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Contributions by Hitendra Varsani

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  1. BLOG

    Factors in Focus: Value Springs into Action 

    Apr 6, 2021 Waman Virgaonkar , Hitendra D Varsani , Hitendra Varsani

    Factor Indexes , Fixed Income , Factor Investing

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    Value has historically outperformed in economic recoveries. With the reopening of the global economy we examined value’s performance against other factors, and exposures from our adaptive multi-factor model at the end of Q1. 

  2. BLOG

    Reopening Economies and the Resurgence in Value 

    Mar 31, 2021 Waman Virgaonkar , Hitendra D Varsani , Hitendra Varsani

    Factor Indexes , Global Investing , Factor Investing

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    After 15 years of challenging performance, many have asked if value is still a valid investment strategy. But the reopening of the global economy following vaccination rollouts has reignited interest across stocks, sectors, countries and regions.

  3. BLOG

    How Are High-ESG-Rated Bond Portfolios Distinct? 

    Feb 5, 2021 Rohit Mendiratta , Hitendra D Varsani , Guido Giese , Hitendra Varsani

    Fixed Income , Risk Management , ESG Research

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    ESG investing makes up an increasingly large footprint in equity portfolios, but ESG integration in bond portfolios is still in its early days. We examine the characteristics that make high-ESG-rated corporate-bond portfolios distinct.

  4. BLOG

    Factors in Focus: Val-come Back! Shifting Factors as the Cycle Turns 

    Jan 6, 2021 Waman Virgaonkar , Hitendra D Varsani , Hitendra Varsani

    Factor Investing

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    In this two-year-anniversary edition of Factors in Focus, we reflect on the historical relationships between factor returns and macro cycles, which have provided useful information for investors looking to take an active stance on factor exposures based on their outlook.

  5. BLOG

    What ESG Ratings Tell Us About Corporate Bonds 

    Nov 11, 2020 Rohit Mendiratta , Hitendra D Varsani , Guido Giese , Hitendra Varsani

    ESG Research , Risk Management

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    How did incorporating ESG factors affect the performance of corporate-bond portfolios? Did ESG add insights beyond credit ratings? How did ESG impact risk and performance of investment-grade and high-yield bonds? Short-dated versus long-dated bonds?

  6. PAPER

    Foundations of ESG Investing in Corporate Bonds 

    Nov 11, 2020 Guido Giese , Hitendra Varsani , Rohit Mendiratta

    Risk Management

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    Environmental, social, and governance (ESG) investing is a very broad field with many different investment approaches addressing various investment objectives across asset classes. While there are many studies relating to ESG in equities, the risk assessment of ESG considerations within fixed income may be equally if not more important. Bonds have limited upside, but in a negative scenario, investors can potentially lose all their invested capital. At a top level, we can break down ESG investing into three main areas that each has its own investment objective (Exhibit 1): first, ESG incorporation, in which the key objective is to improve the risk-return characteristics of a portfolio; second, values-based investing, in which investors seek to align their portfolio with their norms and beliefs; and third, impact investing, in which investors want to use their capital to trigger change for social or environmental purposes — for example, to accelerate the decarbonization of the economy. In this paper, we focus on the first investment objective — ESG as a means to achieve

  7. BLOG

    Factors in Focus: Impact of Inflation on Style Factors 

    Oct 2, 2020 Waman Virgaonkar , Hitendra D Varsani , Hitendra Varsani

    Factor Investing , Global Investing , Risk Management

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    Global equities continued to rally in Q3, brushing aside fear of a second wave of COVID-19 and a large economic slump. We review what it meant from an equity and fixed-income factor perspective and look at what our models showed headed into Q4

  8. COVID-19 has had a profound impact on how companies manage cash flows and liquidity. Bond investors face the possibility of increased leverage, rating downgrades and defaults. Can factors and ESG metrics shed light on these risks?

  9. BLOG

    Factors in Focus: How Trendy Is Your Style Factor? 

    Jul 6, 2020 Rohit Mendiratta , Hitendra D Varsani , Waman Virgaonkar , Hitendra Varsani

    Factor Investing , Risk Management

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    As markets rallied worldwide, investors took on high-beta exposure and rotated away from stocks with lower risk. The latest edition of Factors in Focus explores the details.

