Extended-lister
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Private-capital funds enjoyed record inflows from 2014 to 2018, as asset owners sought high-returning assets that had low correlations to traditional public asset classes. Did private capital deliver?
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Trade deal broadened access to China’s nonperforming loans
Jan 29, 2020 Yini Yang , Jian ChenRisk Management , Fixed Income , Global Investing , Emerging Markets
Learn MoreThe phase-one U.S.-China trade deal lets U.S. asset managers acquire nonperforming loans directly from Chinese banks. We assess the market’s characteristics, as investors face challenges estimating recovery rates and liquidation timing of these loans.
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Did corporate-credit factors offer a risk-return edge?
Jan 24, 2020 Rohit Mendiratta , Hitendra D VarsaniFactor Indexes , Factor Investing , Factors , Fixed Income , Risk Management
Learn MoreFactors have gained popularity in equity investing for providing insight into the key drivers of portfolio risk and returns. Did tilting hypothetical fixed-income portfolios toward some bond-specific factors benefit investors?
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Counterparty credit risk and the initial-margin big bang
Jan 22, 2020 Benedek Skublics Learn MoreA forthcoming global regulatory standard will require derivatives users to estimate mandatory initial margin on their portfolios. The choice of model methodology may have a significant impact on this calculation.
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MBS prepayment in 2020: Looking back, looking ahead
Jan 21, 2020 Yihai YuFixed Income , Risk Management
Learn MoreDrawing on two decades of U.S. data on MBS prepayment and borrower incentives to refinance, we used our model to look at three potential prepayment themes for 2020.
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Factors in Focus: Will 2020 vision sharpen exposures?
Jan 6, 2020 Waman Virgaonkar , Hitendra D VarsaniFactor Indexes , Factor Investing , Factors
Learn MoreSome global equity markets reached all-time highs and experienced limited bouts of volatility over the course of 2019. But underneath the calm surface, we saw a high degree of dispersion among factors and sectors.
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Synthetic CDOs: Back in vogue but not without risk
Dec 13, 2019 Gabor AlmasiFixed Income , Risk Management
Learn MoreAs credit spreads have gradually declined, investors have increasingly been focusing their attention on more complex instruments including synthetic Collateralized Debt Obligations in the search for yield. However, the risks of these investments — including the senior tranches — should not be overlooked.
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Looking to the futures of emerging markets
Dec 11, 2019 Hitendra D VarsaniGlobal Investing , Risk Management , Economic Exposure , Emerging Markets
Learn MoreEmerging-market (EM) equities have delivered unique risk and return characteristics over the last 30 years. Are futures on EM stocks a liquid enough means to gain exposure during normal and stressed conditions?
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Has global sovereign rates momentum headed in reverse?
Dec 6, 2019 Andrew DeMondRisk Management , Fixed Income
Learn MoreMomentum can be an important factor in sovereign-rates markets. But investors concerned with exposures to short-term rate movements in global bond markets may wish to ask themselves whether the trend is indeed their friend.
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The emerging-market (EM) equity segment has evolved substantially during the two and a half years since MSCI announced the inclusion of China A shares in the MSCI Emerging Markets Index.
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Standards can establish a common language and provide clarity among market participants. We examine three to see how they can help evaluate returns, quantify factor exposures and measure the impact of changes in sector and industry trends.
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Are EU corporate bonds all alike?
Nov 27, 2019 Hamed FaquiryanEconomic Exposure , Fixed Income , Risk Management
Learn MoreThe integration of the eurozone’s economy may tempt investors to view corporate debt issued by European companies as undifferentiated. On average, this view has seemed correct — but not always durings times of market stress.
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Factors behind value’s underperformance
Nov 22, 2019 Leon RoisenbergFactor Indexes , Factor Investing , Factors
Learn MoreAs the relationship between U.S. value factors’ exposures and returns deteriorated over the last decade, U.S. momentum’s return patterns improved. We examine the value-momentum relationship and contributions of other style factors to value’s performance.
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Something for nothing? Increasing bond duration may not increase portfolio risk
Nov 20, 2019 Juan Sampieri , Andy SparksFixed Income , Risk Management
Learn MoreAsset allocators may consider lengthening the duration of their bond portfolios to prepare for a potential recession in the U.S. But could duration extension push risk above target thresholds? Maybe not.
