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A New Era for the Bank of Japan? 

Haruhiko Kuroda is stepping down after a decade as governor of the Bank of Japan, and the soon-to-be-appointed Kazuo Ueda has the potential to shake things up. What could the new regime mean for investors?

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How Could China’s Reopening Impact Global Stocks? 

China’s reopening from COVID-19 lockdowns has led to the recent outperformance of the Chinese equity market. We used companies’ economic-exposure data to assess the reopening’s impact on global equities with large revenue exposure to the country.

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MBS Valuation and Risk Management Under SOFR 

With LIBOR’s imminent cessation, the transition from LIBOR to new benchmark the secured overnight financing rate (SOFR) is entering a new stage. We analyze the potential impact on valuation frameworks and hedging practices for mortgage-backed securities.

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Real Estate Factors’ Performance: The Financial Crisis vs. Now 

As U.K. real estate experiences a pricing correction at record pace, it’s natural to make comparisons to the 2008 global financial crisis. We draw on factors in private real estate to better understand current conditions and give us clues to what may happen next.

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Manhattan Office Redevelopment: Still Stuck on Pricing 

Sales of Manhattan offices for the purpose of conversion into apartments have been minimal. We look at the barriers deterring redevelopment.

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Carbon-Emissions Data to Inform the MBS Market 

Our state-level analysis of carbon emissions for U.S. residential properties indicates strong regional differences in emissions and their drivers. Such data could improve understanding of emissions from holdings in mortgage-backed securities and property loans.

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ESG Factor Returns: 2022 in Review 

Our analysis of ESG factor performance in 2022 suggests that time horizons, as well as specific sectors and regions, may be significant in assessing the return characteristics of ESG portfolios. 

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Will the US Government Default? 

The debt-ceiling debate has heated up in Congress, and the U.S. government’s ability to borrow could be exhausted sometime between July and September. But what does the market for credit-default swaps say about the likelihood of U.S. default?

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40% Women on Boards — the New Frontier 

The number of women on boards continues to rise. While a 30% board gender diversity target has long been the magic number, the continued evolution of boards, both by choice and by regulation, means 40% women on boards is becoming the new frontier.

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Drawing Insights from Thematic Exposures: The (Natural) Language of Growth Investing 

What impact could natural language processing (NLP) have on equity portfolio management? We explore how firms’ thematic exposures, assembled with an assist from NLP, can bring unique insights to portfolios.

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Regional Blocs: Emerging to Diverging Markets 

One of the primary investment implications of deglobalization in 2022 was a greater dispersion of returns among countries. We review the investor challenge of identifying potential pockets of opportunity through targeted EM allocations.

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Global Markets One Year After Russia’s Invasion of Ukraine 

Markets have partially recovered since Russia invaded Ukraine, but questions remain about inflation, economic growth and central banks’ actions. Understanding last year’s performance across asset classes, may help with investment decisions in 2023.

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What Biodiversity Loss and COP15 Mean for Investors 

Investors face growing pressure to reverse biodiversity loss. We take a look at the issues shaping nature-related financial risk, key takeaways from the COP15 pact for investors and developments in biodiversity-based disclosure.

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Agency MBS in 2023: Uncharted Territory 

Rates spiked in 2022 as the Federal Reserve started quantitative tightening, pushing the prices of most agency mortgage-backed securities into discount territory, while prepayment speeds have slowed to a historical low. The market has entered uncharted territory.

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A Day in the Life of Regional Futures 

Investors benchmarked to global and regional indexes may use index futures for hedging or asset-allocation decisions. We analyzed the intra-day volume patterns of futures linked to the MSCI World, MSCI EM and MSCI EAFE Indexes to illuminate pockets of liquidity.

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Is Inflation Here to Stay? 

The market has recently signaled optimism about slowing inflation and interest-rate hikes. If correct, such easing could lead to lower mortgage rates. But could real estate costs themselves continue to push up inflation?

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Matching Portfolios and Clients’ Expected Returns, with Factors 

Wealth managers face the challenge of matching clients’ objectives with an ever-growing set of investment products. Standard practice is to build strategic asset-allocation models based on broad capital-market assumptions. But we present a new approach.

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How to Evaluate Climate Metrics and Avoid the Big Confusion 

Climate metrics can often be a daunting field, with misunderstanding and confusion rife. We present a two-step toolkit that can help investors identify the most suitable metrics as they look to gauge progress toward their climate-investing goals.

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Four Scenarios for 2023: Navigating Uncertainty 

The macroeconomic landscape for 2023 is shrouded in uncertainty following a tumultuous 2022. We consider four scenarios for growth, rates and inflation and gauge their potential impact on a portfolio of global equities and U.S. bonds.

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The Performance of ESG Indexes: Year in Review 

There were several dynamics that influenced the performance of ESG indexes in 2022. We examine the impact of macroeconomic and financial conditions on returns in the short- and long-term.

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What Would the SEC’s Liquidity Proposal Mean for Equity Funds? 

The SEC recently proposed amendments to the liquidity classification of open-end investment funds, aimed at standardizing reporting practices. But under the proposed approach, many large equity funds could exceed regulatory limits.

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Climate Indexes' Year in Review: The Journey Toward a Low-Carbon Transition 

There have been several dynamics that influenced climate-index performance in 2022. We examine the impact of macroeconomic and financial conditions on risk, return and sectors, as well as the management of low-carbon transition risks.

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Comparing Apples to Apples in Bond-Fund Liquidity 

The SEC has proposed changes to standards for classifying the liquidity of fixed-income instruments held by open-end funds. The new approach may not pick up differences between funds and may not signal worsening liquidity amid market stress, however.

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Building the Corporate Boards of the Future 

Corporate boards are key in helping companies navigate economic and social disruption. Introducing more climate-related experience, more women and appointing younger directors are three key factors that could help strengthen boards.

