Maximizing for diversification in the multi-asset multi-factor universe, the literature advances diversified risk parity strategies across economic clusters. For handling overly complex correlation matrices, hierarchical clustering techniques have recently been put forward to guide risk parity...

Institutional investors who are highly sensitive to oil price changes are keen to reduce their risk exposure without explicitly engaging in oil price hedging. We investigate a viable alternative that considers diversifying oil exposure by employing adequate market and style factors. In...

The 2015 Paris Agreement is a landmark in limiting emissions and targeting global warming well below 2, preferably 1.5, degrees Celsius compared to pre-industrial levels. In this light, we investigate how to efficiently construct equity portfolios that help mitigating climate change risk but at...

Risk mitigation strategies seek to create an asymmetric risk-return profile. But benchmarking against the underlying investment is not a valid approach given the potentially stark difference in risk profiles. We discuss how to appropriately calibrate and assess portfolio insurance strategies...

Dealing with a portfolio's currency risk is no clear-cut matter. Using a minimum variance hedging strategy, we explore a middle road between full hedging of all currency risks and no hedging at all. Past performance analysis suggests that a minimum variance hedge is often superior to either...

To limit the maximum loss of a portfolio, investment strategies can be enhanced by adding a portfolio insurance component. We have analyzed various portfolio insurance strategies – from the static stop-loss concept to option-based strategies and dynamic portfolio insurance strategies. The...

Currency hedging is often approached with an all-or-nothing mentality: either full hedging of all foreign exchange (FX) positions or no hedging at all. As a more nuanced alternative, we suggest systematically harvesting the benefits of the FX style factors carry, value and momentum. In...

Embracing the concept of factor investing, we design a flexible framework for building out different factor completion strategies for traditional multi-asset allocations. Our notion of factor completion comprises a maximally diversified reference portfolio anchored in a multi-asset multi-factor...