applies to investment management, we achieve or learn of others realizing superior returns in what feels or appears effortless. However, our perception deceives us, as…

The Cost of High-Frequency Traders and Latency Arbitrage

A new study released by the Financial Conduct Authority (FCA) in the U.K. has reignited concerns around the ability of predatory high-frequency traders (HFTs) to profit on equity trades by using a technique called “latency arbitrage.” Latency arbitrage is a practice used by HFTs that utilizes a fragmented market structure and speed to “snipe” stale…

Superforecasting: The Art and Science of Prediction

Making predictions and forecasting the future are integral parts of everyday life, yet it’s unlikely individuals realize the amount of predictions one makes in a day. The use of heuristics or “rules of thumb” are ingrained in human psychology and help people quickly determine courses of action with limited information at their disposal. Deciding what…