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India Equity Futures for the World 

India is the world’s fifth largest economy and one of the fastest-growing major markets. We believe that futures linked to the MSCI India Index could help capture a deeper opportunity set and manage Indian equity exposure. 

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No Country for Old Firms? Revisiting Growth and Thematic Investing 

Investors that were previously enthralled with growth at any price have since retreated. With this in mind, we focus on spotting key differences between growth and thematic investing, and highlight how the two can complement each another.

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Parallel Benchmarking for Climate Alignment 

Broad market-cap weighted indexes might not fully assess climate-objective alignment. We believe that an appropriate parallel benchmark could help illustrate this alignment, improve transparency and allow investors to make more informed decisions.

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Markets in Focus: Investors Look to Capture Big Market Shifts 

Global equities and bonds declined in 2022 against a surge in inflation, waning economic growth and monetary tightening. We highlight how factor indexes, country allocation and thematic investing can help investors capture opportunities with greater precision.

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Growth Investing in Private Markets: Trends and Transparency 

Are quoted returns of private-equity investment comparable to those in public equity markets? To analyze this quandary, we use transaction and order-book data for timely insights into venture capital trends and relate them to public markets. 

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Challenges for Non-Traded Private REITs Are Not Unique 

Increased talk of redemption queues has led to some seeing a dimmer future for groups with net-asset-value REITs — but their challenges are not unique. The impact of credit-market stress has hit all private vehicles for commercial real estate. 

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Three Scenarios for Fed Policy, Inflation and Growth 

Despite two months in a row of unexpectedly low inflation, the Fed once again raised rates this week. Amid considerable uncertainty over inflation and rate policy, we analyze three scenarios for the U.S. economy and their impact on diversified portfolios.

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Deforestation Risks on the Rise 

Continued forest loss poses risks to companies and investors. We use MSCI’s Biodiversity Screening Metrics to help identify industries exposed to deforestation risks and flag companies for a review of risk-management practices and active engagement.

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Six ESG and Climate Trends to Watch for 2023 

Amid a seismic shift in the ESG and climate landscape, we identify key trends companies and investors need to be cognizant of. Beyond the road to net-zero, issues such as supply chains, labor management and biodiversity could impact portfolios. 

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From Paris to the Pandemic: Investigating Trends in Industry Emissions 

Emissions-intensity metrics can help compare the relative contributions of different holdings to a portfolio’s carbon footprint. However, understanding the reasons behind a firm’s changing emissions is key to identifying sustained reduction trends.

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Lost and (Not) Found: Carbon Migration Out of US Public Markets 

While public markets are witnessing growing climate-related regulatory proposals and voluntary commitments, climate disclosures in private markets remain limited. We examine whether carbon emissions are migrating out of U.S. public markets.While public markets are witnessing growing climate-related regulatory proposals and voluntary commitments, climate disclosures in private markets remain limited. We examine whether carbon emissions are migrating out of U.S. public markets.

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Has Liquidity Dried Up in Private Equity? 

Investors who commit capital to private-asset funds must provide money when the fund managers buy portfolio companies, but receive it back only when the managers sell. The uncertain timing and size of these cash flows demand careful liquidity management.

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Three Scenarios for Investors in European Credit 

We explore three scenarios of varying severity for European credit, with outcomes for a multi-asset European portfolio ranging from a 2% return in a “mild recession” scenario to an almost 11% drop in a “sharp global recession,” according to our model. 

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Total Portfolio Footprinting to Transform Green-Bond Emission Accounting 

We take a look at how MSCI’s Total Portfolio Footprinting could provide an innovative way for investors to compare the financed-emissions of green and non-green bonds, helping them make better informed investment decisions.

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The Rise and Fall of Big Tech 

U.S. tech giants had a spectacular run over the past decade, but the tide has turned for many of these companies in 2022. We evaluate Big Tech’s descent and discuss the efficacy of building resilient portfolios.

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What COP27 Means for Companies and Investors 

COP27 underscored the need for action on corporate climate pledges, the importance of data and a series of initiatives to spur public and private investment for developing countries. We review some of the key developments for companies and investors.

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Can Style Momentum Be Optimized? 

Momentum is a well-documented investment strategy used across assets, industries and asset classes, as well as style factors. We present an optimized style-timing strategy that accounts for both past performance and the variance-covariance of styles.

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Footprinting the World’s Largest Asset Managers 

We assessed the carbon footprint of the world’s largest asset managers and found that while there was little difference between equity and fixed income assets, geography and size mattered when it came to carbon intensity.

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Leveraging Governance to Improve Net-Zero Engagement 

Reducing emissions of greenhouse gas may mean that investors engage with companies lacking adequate net-zero targets. This post explores different engagement tools that investors can use to help net-zero laggards catch up to net-zero leaders. 

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What Drove Private-Credit Funds’ Outperformance? 

When selecting private-credit funds, investors can often only consider broad strategies, due to the general opacity of the asset class. We draw on loan-level data and proprietary analytics to produce a more detailed picture of the direct-lending market. 

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Diversification for Home-Biased China Investors 

The U.S. and China represent two of the largest and complementary global-equity markets. We detail whether home-biased investors in China may be neglecting long-term growth and diversification opportunities.

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US Midterm Elections from an Equities Perspective 

Leading up to and including Nov. 8, Americans will vote for 35 Senate and all 435 of the voting House seats.

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A Correction in US Commercial Real Estate 

Potential buyers and current owners of U.S. office assets have moved apart on price expectations, causing deal activity to drop. We discuss two approaches to gauging the outlook for pricing.

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Supporting the Low-Carbon Transition: An Indexed Approach 

Investors globally are committing to reduce the carbon footprint of their portfolios. We illustrate how indexes can be an option for investors who wish to finance the transition as well as encourage companies to set and meet net-zero targets. 

