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Chinese convertibles: Equities in fancy dress? 

Emerging Markets , Fixed Income , Global Investing , Models/Client Cases , Risk Management

Chinese 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 

ESG Research , Factor Investing , Models/Client Cases , Risk Management

Despite 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? 

Global Investing , Models/Client Cases , Risk Management

Brexit 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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Factors in Focus: Momentum hits a valuation speed bump 

Factor Investing , Factors , Models/Client Cases , Risk Management

The 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 

Fixed Income , Models/Client Cases , Risk Management

Write-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? 

Fixed Income , Models/Client Cases , Risk Management

Artificial 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? 

Fixed Income , Models/Client Cases , Risk Management

Have 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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Are rates and equities losing their balance? 

Fixed Income , Models/Client Cases

For 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? 

Factor Investing , Models/Client Cases , Factors

The 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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A smoother ride? Looking at factor-based asset allocation 

Factor Investing , Models/Client Cases , Risk Management

On 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.