8 mins

Searching for Yield with MLP ETPs

The prolonged low yield market over the past six years has forced many investors to search for nontraditional ways to generate income in their portfolios. Traditionally, dividend stocks, Treasuries, corporate bonds, and high yield bonds have been the standbys, fulfilling this role faithfully for decades. However, the low interest rates maintained by the Federal Reserve ...

7 mins

A Brouhaha in Bank Loan ETFs

In May, debate erupted when Laurence Fink, CEO of BlackRock, the world’s biggest ETF manufacturer, said that his firm would not be packaging bank loans into an ETF as the liquidity mismatch between the ETF vehicle and the underlying loans represent a structural risk.  This structural risk could lead to performance that can meaningfully deviate ...

4 mins

Why allocating to negative expected excess return can be entirely rational

The vast majority of people will actually allocate, during their lifetime, to a strategy with negative expected excess return — and “happily” do so!  What is this strategy?  Insurance.  Why do we choose to allocate to such a strategy?  Risk aversion implies that we’ll take a small shift left in our return distribution for the ...

3 mins

The Need for Tactical Solutions Across Generations: Retirees

This is the final part in a four part series exploring the usefulness of tactical strategies across generations.  The first three parts of the series focused on Millennials, Generation X and Baby Boomers, respectively.  Today, we will discuss Retirees.  Our one-pager on Retirees can be found here. The word "retirement" conjures up different ideas for many people: family, healthcare, hobbies, part-time work, relaxation, ...

2 mins

Risk Budgeting (with Spreadsheet)

In our previous post on portfolio risk attribution, we presented the following formula for decomposing the risk contribution of each asset in a portfolio: This formula shows that the individual risk contributions of each asset are the product of the asset's weight, volatility, and correlation to the rest of the portfolio.  It gives us an ...

3 mins

Risk Attribution in a Portfolio

Diversification is touted as the only free lunch (see our old post Is Diversification Really a Free Lunch) in investing and is a primary way to reduce portfolio volatility without sacrificing a proportional amount of return.  Return characteristics aside, a well-diversified portfolio can be less risky than any of the constituents taken alone; it is ...

4 mins

The Need for Tactical Solutions Across Generations: Baby Boomers

This is the third part in a four part series exploring the usefulness of tactical strategies across generations.  The first two parts of the series focused on Millennials and Generation X, respectively.  Today, we will discuss Baby Boomers.  Our one-pager on Baby Boomers can be found here. When it comes to stock market crashes, the ...

2 mins

The Need For Tactical Solutions Across Generations: Generation X

This is the second part in a four part series exploring the usefulness of tactical strategies across generations.  The first part in the series focused on Millennials.  Today, we turn our focus to Generation X.  Our one-pager on Generation X can be found here. As a whole, Generation X is facing significant financial difficulties.  Individuals ...

4 mins

Replicating LDI Indices with Fixed-Income ETFs

Liability-driven investment policies and asset management decisions are those largely determined by the sum of current and future liabilities attached to the investor, be it a household or an institution. As it purports to associate constantly both sides of the balance sheet in the investment process, it has been called a "holistic" investment methodology. Wikipedia Traditionally, liability-driven investment ...

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