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Climate Action Could Lessen Physical Climate Risks 

A future that relies on fossil fuels could expose almost a quarter of the market value of companies in the MSCI ACWI IMI to the risks of severe physical climate impacts. Which were the most vulnerable sectors and what can be done to limit the risks? 

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ESG Indexes Lifted by Carbon-Efficient Firms but Underperformed 

While much of the market volatility endured, the MSCI ESG Indexes’ performance drivers varied from the first half to the third quarter of 2022. We examine the impact of macroeconomic and financial conditions on returns in the short- and long-term.

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炭素効率型企業が追い風となるも、各種ESG指数はアンダーパフォーム 

While much of the market volatility endured, the MSCI ESG Indexes’ performance drivers varied from the first half to the third quarter of 2022. We examine the impact of macroeconomic and financial conditions on returns in the short- and long-term.

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Keeping Energy Exposure While Lowering Emissions 

Could equity managers have maintained their energy exposure during the sector’s recent outperformance while also reducing carbon emissions? We find that they could have lowered emissions but with some trade-offs during our study period. 

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Decarbonizing Bond Portfolios: Risk Trade-Offs 

Bond investors looking to reduce their portfolios’ carbon footprint may decide to shift capital from high to low emitters. Did a decarbonizing approach that preserves sector exposures significantly change the main portfolio risk characteristics? 

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Despite Energy Outperformance, Climate Indexes Were Resilient 

There have been several dynamics that have influenced climate-index performance in the third quarter and first nine months of 2022. We examine the impact of macroeconomic and financial conditions on risk, return and sectors. 

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エネルギーセクターがアウトパフォームしたものの、気候指数もレジリエンスを発揮 

There have been several dynamics that have influenced climate-index performance in the third quarter and first nine months of 2022. We examine the impact of macroeconomic and financial conditions on risk, return and sectors. 

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Getting the Full Picture on Tenant-Default Risk in Real Estate 

With economic pressures mounting, we examine the importance of analyzing rental income across all tenants in real estate funds, and not just the biggest tenants. 

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Markets in Focus: Is the Beta Pendulum an Edge or Hedge? 

Investors remained fearful of inflation and recession worries in the third quarter of 2022. We take a closer look at beta in a period where factors were sensitive to changing market conditions.

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Rent-Growth Expectations Shaped Returns for US Industrial Real Estate 

Investment in industrial real estate has benefited in recent years from the growth of online shopping, a trend that was turbocharged during the pandemic. But are expectations for the sector still grounded in reality?   

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Net-Zero Alignment for Multi-Asset-Class Portfolios 

Asset owners who want to keep global warming below 1.5 degrees Celsius (1.5°C) have a tough row to hoe.

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Climate Stress Tests: Upping the Ante for Banks and Insurers 

When institutional investors and financial supervisors seek to understand climate risk exposures of banks and insurers, they look to climate scenario analysis. 

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Looking Beyond Japan to Understand Risks to the Yen 

By remaining steadfast in its commitment to zero yields, the Bank of Japan may have sacrificed the ability to control its own destiny. 

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日本国外に目をむけて円へのリスクを理解する 

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Crowd Control for Fund Managers 

Stock markets around the world have heated up this summer. The MSCI ACWI Investable Market Index (IMI) has gained 5% in the third quarter, a partial thaw from its chill when it fell 20% through the first half of the year. 

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Portfolio Intelligence Through a Carbon-Efficiency Factor 

The transition to a low-carbon economy may trigger a major transformation of the global economy, generating significant risks and opportunities for companies and investors.

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Inflation Reduction Act May Energize Utilities’ Energy Transition 

The Inflation Reduction Act may help utilities and energy firms reduce direct and indirect emissions through tax-credit incentives designed to scale up the deployment of renewables and accelerate development of frontier decarbonization technologies.  

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How Did Climate Corporate-Bond Indexes Weather Market Volatility? 

Climate indexes tend to have a lower weighting (relative to parent indexes) allocated to companies in the emission-intensive energy, utilities and materials sectors. Did these indexes underperform in the year to date, given high recent energy prices?

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Navigating Inflation in Equity Portfolios 

Stock-level inflation sensitivity can help investors assess a portfolio’s exposure to inflation. We use this metric to construct hypothetical portfolios aligned with investors’ range of views on inflation.  

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MSCI ESG Indexes Underperformed but Met ESG Objectives 

There have been specific dynamics that have influenced ESG-index performance in the first half of 2022. We examine the impact of macroeconomic and financial conditions on return in the short- and long-term. 

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各種ESG指数はアンダーパフォームしつつも、ESG目標を達成 

There have been specific dynamics that have influenced ESG-index performance in the first half of 2022. We examine the impact of macroeconomic and financial conditions on return in the short- and long-term. 

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Inflation Sensitivity and Equity Returns 

Inflation and the chatter around inflation have been rising since last year (as shown in the exhibit below) following years of relatively tame inflation. This macroeconomic shift is likely to have both a short- and long-term impact on asset prices and has raised many important questions for investors.

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Private Assets Can’t Hide from SEC’s Proposed Climate Rule 

The SEC’s climate-disclosure proposal also may affect U.S.-listed GPs’ portfolios. In reality, the rule may represent the camel’s nose under the tent as the SEC indirectly brings climate transparency to some private companies.

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Did Closed-End Real Estate Funds Add Value? 

Global real estate markets enjoyed their strongest returns since the 2008 global financial crisis (GFC) as they bounced back from COVID-19-induced weakness last year.

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Value and Growth Investing as ESG and Climate Friendly 

Many investors may be seeking to align their value- or growth-oriented portfolios with the consideration of ESG as well as the transition to a low-carbon economy. We detail several approaches for working toward these investment objectives.

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Climate Indexes Brought Short-Term Gloom with Blooming Offshoots 

There have been several dynamics that have influenced climate-index performance in the first half of 2022. We examine the impact of macroeconomic and financial conditions on risk, return, sectors and factors.