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Did insider transactions have secrets to tell?
Nov 19, 2019 Vipul Jain , Roman KouzmenkoFactor Investing , Factors , Risk Management
Learn MoreCompany insiders’ trading of their company’s stock is usually subject to strict rules, including public disclosure. Did observing insider transactions provide more information about expected company performance than traditional sources?
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A default wave for Chinese consumer ABS?
Nov 18, 2019 Yini Yang , Jian ChenEconomic Exposure , Emerging Markets , Fixed Income , Global Investing , Risk Management
Learn MoreThe default rate for auto loans in Chinese consumer asset-backed securities increased rapidly in recent months, and China may be moving toward a more borrower-friendly bankruptcy regime. Could this lead to even higher default rates?
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Have regional equity-market correlations risen?
Nov 15, 2019 Guido Giese , Roman Kouzmenko Learn MoreGlobal equity investors use regions as building blocks in asset allocation, typically segregating markets by how developed they are and by geography. Has globalization reduced the potential for geographical portfolio diversification?
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The state of global investing
Nov 12, 2019 Dimitris MelasEconomic Exposure , Emerging Markets , Global Investing
Learn MoreFinancial markets are inherently unpredictable, while structural forces such as shifts in monetary policy, trade conflicts and climate change compound the challenges facing investors. Read our analysis commissioned by Norway’s Ministry of Finance.
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Emerging market country allocation matters
Nov 6, 2019 Jean-Maurice LadureEmerging Markets , Global Investing , Economic Exposure
Learn MoreInvestors with strong convictions on emerging markets might consider an approach allowing tilts toward or away from specific themes, such as active allocation to single-country index-based funds. We explore considerations linked with this approach.
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Cyclicals vs. defensives: Did tariffs tip the scales?
Nov 5, 2019 Guillermo CanoEconomic Exposure , Emerging Markets , Global Investing
Learn MoreDid tariffs imposed by the U.S. and China in May trigger a shift to defensive from cyclical stocks? How did they affect different U.S. sectors and industry groups?
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Beware high dividend yield traps
Oct 25, 2019 Saurabh Katiyar , Jean-Maurice Ladure , Ashish LodhFactor Investing , Factors , Risk Management
Learn MoreDuring low interest-rate, high-volatility environments, some investors have turned to high dividend-paying stocks. However, overly simplistic approaches to selecting dividend-paying securities exposed investors to potential “yield traps.” Could these traps have been avoided?
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Repo-market turmoil may not spell SOFR’s end
Oct 24, 2019 Michael Hayes , Maks OksFixed Income , Risk Management
Learn MoreInvestors and the media have begun to worry that the secured overnight financing rate (SOFR) — the U.S. interest-rate benchmark meant to address issues with and replace USD LIBOR — may introduce a new set of problems. Are the concerns justified?
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Value investing is down. But is it out?
Oct 23, 2019 Abhishek Gupta , Anil RaoFactor Indexes , Factor Investing , Factors , Global Investing
Learn MoreValue stocks generally underperformed the broad U.S. equity market over the past decade — just as they did in the late 1990s. What drove that underperformance? Was it consistent globally? Within U.S. sectors?
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Stress testing US-China trade wars
Oct 22, 2019 Anikó Maráz , Thomas Verbraken , Maraz AnikoEmerging Markets , Fixed Income , Global Investing , Risk Management
Learn MoreAmid ongoing U.S.-China trade tension, we have updated our stress test to consider three scenarios for how the situation could unfold — and their impact on currency, bond and equity markets around the world.
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Factors separated fact from fiction
Oct 16, 2019 George BonneFactor Indexes , Factor Investing , Factors
Learn MoreTechnological advances have expanded the application of factors. What was the realm of quantitative investors has become more accessible, bringing greater transparency and potential insight into portfolio characteristics and performance drivers.
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Chinese convertibles: Equities in fancy dress?
Oct 14, 2019 Gergely SzalkaEmerging Markets , Fixed Income , Global Investing , Models/Client Cases , Risk Management
Learn MoreChinese corporate bonds that convert to A shares display equity-like characteristics. But investors who view these securities as equities in disguise are overlooking the complexities of the asset class.
