Tag Archives: risk management

Parsing the Dynamics of Global Tactical Asset Allocation (GTAA) Funds

Global Tactical Asset Allocation (GTAA) funds, which seek to take advantage of changing market conditions while maintaining a globally diversified portfolio, have suffered recent underperformance, possibly driving withdrawals from the strategy.  Considering the question of whether investors are bailing too soon, MPI was asked by Institutional Investor to look at some of the funds that […]

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Does Risk Parity Maximize Risk-adjusted Returns?

While it is well known that risk parity strategies typically allocate more weight or apply leverage to asset classes with lower risk, it is not well understood how higher volatility affects the Sharpe ratios exhibited by the assets that get over- or under- weighted.  We find that in practice the strategy increases an asset’s weight […]

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Is there more liquidity danger in High Yield Bond Funds? Check with Durbin-Watson.

In the winter of 2015, an almost unheard of situation happened. A mutual fund, normally required to guarantee daily liquidity, blocked its clients from withdrawing money. The Third Ave Focused Credit Fund (TFCIX), citing losses and a lack of liquidity in the high yield bond market, put some of its assets into a trust to […]

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Like That 40% Return? Better Understand Risks First.

A July 20th WSJ article featured Quantedge Capital, a quantitative global macro hedge fund manager that gained 40% after fees year-to-date through June. The fund’s 2016 performance is outstanding indeed, as compared with major asset classes in the chart below (here and below we use the fund’s performance data from Eurekahedge):  According to the investor […]

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Risk Parity and Brexit: A Volatility Surprise!

Risk parity strategies hold the promise of smooth sailing through periods of market turbulence, offering consistent performance via risk diversification. And prior to Brexit, risk parity funds had done quite well to reverse most of last year’s losses, displaying similar performance patterns despite the difference in strategy implementation or exposure and dynamics as reported by […]

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World Bond Managers Ride FX Roller Coaster

In the world bond fund category[1], a dramatic change has happened: last year’s worst-performing funds are this year’s best-performing ones.  This is clear in the chart below, in which we see the performance rank of funds contrasted between 2015 and 2016. Funds below the line have decreased in rank, while funds above the line have […]

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Smart(er) Beta? Part 1 of a Series on Multifactor Smart Beta ETFs

Is it alpha or is it beta? Is it smart beta, or is it dumb? Can it be timed, or is that dumb? Is a crash looming? The questions fueling “smart beta” debates carry on, but that hasn’t stopped a number of providers from launching a “smarter” product – and from picking up assets as […]

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Remembrance of Things Past: Carmignac Patrimoine’s Resurgence

Carmignac Gestion’s flagship fund, Carmignac Patrimoine, which grew in size and stature amongst the European investment management community due to sage risk management during the Financial Crisis and stellar long-term performance, faced a difficult 2013 and early 2014. Performing near the bottom of its peers in this window of time, investors questioned whether Patrimoine and […]

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Red Flags in the East: Learning from AIJ

The difficulty Japanese pensions face is hard to overstate. As the world’s most rapidly aging economy continues to confront low economic growth and a paltry interest rate environment, the institutional community’s search for yield is inevitable and necessary. Unfortunately, the discovery of alleged fraud at investment firm AIJ Investment Advisors Co. – where  109.2 billion […]

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An Eye on the Residuals: MPI Presents to CFA Societies on Dynamic Factor Analysis

In conjunction with the CFA Societies of the UK, France and Germany, MPI recently presented at sold-out events in London, Paris and Frankfurt in an effort to address best practice quantitative methodologies for dynamic factor analysis and their applications for the wealth and investment management industry. The presentation, entitled “Hidden sources of alpha: from market […]

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