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気候指数は短期的に冴えなかったが、明るい兆しも 

There have been several dynamics that have influenced climate-index performance in the first half of 2022. We examine the impact of macroeconomic and financial conditions on risk, return, sectors and factors.

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Measuring Climate Impact with Total-Portfolio Carbon Footprinting 

Carbon footprinting across multi-asset-class portfolios allows investors to measure financed emissions and inform decarbonization decisions. We examine this important step toward managing the net-zero journey.

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Abenomics’ Impact on Japanese Firms and Global Investors 

As the world mourns former Japanese Prime Minister Shinzo Abe, we ask: What was his impact on Japanese firms and global investors? To help answer, we look at two key initiatives: competitiveness and profitability, and corporate governance.

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Equities Ownership: Concentration on the Rise? 

Controlled companies accounted for nearly 46% of all constituents of the MSCI ACWI Index, as of Feb. 1, 2022, a 44% increase from 2015 levels. What does growing concentration mean for minority shareholders?

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Index Replication with Futures in a Deglobalized World 

While investors may aim to synthetically replicate equity indexes using a basket of local-index futures and currency forwards, our research focuses on potential country and currency risk as well as tracking error of these efforts. 

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Markets in Focus: Half-Time – Keeping it Real and Defensive 

It was a challenging market environment in the second quarter. We take a closer look at real assets, defensive sectors and factor indexes as investors navigate what might be a prolonged period of volatility and uncertainty.

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Chinese High-Yield Corporate Bonds Under Pressure 

Bonds from Chinese property developers have come under severe distress, and the latest wave of COVID-19 lockdowns have had a heavy impact on China’s economy. How has the country’s corporate-bond market responded?

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Carbon Markets: An Emerging Derivatives Class 

Carbon markets can play a significant role in managing carbon risk within equity portfolios to hedge against price risks. Our research focuses on applications, carbon-risk management and correlations to other assets classes.

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The Impact of ESG and Climate on Equity Yield 

Investors are increasingly incorporating ESG and climate considerations in asset selection. With that in mind, our research focuses on ESG and climate profiles in relation to equity yield and tracking error.

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How Eurozone Inflation and ECB Policy Could Impact Markets 

In a portfolio stress test, we consider the uncertainty around eurozone inflation and the European Central Bank’s policymaking. We outline four scenarios and their potential impact on the bloc’s economy and a hypothetical multi-asset-class portfolio.

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Are Emissions Rising or Falling in Equity Indexes? 

Investors can use different metrics to track their portfolios’ carbon footprint. Regardless, they will increasingly need tools to better identify the sources of changes in whichever climate metrics they use. We present an attribution methodology.

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Introducing the Carbon Market Age 

The carbon market can play a significant role in the decarbonization of the global economy by putting a price on carbon and giving polluters an incentive to reduce their emissions.

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Plastic Packaging: The Unmasking of Regulations 

A rapid increase in plastic-waste regulations may increase costs and liabilities, or limit market access for companies that are slow to align with them.  

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The Signal for Industrial Property Amid E-Commerce Noise 

Demand and pricing for industrial commercial property got a boost from spiking e-commerce demand during the early part of the pandemic. We look at the longer-term trends in e-commerce sales for guidance.

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Real Estate Has Bucked the Deglobalization Trend 

Real estate investors have historically exhibited a strong home bias. But there is evidence that real estate may have become more global based on return and transaction behavior — bucking the trend, evident in listed markets, toward deglobalization.

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Are Russian Stocks Worthless? 

Fixed Income

Investors in Russian securities have faced sizable hurdles trying to manage and value their positions. Our research of the CDS market suggests that Russian stocks are essentially worthless, in contrast to the prices listed on the Moscow Exchange.

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SEC Climate Disclosure: Targeting Standardization 

The SEC has proposed new requirements for U.S.-listed companies to disclose information on climate-related risks. We believe the framework may represent an opportunity to facilitate the transparency and standardization of climate-related goals.

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A Factor-Based Approach to Munis in Turbulent Times 

Tracking municipal-bond benchmarks can mean evaluating hundreds of thousands of securities along many dimensions, such as credit ratings. We evaluate an alternative, factor-model-based approach. 

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Location Matters: Using Geospatial Analysis to Assess Biodiversity Risks 

A quarter of animal and plant species could face extinction heightening economic risks from biodiversity loss. Investors and issuers focusing on asset location and dedicated risk management practices could mitigate some of these challenges.

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China at a Crossroads: Three Scenarios for Investors 

The recent COVID-19 lockdowns in China and their impact on global supply chains add another concern for investors, on top of the Russia-Ukraine war. We model three scenarios for China and their potential spillover effects on global portfolios.

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Wildfire Risks and Costs for Companies 

Wildfires can potentially increase costs from physical risks for companies, making it an important consideration for investors as they manage risk in their portfolios. Our analysis revealed four future hotspots with elevated annual fire probabilitie

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Russian Bonds: Rolling Back the Default Clock 

Fixed Income

The Russian government’s decision on April 29 to pay holders of two dollar-denominated Russian sovereign bonds led to a major rally, encouraging some investors that Russia may avoid default. There are, however, more challenges ahead. 

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Low Carbon and High Liquidity for Bond Investors? 

ESG Research , Fixed Income

As corporate-bond investors embrace decarbonization as a goal in portfolio construction and management and benchmark selection, the question arises whether decarbonization targets are at odds with other desirable index attributes, such as liquidity.

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Russian Bonds: Sifting Through Sectors 

Russian bond market losses have cut deep. Still, certain sectors fared better than others. The question now is how trade policy and sanctions may be shifting, and whether there may be greater impact on sectors that have shown relative strength.

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Which Scope 3 Emissions Will the SEC Deem ‘Material’? 