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Retire in Monte Carlo? Simulating retirement outcomes
Oct 11, 2019 Anil RaoESG Research , Factor Investing , Models/Client Cases , Risk Management
Learn MoreDespite global equity performance, U.S. DC plan participants may be ill prepared to meet retirement-spending needs. We assessed four equity-allocation scenarios — including an equity multifactor allocation and integration of ESG views — to see which performed best.
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Stress testing Brexit: Deal or no deal?
Oct 9, 2019 Anikó Maráz , Thomas Verbraken , Maraz AnikoGlobal Investing , Models/Client Cases , Risk Management
Learn MoreBrexit has roiled markets since U.K. voters chose “leave” in the June 2016 referendum. We used our stress-testing model to examine how markets could react to deal and no-deal scenarios.
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Investors have a choice between investing in European stocks regionally or through local-country index-based portfolios. What are the pros and cons?
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What’s the downside in real estate?
Oct 4, 2019 Bryan ReidReal Estate Investing , Global Investing
Learn MoreReal estate has always been marked by periods of expansion and sometimes painful corrections. But all cycles are not alike.
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Factors in Focus: Momentum hits a valuation speed bump
Oct 3, 2019 Waman Virgaonkar , Hitendra D VarsaniFactor Investing , Factors , Models/Client Cases , Risk Management
Learn MoreThe momentum-value spread saw one of the largest corrections in history over the summer. What does our model show going forward?
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Senior bonds in name only
Oct 2, 2019 Máté MaródiFixed Income , Models/Client Cases , Risk Management
Learn MoreWrite-down protection doesn’t extend to a new bond category issued by too-big-to-fail European banks: senior non-preferred. Investors in senior debt may wish to consider these bonds’ recovery risk.
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MBS prepayment modeling: AI 1, Humans 0?
Sep 27, 2019 Joy Zhang , David ZhangFixed Income , Models/Client Cases , Risk Management
Learn MoreArtificial intelligence has broken through in fields previously dominated by humans. Could AI surpass humans in modeling the complex risks of agency mortgage-backed securities?
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Should bank-loan investors worry about liquidity risk?
Sep 24, 2019 László AranyFixed Income , Models/Client Cases , Risk Management
Learn MoreHave bank loans posed more liquidity risk than corporate bonds when the market was stressed? We compared various liquidity metrics for bank loans and high-yield bonds during the December 2018 high-yield sell-off to find the answer.
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Growth’s recent outperformance was and wasn’t an anomaly
Sep 20, 2019 Mehdi Alighanbari , Shubhangi SharmaFactor Investing , Factor Research Group , Factors
Learn MoreGrowth strategies have outperformed value strategies in recent years. Is growth’s recent performance an anomaly when we look at it in a long-term context? The answer: It depends on what you mean by a growth strategy.
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Is climate-change risk all about fossil fuels? Think again.
Sep 19, 2019 Michael DisabatoESG Research , Global Investing
Learn MoreWhen it comes to reducing greenhouse gases, investors tend to focus on fossil fuels and power generation. But other companies also need to adapt to a lower-carbon world. We look at the implications for five types of companies.
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Are rates and equities losing their balance?
Sep 16, 2019 Peter ShepardFixed Income , Models/Client Cases
Learn MoreFor most of the past two decades, a benevolent relationship between bonds and equity has prevailed as a central pillar of asset allocation. Falling equity markets consistently coincided with falling interest rates, providing an effective hedge between bond and equity allocations. Now, talk of weaker central-bank policy or a risk of deflation has many asset allocators focused on the future of the rates-equity correlation.
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Back-to-school (momentum) blues?
Sep 13, 2019 George Bonne , Leon RoisenbergFactor Investing , Models/Client Cases , Factors
Learn MoreThe U.S. price momentum factor, which we highlighted for elevated crowding scores and vulnerability to negative performance at the end of June, suffered sizable drawdowns in the first seven trading days of September.
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Real estate may be yielding less than you thought
Sep 12, 2019 Bryan ReidGlobal Investing , Real Estate Investing
Learn MoreIncome has long been an important part of real estate returns meaning yields are often heavily scrutinized by investors. However, headline yields do not factor in capital expenditure requirements which can vary significantly. Investors looking to better understand potential “free cash flow” positions of portfolios post-capex may want to adjust the yields they use to account for it.
