Maximizing the Rebalancing Premium: Why Risk Parity portfolios are much greater than the sum of their parts

We examine the distribution of rebalancing premiums for a simple risk parity implementation (a version of the Permanent Portfolio) consisting of US stocks, gold and bonds from 1982 through May 2020. We then proceed to analyze historical and expected future rebalancing premia for a variety of global risk parity strategies ..

Are We Living in a Post-Factor World?

In some ways new investment concepts are like any new technology. The progenitors of any early technology typically earn extraordinary profits until competition heats up. Eventually competition drives down profit margins and the technology becomes commoditized. But investment technology has a special quality that arises from…

Novel Price Estimator Guaranteed to Produce Non-Negative Prices

The following report was produced by our research team and we felt it was worth sharing for discussion and comment. The recent price action in crude oil prompted us to spend a little effort thinking about how to manage around negative prices.

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BOE Paper Signals Worrisome Outlook for Equities Post QE

This article is about how central banks have orchestrated a large overshoot in asset prices, and what this means for likely future returns to stocks and bonds in particular. We’ve written on this topic before, but this article approaches the problem from the point of view of central bank policy rather than analyzing valuation metrics.

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Path Dependency in Financial Planning: Retirement Edition

Imagine for a moment sitting at the kitchen table, steaming coffee in hand. The sun is streaming in the windows, bacon is popping in the pan, and Rover drops the paper at your feet. A brilliant Saturday morning by any measure, but today is extra special. Now you’re retired!

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Don’t Fear the (Alpha) Reaper

Let us preface this article by saying that we can’t for the life of us figure out why any investor cares about beating the market in the first place. To us, the whole concept of beating the market is a red herring. The only people who should be concerned with beating the market are investment managers themselves, because their compensation is directly tied to this specific objective.

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Dynamic Asset Allocation for Practitioners Part 4: Naive Risk Parity

Our last ‘prequel‘ article explored the creation of a policy portfolio that utilizes a framework of structural diversification to hedge against the four major market regimes – inflationary boom, deflationary boom, stagflation and deflationary bust. In the conclusion of the article we said we would investigate a variety of quantitative methods of risk diversification to complement the more theoretical construct of structural diversification. This next instalment introduces naive risk management methods.

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Structural Diversification for All Seasons

Now that we are hip deep in our Dynamic Asset Allocation for Practitioners series (Parts I, II and III), it’s become evident that we may have skipped over some fundamental concepts in our rush to explore the more juicy material. This next series of posts is intended to lay the groundwork for how we think about the broader asset allocation problem.

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Planning for Adverse Scenarios: Savings Edition

Let’s face it, it’s uncomfortable to acknowledge the fact that fate dominates many of the most meaningful outcomes in life. Take marriage for example. Raise your hand if you had planned in advance to meet the person you ended up marrying on the exact day you met them. No hands?

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About Us

ReSolve Asset Management Blog is an investment research forum, opinion pieces, and educational material from the team at ReSolve Asset Management. Our views are driven by evidence based finance, with a special focus on asset allocation, factors and smart beta, retirement and endowment strategies, and quantitative methods.

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