The SEC’s climate-disclosure proposals did not set a “materiality threshold” for Scope 3 emissions, and the commission is considering either quantitative analysis for a uniform approach or letting companies determine materiality. How might each affect transparency?

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Real Estate's Income Risk in an Inflationary World 

Although real estate income returns have tended to be stable in aggregate, the right-hand chart below illustrates the extent to which they have varied across individual properties in the MSCI Pan-European Quarterly Property Fund Index (PEPFI).

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Sanctions Bring a New Form of Russian-Bond CDS Risk 

Sanctions on Russia have not affected credit-default swaps directly, but the settlement process following a default would rely on delivering and auctioning the sanctioned bonds. We examine this new form of recovery risk.

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As TCFD Comes of Age, Regulators Take a Varied Approach 

The recommendations of the Task Force on Climate-related Financial Disclosures have become a landmark reference for investors, who now face the challenge of making sense of how various jurisdictions will implement their versions of the TCFD’s standards.

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Drivers of China Equities’ Sell-Off 

Emerging Markets , Global Investing , Equity Themes , Equity indexes

Following the recent sell-off in Chinese equities, global investors may have some concerns and questions about their China exposure. Have fundamentals changed? What role did the Russia-Ukraine war play? Which factors are important to keep an eye on?

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Understanding Private Capital’s Exposure to Carbon-Intensive Sectors 

Real Estate Investing

Understanding private capital’s exposure to the energy, materials and utilities sectors, and their related industries, across asset classes, may be critical in supporting more-informed risk management and engagement decisions.

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Fed Policy and the Threat of Stagflation 

Integrated Risk Management

Investors are increasingly focused on inflation and the Fed’s tightening of monetary policy. With the Russia-Ukraine war and resulting sanctions, they may also worry about slowing economic growth. We model three economic scenarios’ potential impact on markets.

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Factors in Focus: Disentangling Market Gyrations Through the War 

Factor Investing

It was a tale of two quarters in many ways. We analyze the effects of past and present military conflicts on factor investing to provide insights to investors seeking to build resilient portfolios.

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Could Europe’s Shift from Russian Gas Accelerate Climate-Transition Risk? 

Europe’s search for energy sources outside of Russia may slow the low-carbon transition in the short term. Staying within a net-zero cumulative emissions budget would mean fewer emissions later. What might this path mean for investors’ portfolios?

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Companies May Not Be Ready for SEC Climate-Disclosure Rules 

The SEC proposed requirements for U.S. companies to disclose certain climate-related risks, beginning in 2024. To assess whether companies are prepared to meet these requirements, we looked at the emission-disclosure rates of a large sample of U.S. equities.

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What Drove 2021 Real Estate Returns? 

Real Estate Investing

As 2021 real estate index returns roll in, we’ve seen a broad-based acceleration of returns across nearly all countries and property types. But what can looking beyond the aggregate index returns tell us about the difference between the winners and losers?

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Bond-Index Replication While Navigating Volatility 

Market volatility poses major challenges to investors trying to track bond indexes while also keeping transaction costs low. Can managers of funds tracking bond indexes balance transaction costs and tracking error?

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Evaluating Options in Different Macro and Volatility Regimes 

Faced with volatile markets, some have looked to options strategies to manage volatility or target alternative risk/return profiles. We evaluate historical performance of options-overlay strategies across various macro and volatilty regimes.

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Quality in Times of Crisis 

Two years into the “pandemic rally,” global equities finally cooled as rising inflation, looming interest-rate hikes and the war in Ukraine spooked equity investors. High-quality firms, however, have been relatively resilient. We examine why.

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Reported Emission Footprints: The Challenge is Real 

ESG Research

Investors’ ability to make comprehensive assessments of companies’ climate profiles relies on being able to analyze trustworthy corporate disclosures of greenhouse-gas emissions. Yet the current state of disclosures remains challenging.

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Which Factors Rose with the Price of Oil? 

Factor Investing

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Riding Rising Interest Rates with the Agency-MBS Model 

Fixed Income

Expectations of higher inflation dominated the market for U.S. agency mortgage-backed securities in 2021. We reviewed the performance of our agency-MBS model in 2021, to assess its accuracy and help investors manage MBS risk through what may be a volatile 2022.

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Markets May Be Vulnerable to Stagflation from Russian Invasion 

In addition to the growing human toll, Russia’s invasion of Ukraine could significantly impact economies and financial markets worldwide. We employ stress testing to explore two scenarios and their consequences for multi-asset-class portfolios.

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Has DEI Worked for Women? 

ESG Research

Have Diversity, Equity and Inclusion programs worked for women? While these can help establish frameworks and goals, it’s less clear whether they actually have improved diversity.

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Five Misconceptions About Climate-Change Risk in Real Estate 

Real Estate Investing

Real estate portfolios may be particularly vulnerable to the threat of climate-change risks. While investors are increasing their focus on the topic and considerable progress has been made in recent years, some misconceptions remain.

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中国绿色债券市场：发行量不断增长， 历史表现优异 

ESG Research , Fixed Income

中国已成为仅次于美国的全球第二大绿色债券发行国家。

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China’s Green-Bond Market: Growing Issuance and Historical Outperformance 

ESG Research , Fixed Income

China’s green-bond market has grown rapidly in recent years and is now second in size only to the U.S. Understanding the reasons behind this market’s growth and performance may help investors as they consider incorporating Chinese green bonds in portfolios.

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Paris-Aligned Indexes to Manage the Future 

ESG Research

As commitments to reach net-zero by 2050 surge, institutional investors are looking for tools to implement net-zero strategies in portfolios. Futures linked to the MSCI Climate Paris Aligned Indexes are one option for asset managers and asset owners.