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MBS investors: quantitative easing déjà vu?
Sep 5, 2019 Joy ZhangFixed Income , Risk Management
Learn MoreDespite the Fed’s silence on the matter, the MBS market may be indicating that a new round of QE is coming.
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Using multi-country multi-currency futures in portfolio management
Sep 3, 2019 Hitendra D VarsaniGlobal Investing , Risk Management
Learn MoreInvestors seeking to more tightly manage their exposures to regional or global benchmarks are turning to multi-country multi-currency futures.
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A smoother ride? Looking at factor-based asset allocation
Sep 3, 2019 Andrea Amato , Chenlu ZhouFactor Investing , Models/Client Cases , Risk Management
Learn MoreOn the surface, holding-based asset allocation appears to produce stability. But is what you see always what you get? We investigate the pros and cons of a factor-based approach.
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Where were the (factor) crowds this summer?
Aug 21, 2019 George Bonne , Leon Roisenberg Learn MoreWhen factors have historically become crowded, they’ve often experienced significant drawdowns in subsequent months. Which factors were relatively crowded at the end of 2018 — and how did they perform in the first half of 2019?
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A reality check for MBS duration risk
Aug 15, 2019 Yihai YuRisk Management , Fixed Income , Models/Client Cases
Learn MoreEmpirical duration data can be used to check whether models for mortgage-backed securities are accurately measuring interest-rate risk.
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The changing face of real estate portfolios
Aug 14, 2019 Bryan ReidGlobal Investing , Real Estate Investing
Learn MoreOffice and retail investments’ historic dominance of commercial real estate portfolios is decreasing, with other property types — including logistics centers, student housing, and data centers — increasing. This evolution highlights how technology and the search for yield have led investors to diversify and seek exposure to other property types.
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Liquidity risk under stress: Beyond bid-ask spreads
Aug 7, 2019 Diana KniplFixed Income , Models/Client Cases , Risk Management
Learn MoreRisk managers at investment funds are more and more focused on liquidity risk, as regulators have recently issued guidance that increases demands for liquidity stress testing. Although markets are currently considered fairly calm, the 2008 financial crisis showed how liquidity can deteriorate quickly under stressed conditions, resulting in widened bid-ask spreads. But by focusing solely on the change in bid-ask spreads, could investors underestimate their liquidity risk? The often-overlooked market impact — or the additional cost on top of the bid-ask cost for large trades — could also increase significantly, driving transaction costs still higher.
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Same target, different destinations
Jul 31, 2019 Anil RaoIntegrated Risk Management , Models/Client Cases
Learn MoreTarget-date funds (TDFs) have gained wide adoption in U.S. defined-contribution plans over the last decade, aided by the proliferation of auto-enrollment features and the funds’ presentation as a “set it and forget it” approach.
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Home bias in fixed income: Has it helped or hurt?
Jul 29, 2019 Anikó Maráz , Andy Sparks , Maraz AnikoFixed Income , Global Investing , Integrated Risk Management
Learn MoreHas global diversification historically helped reduce risk in the fixed-income portfolios of U.S. defined-benefit (DB) pension plans? Our backtests show that globalizing bond allocations would have increased risk measured relative to a liability benchmark. For such plans, home bias in bond portfolios would have reduced active risk over the period of our study.
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Three scenarios for Fed rate cuts
Jul 23, 2019 Andy Sparks , Thomas VerbrakenEconomic Exposure , Fixed Income , Models/Client Cases
Learn MoreA consensus has emerged that the Federal Reserve will lower rates in the coming months, but investors remain uncertain over the timing and magnitude of the cuts. What impact could three rate-cut scenarios have on markets?
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More than a feeling: Quantifying consumer sentiment
Jul 17, 2019 Rohit Mendiratta , George BonneFactor Research Group , Factor Investing , Factors
Learn MoreAmong a flood of alternative data sources, consumer sentiment based on citations online stood out.
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Is there another Woodford waiting to happen?
