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Did hedging tail risk pay off? 

Investors taking stock of the coronavirus fallout and recent market volatility have begun exploring tail-risk-hedging strategies as a way to protect against further drawdowns. What are the potential costs and benefits of hedging against tail risk?

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The end of an era for the bond-equity relationship? 

Stock and bond prices dropped together during the recent coronavirus sell-off, leading to fears that U.S. Treasurys were no longer the safe haven they had been in previous crises. Did it mark the end of an era of flight to quality?

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‘Nowcasting’ private equity in the coronavirus crisis 

What may be happening to the value of portfolios of private assets during the COVID-19 crisis? We used MSCI’s private-equity model, which integrates data on private assets from our partner Burgiss, to try to shed some light.

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What scenarios has the US equity market priced in? 

With the outbreak of the COVID-19 pandemic, the U.S. equity market turned sharply downward. We performed a reverse stress test considering various scenarios that potentially explain current valuations.

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Are rates and equities losing their balance? 

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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Factor investing goes multi-asset class 

Factor investing is now going multi-asset class: to factor-based asset allocation and systematic strategy factors that push beyond equity selection.

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Managing Fixed-Income Risk in Turbulent Times 

Fixed-income markets have weathered a series of financial crises since 2008, forcing institutional investors to discard old assumptions and seek a risk management framework suited to the new, ever changing environment.

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The Search for Yield: Leveraged Loans vs. High-Yield Bonds as Interest Rates Rise 

The low interest rate environment continues to send institutional investors on a search for yield. But with the Federal Reserve signaling an increased pace of tightening in 2017, many are reducing interest rate exposure and seeking higher yields in credit instruments.

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MULTI-ASSET CLASS RISK: SEEING THE FOREST AND THE TREES 

As investors shift toward global, multi-asset class strategies from narrower mandates, the number of dimensions to manage is rapidly increasing. This complexity requires seeing both the forest and the trees. Investors need a multi-asset class view of the markets, but they also need to understand the unique drivers of risk and return within each market.

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UNDERSTANDING PRIVATE REAL ESTATE 

Private real estate and other real assets have become a major component of many institutional investors’ portfolios in recent years, but risk management has lagged. A wide range of proxies and assumptions have stood in place of a solid risk management framework, with perhaps the most common risk model being … nothing.

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There is More Than Equity in Private Equity 

Private equity is both “private” and “equity.” The valuations look smooth from quarter to quarter, but in the long run, private equity shows a strong relationship with equity and is exposed to many of the same systematic factors that drive traditional assets.

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IS REAL ESTATE BOND-LIKE? 

Many institutional investors have been favoring private real estate over bonds, drawn by its steady income stream and higher yields. While the short-term income may be bond-like, the long-run behavior of the asset class is much more cyclical and growth-sensitive.