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Latin American Equity Markets: The Lay of the Land 

Equity indexes

How is Latin America different from other emerging markets? We analyze the influence of foreign direct investment; market performance; exposure to sectors and thematic investments; ESG and climate risks and opportunities and corporate-ownership structures. 

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Say on Climate: Investor Distraction or Climate Action? 

ESG Research

Say-on-climate shareholder votes are on the rise globally. Are they a distraction to real climate efforts or an effective way for shareholders to engage management?

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US ABS: Strong Bounce Back, Uneven Performance 

Fixed Income

As the U.S. job market has begun to recover, so have consumer credit levels. The issuance of U.S. consumer asset-backed securities (ABS) had a strong bounce back in 2021. What drove this surge across ABS markets?

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Nasdaq’s New Board Diversity Rules: What’s the Impact? 

ESG Research

The Nasdaq stock exchange’s new diversity rules will impose board-diversity disclosure requirements on Nasdaq-listed companies. These new rules may nudge companies to improve the diversity of the boards or risk facing investor pressure.

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Managing Climate-Transition Risk in Credit Portfolios 

ESG Research , Fixed Income

Can managers take an active approach to systematically managing exposure of a corporate-bond portfolio to climate-transition risk? We investigate two different approaches to decarbonizing credit portfolios.

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Despite Oil & Gas’s Rebound, ESG Indexes Outperformed 

ESG Research

In 2021, oil and gas stocks bounced back after five years of weak performance. However, leading MSCI ESG Indexes, which often have lower weights to high-carbon emission industries such as oil and gas, were resilient last year. What drove performance?

BLOG

石油・ガスがリバウンドするも、ESG指数はアウトパフォーム 

ESG Research

In 2021, oil and gas stocks bounced back after five years of weak performance. However, leading MSCI ESG Indexes, which often have lower weights to high-carbon emission industries such as oil and gas, were resilient last year. What drove performance?

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Personalizing Climate-Focused Wealth Management Portfolios 

ESG Research

A climate-first approach can help wealth managers tailor portfolios to the unique preferences of clients who want their investments to slow climate change or create positive impact while furthering their financial objectives and appetite for risk.

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Why Your Portfolio May Be Hot, Cold or Just Right 

ESG Research

Investors may want to understand not only if their portfolios are aligned with global climate goals but why they may (or may not) fall short of the mark. A performance-attribution analysis can help them understand how “hot” or “cold” their portfolios are.

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Climate Change and the Cow in the Room 

ESG Research

The global food system is one of the major drivers of climate change, biodiversity loss and depletion of freshwater resources. We looked at traditional plant-based and alternative proteins trends and potential transition risks to food companies’ valuations.

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How ‘Greenflation’ Could Impact Bond Returns 

Fixed Income

Investors and policymakers are increasingly focused on the fact that a transition to a low-carbon economy could result in “greenflation,” which could put upward pressure on long-term interest rates and in turn lead to downward repricing of bond portfolios.

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2022 Private-Asset Trends to Watch 

Real Estate Investing

Private-asset investors are waking up to the urgency of the climate crisis, while dealing with other long-term disruptive trends that accelerated during the pandemic. We may see a substantial reallocation of capital as investors respond to these challenges.

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Hotter Inflation Set Some Styles and Sectors on Fire 

Factor Investing

Whether due to stimulus, deglobalization, decarbonization or an overheating economy, higher inflation could have an impact on style-factor and sector performance. We investigate this impact in the context of two potential economic-growth regimes.

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Higher Agency Loan-Size Limit: A Booster Shot in ARMs? 

Fixed Income

Securitizations for U.S. agency adjustable-rate mortgages have declined since the 2008 global financial crisis. But could a loan-limit increase by the government-sponsored enterprises, boost issuance of agency-ARM mortgage-backed securities?

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ESG Trends to Watch for 2022 

ESG Research

As the world’s biggest companies work toward net-zero, corporations ask: What do we do about our suppliers? Meanwhile, ESG investing truly has gone mainstream (with the regulatory attention to prove it). We review these trends and emerging risks.

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Factors in Focus: Are Your Equity Styles Ahead of the Curve? 

Factor Investing

If economic expansion and higher inflation continue in 2022, interest rates could rise around the world. As investors re-evaluate equity portfolios, we look at factor-index performance in different U.S. interest-rate and yield-curve regimes.

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Did Market Liquidity Impact Real Estate Returns? 

Real Estate Investing

Real estate is an illiquid asset class. But liquidity can also vary considerably between different assets, markets and time periods. Have differences in liquidity within real estate had an impact on investment returns?

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Will Rising Sea Levels Eventually Sink Christmas? 

ESG Research

It’s not just Santa’s North Pole headquarters that are at risk from global warming. Around 75% of the world’s toys are made in China — most coming from the country’s coastal provinces which face an increasing threat of flooding as global temperatures rise.

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Which Companies Lost Most in Europe’s Lost Decade? 

Global Investing

If uncertainties over deglobalization persists, the performance divide between Europe and the U.S. could widen further. Have European firms been more at risk, given they have had more international revenue than U.S. companies?

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Did Deglobalization Add to Inflation Woes? 

Global Investing

Inflation watchers, aware of how COVID-19 led to trillions of dollars of stimulus, may want to note the longer-term shift toward deglobalization. As these forces collide, they may lead to rising global inflation and affect asset-allocation strategies.

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The Implied Temperature Rise of 'Paris-Aligned' Indexes 

ESG Research

Using Implied Temperature Rise — an intuitive metric that can be used to assess net-zero alignment — we analyze temperatures for climate-focused indexes designed to meet or exceed the requirements of the EU Paris-Aligned Benchmarks standard.

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What Implied Temperature Rise Means for Funds 

ESG Research

With COP26 over, the hard work begins as investors seek to limit temperature rise to less than 2°C above preindustrial levels in their portfolios. We investigate how they can understand whether a portfolio or fund is aligned with temperature targets.