Jul 11, 2019 Laszlo HolloGlobal Investing , Risk Management
Learn MoreWhen the Woodford Equity Income Fund suspended redemptions on June 3, 2019, it showed how, when a fund’s liquidity profile is misaligned with its shareholder profile and redemption constraints, a single large redemption request can trigger gating.
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Under the hood: Rating ESG funds
Jul 10, 2019 Michael DisabatoESG Research , Global Investing
Learn MoreNearly $31 trillion in assets under management were invested in funds that consider ESG issues in their investing process as of January 2018, a 34% increase from two years previously. Transparency is key to understanding what this expansion means.
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Liquidity and correlation in the Chinese credit market
Jul 9, 2019 Manuel RuedaFixed Income , Risk Management , Models/Client Cases
Learn MoreChina’s stock market has drawn huge attention from global investors, especially as China A shares have been added to leading equity indexes. But the same cannot be said for the country’s 38 trillion CNY (USD 5.5 trillion) credit market, now the second-largest in the world. Despite the market’s overall size, foreign investor participation remains miniscule, with overseas bondholders accounting for less than 1% of the total holdings.
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Asian retail resilience: Have store hours affected performance?
Jul 9, 2019 Bryan ReidReal Estate Investing , Global Investing
Learn MoreIndustrial real estate has outperformed retail assets in recent years, but the trend has been less pronounced in Asia, where store hours, among other reasons, might have led to more resilient retail performance.
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Reverse Convertibles: Worth the Risk?
Jul 5, 2019 Gyorgy Kocsis , István Varga-HaszonitsRisk Management , Models/Client Cases , Fixed Income
Learn MoreDo reverse convertibles offer any obvious risk-return benefits over high-yield bonds?
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Factors in Focus: Dynamic short term, strategic long term
Jul 2, 2019 Waman Virgaonkar , Hitendra D VarsaniFactor Investing , Factor Research Group , Factors
Learn MoreWe review factor performance over the second quarter, provide the perspective of a long-term view and look to indications from our adaptive multi-factor model heading into Q3.
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Bank Loans: Will Crisis Follow the Search for Yield?
Jun 27, 2019 Hamed FaquiryanRisk Management , Fixed Income , Models/Client Cases
Learn MoreIn the post-2008 search for yield, investors have taken on considerable exposure to leveraged bank loans. We assess whether these loans pose systemic risk in the way subprime mortgages did during the last crisis.
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Beware of FRTB Cliff Effects. Sharp Curvatures Ahead.
Jun 20, 2019 Andras RokobIntegrated Risk Management , Fixed Income , Models/Client Cases , Risk Management
Learn MoreThe Basel committee’s revised market-risk capital requirements contain a small surprise with potentially big implications. Cliff effects remain in the framework.
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European securitization at the regulatory crossroads
Jun 17, 2019 Miklós VörösFixed Income , Risk Management
Learn MoreHave new European Union reforms clouded the future of the securitization market in Europe?
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Lessons from Woodford: Shutting the barn door after the horses have bolted
Jun 14, 2019 András Bohák , Dimitris Melas , Roman Kouzmenko Learn MoreThe suspension of the U.K.’s Woodford Equity Income Fund highlights the value of regularly reviewing a portfolio’s factor exposures and liquidity characteristics for signs of style drift or deteriorating ability to redeem shares.
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The rise of fundamental factors in China A shares
Jun 6, 2019 Oleg RubanEmerging Markets , Factor Investing , Global Investing
Learn MoreCommonly held perceptions about China A shares have influenced investors to think factor strategies may not work in the Chinese equity markets. Our research suggests this may be changing.
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Fed policy, the credit cycle and real estate
May 28, 2019 Yihai Yu , David ZhangRisk Management , Real Estate Investing , Fixed Income
Learn MoreAmid the uncertainty over Federal Reserve policy, investors in commercial real estate (CRE) are confronting asset-allocation challenges and growing concerns about CRE valuation and debt levels, after an extended period of easy credit.
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What could stress emerging markets?
May 24, 2019 Thomas VerbrakenGlobal Investing , Risk Management , Economic Exposure , Emerging Markets
Learn MoreEmerging-market equities and USD-denominated EM sovereign bonds started 2019 with a bang, but recent market turbulence caused by the U.S.-China trade standoff raises a pressing question: What could trigger the next EM downturn?
