In Part I of this series we explored Grinold’s Fundamental Law of Active Management, and why we believe the theory leads to misguided conclusions in the presence of asset correlations. Recall that Grinold asserted that a manager’s information …
Keep Reading2017
Demystifying Risk Parity with RealVision and 90 Years of History
Risk Parity is having a moment.For us, the fuse was lit in August 2016 when Bank of America Merrill Lynch released a research note suggesting that Risk Parity investment strategies represented a substantial source of systemic risk in global markets…
Keep ReadingThe Case for Tactical Alpha, Part 1: The Fundamental Law of Active Management
This article series will consist of a theoretical discussion of Tactical Alpha followed by a series of novel empirical studies. Below, we explore the concept of Information Ratio from the perspective of Grinold’s Fundamental Law of Active Management, which links investment …
Keep ReadingGet Comfortable with Being Uncomfortable, Part 3: Factor Investing
It is well known that investors in every country around the world have a strong preference to own the stock and debt of their own domestic companies. This home bias is one of the strongest and most pervasive effects in markets. Many investors also express a …
Keep ReadingGet Comfortable with Being Uncomfortable, Part 2: Maximum Diversification
In Part 1 of this series, we addressed how valuations on stocks and bonds remain extremely lofty. As a result, it is unrealistic to expect the portfolios that investors have grown comfortable with over the past few decades to produce the returns investors need to achieve …
Keep ReadingProspect Theory, Bias, and Chalk: Our 2017 March Madness Wrap
Investing is different because we have the opportunity to apply strategies repeatedly over a long period of time. While the outcome of any short-term investment sub-period may have characteristics of randomness, over many repetitions patterns emerge. This …
Keep ReadingGet Comfortable with Being Uncomfortable, Part 1: Valuations
When most investors think about “risk reduction” their minds immediately conjure volatility and losses. However, as advisors, we should consider a broader definition of risk that connects more directly to how clients feel about their investments. Specifically, advisors should …
Keep ReadingFrom the Office of Weak Sauce Management: Your Elite 8 Scoring Update
As we mentioned after the Round 2 update, our scoring rules this year did absolutely nothing to discourage most of you from submitting chalky brackets. And while we’ll do a deep dive after all the dancing is done, right now there’s a simple piece of evidence that …
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