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What Can Liquidity Tell Us About ETF Prices? 

Integrated Risk Management , Risk Management

As thematic equity ETFs have grown in popularity, concerns have been raised about their liquidity — especially when an ETF holds a large fraction of a constituent’s shares. How can ETF investors get a handle on this risk? 

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How Inflation Could Affect Multi-Asset-Class Portfolios 

Real Estate Investing , Fixed Income , Global Investing , Integrated Risk Management

Market participants are hotly debating whether U.S. monetary and fiscal policy may cause inflation. We consider four scenarios — reflation, disinflation, an overheated economy and stagflation — and their potential impact on multi-asset-class portfolios.

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A New COVID-19 Regime for MBS? 

Fixed Income , Integrated Risk Management

In 2020, the Federal Reserve’s purchases of mortgage-backed securities, low interest rates, mortgage-underwriting policy changes and technology advancements led to a historic refinance frenzy and posed an unprecedented challenge for MBS risk management.

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Are Securitized Products Ready for the LIBOR-SOFR Transition? 

Fixed Income , Integrated Risk Management

Will the securitization industry be ready for the transition from LIBOR to the secured overnight financing rate (SOFR), as it faces the fact that LIBOR can no longer be guaranteed beyond the end of 2021? As the industry mobilizes, significant challenges remain.

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Hedging Inflation: A Scorecard 

Integrated Risk Management , Fixed Income , Global Investing , Risk Management

Aggressive actions by central banks and soaring government budget deficits have raised concerns among some investors that inflation may significantly rise. We examine whether an inflation hedge was worth the cost over the past 13 years.

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Same target, different destinations 

Integrated Risk Management , Models/Client Cases

Target-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? 

Fixed Income , Global Investing , Integrated Risk Management

Has 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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Beware of FRTB cliff effects. Sharp curvatures ahead. 

Integrated Risk Management , Fixed Income , Models/Client Cases , Risk Management

The 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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Evaluating the impact of LIBOR fallback 

Fixed Income , Global Investing , Integrated Risk Management

The 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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Have High-Yield ETFs Created Liquidity Risk? 

Fixed Income , Risk Management , Integrated Risk Management

In 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.