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Beyond headlines: How markets responded to US-China trade talks
May 9, 2019 Zhen WeiEconomic Exposure , Emerging Markets , Global Investing
Learn MoreOur analysis suggests that changes in equity-market valuations, analysts’ consensus earnings estimates and data on companies’ revenue exposure are metrics that provided insight into recent market and sector performances.
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Factor investing in Saudi Arabia: size matters
May 7, 2019 Saurabh Katiyar , Neeraj DabakeFactor Indexes , Factor Investing
Learn MoreForeign interest has risen in Saudi Arabia following the easing of foreign-ownership limits. Our analysis shows investors would have benefited by controlling for exposure to small-cap companies.
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Game of Homes: Is winter coming for the domestic-equity bias?
Apr 30, 2019 Raman Aylur Subramanian , Anil Rao , Raman SubramanianEquity Themes , Models/Client Cases , Global Investing
Learn MoreCan we quantify home-bias risk in an allocation? And, what has happened when U.S. stocks ended previous multiyear runs of outperformance?
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Are You Ready for Uniform MBS? (Part 2)
Apr 26, 2019 Yihai YuModels/Client Cases , Fixed Income , Risk Management
Learn MoreAligning prepayment speeds of Fannie Mae and Freddie Mac securities presents a major challenge to the success of uniform mortgage-backed securities (UMBS), which the two government-sponsored enterprises will launch on June 3.
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A More politicized Fed? The Market Yawns
Apr 16, 2019 Andy SparksFixed Income , Risk Management
Learn MoreCould the Federal Reserve Board (the Fed) become less independent, with political forces exerting more influence?
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The Right Tool: How Suitable is Your Real Estate Benchmark?
Apr 11, 2019 Amit NihalaniReal Estate Investing , Global Investing
Learn MoreYou don’t have to be a master craftsman to appreciate the benefits of using the right tool for the job. Even the most casual do-it-yourselfer has experienced the frustration of using the wrong screwdriver for a particular job — one that doesn’t quite fit the screw properly and shreds the head, leaving it uselessly stuck in the wood without fixing anything.
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Need a Lyft? Why the IPO Blew a Tire
Apr 10, 2019 Matt Moscardi , Alan BrettEquity Themes , ESG Research , Risk Management
Learn MoreA week into the highly publicized IPO for Lyft Inc., the ride-sharing company, it’s hard to say it went exactly as planned.
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Are You Ready For Uniform MBS? (Part 1)
Apr 8, 2019 Yihai YuModels/Client Cases , Fixed Income , Risk Management
Learn MoreFannie & Freddie will conclude Single Security Initiative (SSI) June 3, 2019, creating a single to-be-announced (TBA) market & a new TBA security: the uniform mortgage-backed security (UMBS)
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What Yield-Curve Inversions Have Meant For Markets
Apr 5, 2019 Alfredo BequillardEquity Themes , Economic Exposure , Fixed Income
Learn MoreInversion of the yield curve has historically been a reliable indicator that a recession is coming. But what has it implied for stock prices and Treasury rates?
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Evaluating the Impact of LIBOR Fallback
Apr 3, 2019 Maks OksFixed Income , Global Investing , Integrated Risk Management
Learn MoreThe planned discontinuation of LIBOR and other interbank offer rates sometime in 2022 will affect a large number of existing financial contracts based on these benchmarks.
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Factors in Focus: Risky start. Quality finish.
Apr 2, 2019 Waman Virgaonkar , Hitendra D VarsaniFactors , Global Investing , Factor Investing
Learn MoreWe highlight the fast-moving rotation among factors that continued during Q1 2019. As we move into Q2 2019, this framework showed allocation changes in different factors.
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Saudi Arabia inclusion and emerging markets
Mar 28, 2019 Saurabh KatiyarEquity Themes , Emerging Markets , Global Investing
Learn MoreSaudi Arabian stocks will be included in the MSCI Emerging Markets Index and the MSCI ACWI Index in a two-step process starting in June this year. With the first step of inclusion of the MSCI Saudi Arabian Index coming shortly, we ask how inclusion of this Middle Eastern market would have affected the MSCI EM Indexes.