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Spotlight on the Markets: Are Supply Chains the New Grinch 

Global Investing

The holiday season may only exacerbate supply-chain challenges affecting the availability and prices of goods. In this inaugural edition of Spotlight on the Markets, we analyze performance and how investors are working to rise to the occasion.

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Is the Food Industry Ready for Kunming? The Short Answer Is No. 

ESG Research

Over the past two years, a growing number of governments have stepped up their plans to protect biodiversity. The most affected industry: Food products, which may face rising regulatory costs and reduced fiscal subsidies. What are the risks to investors?

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New Frontiers in Carbon Footprinting: Private-Equity and -Debt Funds 

ESG Research

Private-capital funds, which can quickly make large investments in specific targets, are potentially powerful agents in the fight against climate change. But where do private-equity and -debt funds stand in terms of their estimated carbon-emission intensities?

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Climate Matters: What’s in an ESG Rating. And What’s Not. 

ESG Research

ESG ratings are widely used in active management and ESG indexes, with a growing focus on climate change. This has increased debate around two questions: Why are ESG ratings so different across providers? And how do ESG ratings reflect climate risk?

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Beginning to Understand the Performance of Social Properties 

Real Estate Investing

The precise measurement of social impact is in its early stages. But some property sectors like affordable housing have obvious links to social themes, and investment in these “social properties” has increased significantly over the last 10 years.

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Controlling Idiosyncratic Risk in Value Strategies 

Factor Investing

We looked at ways to mitigate some of the performance drag of stock-specific risk on value strategies over the last decade by directly controlling for this risk without negatively affecting value-factor exposures or contributions.

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After Evergrande: Bond Liquidity of Chinese Property Developers 

Fixed Income , Risk Management , Global Investing

Evergrande, one of China’s largest and most indebted property developers, had a recent close brush with bankruptcy that generated considerable concern among global bond investors. In this time of distress, how has market liquidity responded?

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Can Green Spreads Uncover ESG's Influence on Bond Prices? 

ESG Research , Fixed Income

Investors increasingly seek to build portfolios that have reduced exposure to climate-transition risk. How might these changes in investor behavior have affected prices in the corporate-bond market?

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How Climate Change Affected Thirsty Chipmakers 

ESG Research

In the face of increasingly frequent and severe climate hazards around the globe, water constraints appear to be emerging as an important factor impacting the Taiwanese semiconductor industry and global supply chains.

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Focusing a Sustainability Lens on China’s Regulatory Changes 

Global Investing

Market fundamentals may not be significantly affected by new regulations in China. But, given the regulations’ focus on ESG-related issues, investors can use ESG data as they seek to identify risks and opportunities across industries and securities.

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How Climate Change Could Impact Credit Risk 

ESG Research , Fixed Income , Risk Management

Investors are increasingly focused on gauging the risks related to climate change. We investigated how various climate scenarios could impact the credit risk of portfolios. In one scenario, 16% of investment-grade issuers could migrate to high yield.

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Could Factors Help Explain Asset-Level Real Estate Performance? 

Real Estate Investing , Factor Investing

For real estate investors, property type and geography segmentations are the primary lens through which they measure and manage their portfolios. Testing five potential real estate style factors, however, were we able to better explain asset-level variation.

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How to Achieve Net Zero? Leaders Weigh In 

Global Investing

How can investors help accelerate the net-zero transition? This was the central question at MSCI’s 2021 Global Investing Conference. We present the core takeaways from the two-day event, which featured senior corporate and investment thought leaders.

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Understanding Carbon Exposure in Private Assets 

ESG Research

Public companies and managers of listed assets face growing disclosure requirements. But private companies have not received the same level of scrutiny. How can investors in private assets calculate their exposure to carbon emitters, and what can they do about it?

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Creeping Crypto: Cryptocurrency Risk and ESG 

ESG Research

Institutional investors may have more exposure to cryptocurrency risk than they realize. We find that cryptocurrencies were a part of business for at least 52 companies covered by MSCI ESG Research, including 26 MSCI ACWI Index constituents.

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Stress Testing Portfolios for Climate-Change Risk 

ESG Research

How quickly companies implement net-zero pledges can affect the value of investments. Stress testing can be used to test how the valuation of a portfolio could change under different climate transition speeds or scenarios chosen by the investor.

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Factors in Focus: Where’s the Value in Defensive Positioning? 

Factor Investing

Throughout the third quarter, investors shifted attention to risks from inflation, tapering and potential interest-rate rises. We analyze global equities and the rotation toward defensive factors.

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Constructing Net-Zero Portfolios: Three Approaches 

ESG Research

While investors around the world are committing to bring the carbon footprints of their portfolios to net-zero by 2050, figuring out how to do so is not a simple matter. What alternatives do investors have?

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Industry Momentum Across Regions 

Factor Investing

We expand on our analysis of industry momentum to assess the persistence of a premium across different regions and the ability of a rules-based strategy to help investors as they seek to capture this premium.

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Real Estate’s Income Risk in the Wake of COVID-19 

Real Estate Investing

COVID-19 has weighed heavily on the financial positions of companies that hold leases for commercial real estate. Property investors can track the covenant quality of their tenants and translate it into a probability of default over the length of the lease.

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The Impact of China’s New Regulations: A Thematic Lens 

Global Investing

Regulatory changes in China have investors wondering how different industries could be affected. Evaluating the changes through a thematic lens can provide insight into the growth and crowding levels of megatrends, as industries react and evolve.

BLOG

Measuring the Temperature of Your Portfolio 

ESG Research

Institutional investors are setting targets to align their portfolios with a 1.5˚-2°C global warming scenario. But measuring and reporting portfolio temperature rise remain challenging. How can investors measure the temperature of their portfolios?

