September 5, 2024
We cover why investors should not shrug off the August market reversal as a blip. In an environment of continued macroeconomic uncertainty, episodes of volatility will likely persist. We discuss the importance of building a well-diversified portfolio that is resilient to a wide range of future economic scenarios.
ESG Investing
January 22, 2025
Investors seeking to incorporate sustainability considerations into their commodities portfolios may have a variety of ESG objectives. In many ways, assessing which commodities are sustainable is the easy part. The more difficult part is identifying what investment action in commodities will achieve an ESG goal. This paper explores several types of commodities-related sustainability motivations, and how they may be mapped to consistent investment action.
Asset Allocation
January 16, 2025
We update our estimates of medium-term (5- to 10-year) expected returns for major asset classes. We also include a discussion on corporate earnings growth: the market consensus is for more strong growth to come – especially in the U.S. But what is a reasonable medium-term forecast for allocators?
Machine Learning
November 7, 2024
In the second issue of our 2024 Alternative Thinking series, we showed that machine learning techniques can be used to help improve market timing strategies. In this issue, we extend these concepts to constructing stock selection strategies following a similar framework. Our results indicate more complex models utilizing machine learning techniques yield performance improvements relative to a simple, linear approach in the range of 50-100%, suggesting that machine learning can help to build better stock selection portfolios.
Tax Aware
November 6, 2024
Variable prepaid forward (VPF) contracts have been developed as a solution to hedging the risk of concentrated low-basis stock. Using options pricing theory, we develop a VPF pricing model that helps understand the VPF prepayment amount and the cash flows and tax liabilities upon VPF rolls.
Alternative Investing
November 1, 2024
Most Local Government Pension Scheme (LGPS) investment portfolios rely on substantial equity allocations to drive growth over the long term, but heroic rates of earnings growth would be needed to maintain recent strong equity performance. While LGPS have been turning to private assets to seek future returns and diversification, we make the case for truly diversifying liquid alternatives as a viable and versatile complement to existing portfolios, and explore the benefits of a transparent, quantitative approach.
November 1, 2024
In general, capital losses realized on stocks or other assets may offset capital gains, but not ordinary income, from the sale of a property. Therefore, it is important to understand which portion of the gain from the sale would be treated as capital gain and which would be treated as ordinary income.
Arbitrage
October 30, 2024
The recent rise and fall of SPAC issuance and the poor returns of SPAC mergers might suggest that SPACs are a flash in the pan, but this is far from the truth. To the contrary, SPACs have been a compelling asset class for more than two decades. We explore the SPAC market, its history, and its investment characteristics, including why we believe SPACs are a safe investment when managed properly, with the potential for significant upside.
Tax Aware
October 8, 2024
Investors seeking tax efficiency must look for strategies motivated by a pre-tax investment rationale, otherwise known as “economic substance.”
Alternative Investing
September 18, 2024
This paper presents one justifiable set of inputs and finds that alternatives earn themselves a sizable strategic allocation. Investors are encouraged to compare these results with their own assumptions, constraints and allocations as they look to build a resilient portfolio for long-term investment success.
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