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Have High-Yield ETFs Created Liquidity Risk?
Mar 27, 2019 Reka JanosikFixed Income , Risk Management , Integrated Risk Management
Learn MoreIn the fourth quarter of 2018, redemptions of high-yield ETFs soared to approximately 25% of these funds’ assets under management (AUM), according to data provider IHS Markit.
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A New Day for Monetary Policy?
Mar 22, 2019 Andy SparksEmerging Markets , Fixed Income , Global Investing
Learn MoreListen as MSCI’s Andy Sparks discusses potential implications of the US Federal Reserve’s sharply softening monetary policy, and whether the role of central banks has changed.
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Don’t confuse capital growth and asset-value growth
Mar 21, 2019 Niel HarmseEconomic Exposure , Real Estate Investing , Global Investing
Learn MoreMeasuring real estate growth is not a simple exercise; we run through it highlighting some common confusions
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Factors and ESG: The Truth Behind Three Myths
Mar 20, 2019 Guillermo CanoModels/Client Cases , ESG Research , Factor Investing
Learn MoreThere are misconceptions of the relationship between factors and ESG issues. We debunked three common myths about ESG, momentum, quality and smaller-cap stocks.
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Santander’s Coco extension: The New Market Norm?
Mar 18, 2019 Imre Vörös , Gergely SzalkaModels/Client Cases , Fixed Income , Risk Management , Integrated Risk Management
Learn MoreBanco Santander announced it would extend — i.e., not call — its additional-tier-one contingent-convertible (coco) bond. Was the market caught off guard?
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The Risk in Risk-Parity Strategies
Mar 13, 2019 Thomas VerbrakenFixed Income , Integrated Risk Management
Learn MoreThe relationship between bonds and equities may be especially important to investors who employ a risk-parity approach. In our analysis, as the bond-equity correlation turned strongly positive, the effect on risk-parity portfolios was much greater than that on traditional 60/40 equity/bond portfolios.
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Watching Beta in Volatile Equity Markets
Mar 12, 2019 Anil RaoEquity Themes , Global Investing
Learn MoreThe U.S. equity market ended last year with a historic drawdown, and beta stood out as a driver of the market decline. But what happened when those losses starting reversing in early 2019?
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What innovative companies and women on boards have in common
Mar 8, 2019 Meggin Thwing Eastman , Meggin EastmanESG Research , Global Investing
Learn MoreWe examined constituents of the MSCI ACWI Index that had been recognized as innovators on one or more annual lists produced by Forbes, Fast Company, MIT Sloan and the Boston Consulting Group between 2015 and 2018.
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Are Subprime Auto Loans at a Tipping Point?
Mar 4, 2019 Joy Zhang , Yini YangModels/Client Cases , Economic Exposure , Fixed Income
Learn MoreInvestors and the media have lately turned their attention to credit risk in U.S. subprime automotive lending — concerns that increased during the recent market volatility.
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Brexit, Black Wednesday and Real Estate's Currency Risk
Feb 25, 2019 Niel HarmseReal Estate Investing , Global Investing
Learn MoreWhen investors buy overseas real estate, they inevitably take on foreign-exchange exposure. The resulting currency-market dislocations resulted in near-term losses for some investors, but also created attractive opportunities for investors to buy real estate exposure in the U.K.
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Evaluating Emerging-Market Stocks through a Governance Lens
Feb 21, 2019 Raina Oberoi , Anil RaoEquity Themes , Emerging Markets , Global Investing
Learn MoreEmerging-market stocks generally are perceived to have lower governance standards than their developed-market counterparts. Less transparency is one factor behind this view. Some emerging-market companies may also disadvantage minority shareholders. How can active and index-based investors address these issues?
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Venezuela and the Specter of Recovery Risk
Feb 14, 2019 Manuel Rueda , Hamed FaquiryanFixed Income , Global Investing , Factor Investing
Learn MoreVenezuela unfortunately finds itself on the verge of political and economic collapse. From the perspective of investors in the country’s sovereign and corporate bonds, recovery risk is now likely a bigger consideration than default risk.
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What market volatility has meant for factors
Feb 13, 2019 Guillermo CanoFactors , Factor Research Group , Factor Investing
Learn MoreAs investors continue to focus on factor investing in periods of heightened volatility, we ask how volatility has affected factor performance.