  10. BLOG

    Using Derivatives to Manage Volatile Markets 

    May 4, 2020 Rohit Mendiratta , Hitendra D Varsani , Hitendra Varsani

    Emerging Markets , Global Investing , Risk Management

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    We’ve previously noted growth in derivatives contracts to manage emerging-markets exposure in normal and stressed times. Now, facing a real-world stress test, how did investors use these tools? How have implied volatilities and option premium changed?

  11. BLOG

    Corporate-bond performance by factors and ESG 

    Apr 14, 2020 Rohit Mendiratta , Hitendra D Varsani , Hitendra Varsani

    ESG Research , Factor Indexes , Fixed Income , Risk Management

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    The volatility seen in equity markets was also present among investment-grade corporate bonds,. We use factors and ESG ratings to dissect these bonds’ performance over Q1 2020.

  12. BLOG

    Factors in Focus: Risk sentiment and factor dynamics in a crisis 

    Apr 2, 2020 Rohit Mendiratta , Hitendra D Varsani , Waman Virgaonkar , Hitendra Varsani

    Factor Indexes , Factor Investing , Factors , Fixed Income

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    We analyzed the market effects from COVID-19 and a Saudi Arabia/Russia oil-price war. We also examined – for the first time – credit factor performance. How did the quarter play out? What did our adaptive multi-factor model show as it ended?

  13. BLOG

    Did corporate-credit factors offer a risk-return edge? 

    Jan 24, 2020 Rohit Mendiratta , Hitendra D Varsani , Hitendra Varsani

    Factor Indexes , Factor Investing , Factors , Fixed Income , Risk Management

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    Factors 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?

  14. Investors have increasingly turned to equity factors as building blocks for their stock portfolios as a way to measure performance, analyze risk exposures or seek enhanced returns. In recent years, some investors have sought to extend a factor framework to fixed income. But these efforts by and large have not been successful, as equity and fixed-income investors have not been speaking a common language. We simulated the performance of six fixed-income factors — value, low size, quality, momentum, carry and low risk — that broadly align with MSCI’s equity factors. Did these factors offer a risk-return edge?

  15. BLOG

    Factors in Focus: Will 2020 vision sharpen exposures? 

    Jan 6, 2020 Waman Virgaonkar , Hitendra D Varsani , Hitendra Varsani

    Factor Indexes , Factor Investing , Factors

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    Some 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.

  16. BLOG

    Looking to the futures of emerging markets 

    Dec 11, 2019 Hitendra D Varsani , Hitendra Varsani

    Global Investing , Risk Management , Economic Exposure , Emerging Markets

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    Emerging-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?

  17. BLOG

    Factors in Focus: Momentum hits a valuation speed bump 

    Oct 3, 2019 Waman Virgaonkar , Hitendra D Varsani , Hitendra Varsani

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

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    The momentum-value spread saw one of the largest corrections in history over the summer. What does our model show going forward?

  18. BLOG

    Using multi-country multi-currency futures in portfolio management 

    Sep 3, 2019 Hitendra D Varsani , Hitendra Varsani

    Global Investing , Risk Management

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    Investors seeking to more tightly manage their exposures to regional or global benchmarks are turning to multi-country multi-currency futures.

  19. BLOG

    Factors in Focus: Risky start. Quality finish. 

    Apr 2, 2019 Waman Virgaonkar , Hitendra D Varsani , Hitendra Varsani

    Factors , Global Investing , Factor Investing

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    We 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.

  20. Although factor allocation approaches based on simple diversification techniques such as equal-weight or risk parity are transparent and have performed well historically, some investors, such as valuation-sensitive or macro-sensitive investors, utilize a dynamic approach by adapting factor allocations to be more consistent with their strategic or tactical asset allocation process. An adaptive approach aims to strike a balance between a pure single factor timing strategy and the diversification effects of a multi-factor allocation strategy. We discuss a framework that aims to adapt multi-factor allocations to changing market environments while seeking to preserve some of the diversification benefits of multi-factor investing.

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