Sophisticated algorithmic techniques are complementing human judgement across the fund industry. Whatever the type of rebalancing that occurs in the course of a longer horizon, it probably violates the buy-and-hold assumption. In this article, we develop the methodology to predict, dissect and...

In a defined contribution pension system, one of the main risks faced by members refers to the investment of funds. In this context, we discuss which is the most suitable risk measurement for the affiliates to the pension system. Different life-cycle investment strategies are evaluated under...

The asset allocation is a practical problem for most institutional and private investors, who routinely deal with a wide variety of stocks, bonds and options. Evidence suggests that both the expected return and the volatility vary over time. Many studies find that the expected returns have...

Present market instabilities have prompted great interest on the characteristics of specific portfolios such as minimum variance and equally- weighted risk contribution portfolios as these portfolios do not rely on the estimate of expected returns. Indeed, in turmoil periods traditional market...

This paper explores the optimisation of asset allocation within “alternative” investments, i.e. between private equity and hedge funds, as well as between private equity and public equities. It uses our proprietary Portfolio Blender tool. As a preliminary step before the optimisation, we...

Volatility is usually considered as a synonym for risk. Mainstream financial theory states that higher portfolio volatility is translated into higher expected returns while diversification helps eliminate idiosyncratic risks. This leaves us with an apparent anomaly as low-risk (low-beta) stocks...

This paper analyses the fundamental drivers of risk and return in portfolios of private equity fund investments. We draw on a large data set of 771 mature European and North American primary buyout funds with historic performance information from Preqin covering vintages from 1998-2007. Using...

From the perspective of a primarily long-term buy-and-hold investor, this study examines whether occasionally exiting the market when it appears overvalued can be justified. Accounting for continuous price movement, when the S&P 500 earnings yield minus 10-year t-bond yield is relatively low...

Traditional risk measures such as standard deviation and CVaR are properties of the distribution of returns over a specified investment horizon. Because such fixed holding period analysis is relatively easy, and because derivative contracts are fixed-term products, the analysis of derivative...