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How mortgage fees affect rates and spreads
Feb 7, 2019 Yihai YuModels/Client Cases , Real Estate Investing , Fixed Income
Learn MoreHow could potential changes in U.S. mortgage policy and possible long-term industry trends affect mortgage-related fees and rate spreads?
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What Fed monetary policy has meant for factors
Feb 6, 2019 Abhishek Gupta , Raina OberoiFactors , Factor Research Group , Factor Investing
Learn MoreAs interest rates in the U.S. started increasing in late 2015, many investors expressed concerns over the impact that rising rates could have on their investments. However, the tone of the U.S. Federal Reserve (the Fed) shifted from “we’re a long way from neutral” in October last year to a more accommodative stance of “we will be patient” early this year, re-emphasizing that expression at the January 2019 Federal Open Market Committee meeting.
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2019 Emerging Real Estate Trends
Feb 5, 2019 Will RobsonESG Research , Real Estate Investing , Global Investing
Learn MoreFor real estate investors, 2019 may be a year of adjusting to rapid changes arising from a variety of sources, including environmental, social and governance-related (ESG) risks; geopolitical uncertainty; and disruptive technology.
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Should we be surprised by earnings surprises?
Feb 1, 2019 Rohit Mendiratta , George BonneFactors , Factor Research Group , Factor Investing
Learn MoreEarly 2019 earnings season has already contained a number of high-profile surprises, such as Facebooks's, but how predictable are these surprises, and what happens when earnings surprises return to trend?
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What has affected minimum volatility index performance?
Jan 31, 2019 Waman Virgaonkar , Mehdi AlighanbariFactor Indexes , Factors , Factor Investing
Learn MoreAs we head further into 2019, some of last year’s concerns, including market volatility and interest-rate uncertainty, continue to occupy investors’ minds. With the assumption that rates-related concerns continue and uncertainty looms in the global equity markets, the question is how minimum volatility indexes behaved in an environment dominated by these two opposing forces.
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CDS Hedging: Exploring all the Options
Jan 23, 2019 Michael HayesModels/Client Cases , Fixed Income , Risk Management
Learn MoreThe credit-default-swap (CDS) market previously offered a cost-effective means to make short-term hedges or place bets on an individual issuer’s credit.
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What Would a “No deal” Brexit Mean for Markets?
Jan 17, 2019 Thomas VerbrakenGlobal Investing , Integrated Risk Management
Learn MoreFinancial markets are increasingly edgy about prospects for the U.K. Parliament’s expected Dec. 11 vote on a Brexit deal with the European Union.
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Brexit and the Risks of Home Bias
Jan 11, 2019 Jean-Maurice LadureEconomic Exposure , Global Investing
Learn MoreEvery so often, a country can be hit by a negative event — a tidal wave, a terrorist attack, a political uproar.
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From credit crunch to liquidity crunch: managing liquidity
Jan 10, 2019 András BohákModels/Client Cases , Fixed Income , Risk Management
Learn MoreVolatility of credit spreads in both emerging- and developed-market debt increased significantly in 2018. Large rises in credit spread levels were followed by increased bid-ask spreads, making it expensive to reduce exposure within a short time frame.
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U.S. and international equity markets fell sharply to close out 2018. The MSCI USA Index fell 15% in the fourth quarter alone. (It fell a total of 6% for the year.) As we previously examined, investors began rotating from cyclical sectors and factors to defensive ones in June. This pattern continued, in earnest, until October.
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U.S. Real yields: Opportunities and Warning Signs
Dec 12, 2018 Andy SparksFixed Income , Integrated Risk Management
Learn MoreDespite the recent rally in the U.S. government bond market, real U.S. bond yields (i.e., nominal yield minus the market-implied rate of inflation) still remain substantially higher than at the beginning of the year. This may be both a blessing and a curse for investors.
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Factor Investing Goes Multi-Asset Class
Dec 11, 2018 Peter ShepardFactor Indexes , Factors , Factor Investing
Learn MoreFactor investing is now going multi-asset class: to factor-based asset allocation and systematic strategy factors that push beyond equity selection.