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Regulatory Risk Rises for South Korean Employers 

ESG Research

Are South Korean companies ready to deal with the country’s new workplace-safety law? Our research finds that many of those companies — often located in the machinery and metals and mining industries — are ill-prepared.

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How a Shift Toward Buybacks Affected Yield Strategies 

Global Investing , Factor Investing

For investors who use yield strategies to generate income, a steady stream of dividend payments is important. But with more companies using buybacks as a way to redistribute profits, investors may want to consider a more holistic view of income.

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Benchmarking Pan-Regional Real Estate Funds 

Real Estate Investing

Real estate investors have increasingly sought pan-regional funds to diversify globally. But such funds’ exposures can be significantly different from the market at large. What’s an appropriate benchmark for these diversified fund investments?

BLOG

Regulatory Risk Rises for South Korean Employers 

ESG Research

Are South Korean companies ready to deal with the country’s new workplace-safety law? Our research finds that many of those companies — often located in the machinery and metals and mining industries — are ill-prepared.

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Building Climate-Aware Factor Portfolios 

Factor Investing

Factor investing typically involves both security selection and alternative weighting based on security-level factor exposure. If such a strategy also needs to be climate-aware, what is the cost in terms of target-factor erosion?

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A Sector-Balanced Approach to China A Mega-Cap Exposure 

Global Investing

For investors seeking exposure to the mega-cap segment of the China A market, a simple top-50 market-cap-weighted approach can lead to large sectoral biases. We explore how a balanced mega-cap approach may help.

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Sizing Up Small Caps 

Factor Investing

Given small-cap outperformance since March 2020, investors are asking how these stocks size up in terms of short-term valuation, sentiment and macro outlook? Longer term, might small caps help capture opportunities around thematic investing megatrends?

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Housing-Bubble Déjà Vu 

Risk Management

The U.S. in the past year recorded the highest national house-price appreciation in recent decades. Does the run-up in home prices represent housing-bubble déjà vu? And what can MBS investors do to assess their mortgage credit risk?

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Assessing Private Infrastructure in a Multi-Asset-Class Portfolio 

Real Estate Investing , Risk Management

Private infrastructure is a popular element of institutional capital allocations, and increased focus on renewable or carbon-neutral infrastructure may mean significant new investment opportunities. What role could it play in a multi-asset-class portfolio?

BLOG

Fresh IPO Stocks and Indexes: In or Out? 

Global Investing

Depending on a number of factors, stocks may be added to indexes soon after a company’s IPO, which can affect asset managers who use the indexes to create and benchmark portfolios. We investigate the impact of IPO stocks on index performance.

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Managing Against MBS Indexes: A Duration Perspective 

Fixed Income , Risk Management

Mortgage-backed securities constitute a significant portion of fixed-income indexes. Managing MBS portfolios against these indexes depends heavily on an understanding of the dynamics of MBS duration, especially in volatile markets.

BLOG

Could Factors Have Explained Cryptocurrency Risk? 

Factor Investing

As cryptocurrencies rise in popularity as investment vehicles, the need for standardized tools for this market increases as well. We created a multifactor model to measure whether factors important for equity markets were also important for crypto.

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Are SPACs Riskier than Conventional IPOs? 

ESG Research

SPACs exploded in popularity in 2020, but these “blank-check” shell IPOs offer some unusual governance risks to investors. In this blog post, we examine some of the challenges.

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Credit Strategies During the COVID-19 Crisis 

Fixed Income , Risk Management

Short-term credit spreads widened to a greater extent than long-term spreads during the March 2020 COVID-19 crisis. As a result, many U.S. corporate-issuer spread curves flattened or even inverted. What were the implications for corporate-bond investors?

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COVID-19’s Uneven Impact on Office Vacancy 

Real Estate Investing , Global Investing

What was the precise impact of the COVID-19 crisis on office properties? While the overall vacancy rate at the end of 2020 was lower than the previous cycle’s peak, the percentage of fully leased office buildings reached an all-time low.

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What Could a Rate Hike Mean for Portfolios? 

Fixed Income , Risk Management

Although the Federal Reserve may not begin raising rates anytime soon, U.S. and global markets are scrutinizing the Fed’s communications about the likely course of policy actions. We consider three scenarios for the timing of policy responses.

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Are APAC’s High-ESG-Risk Stocks Cleaning Up Their Act? 

ESG Research

The APAC region’s ESG performance has suffered from a combination of low ESG adoption and awareness and limited ESG regulation and reporting. But marked improvements are surfacing in environmental and social performance in certain sectors

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亚太高ESG风险公司是否正在“除弊去疴” 

ESG Research

亚太市场公司的MSCI ESG评级通常低于全球同业公司。但这种情况正在快速变化，即使是某些表现最差的行业（例如能源和原材料）也开始改善其ESG实践。

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Hedging Inflation with Equities 

Global Investing , Factor Investing

Equities have traditionally been viewed as a hedge against inflation, based on the assumption that companies’ revenues adjust for inflation over time. But what has been the short-term impact on equity portfolios?

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How Might Inflation Impact Funding Ratios? 

Risk Management

We analyzed two multiperiod inflation scenarios to understand how the funding ratios of defined-benefit pension funds could evolve in each and what they could mean for a pension fund in terms of special contributions over the next 10 years.

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Active-Management Opportunities in a Disperse Market 

Factor Investing

Disperse markets have historically provided opportunities for active managers to outperform their respective benchmarks. We showed that, based on historical trends, CSV helped shed light on identifying where the dispersion was greatest.

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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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Eyeing the Crowds from Multiple Perspectives 

Factor Investing

We observed historically notable crowding across factors, industries and stocks through the first half of 2021. Examining crowding from multiple perspectives and incorporating multiple data elements provides investors a more holistic view. 

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Chinese RMBS: A Way to Diversify Fixed-Income Portfolios? 

Fixed Income

The market in Chinese residential mortgage-backed securities is growing, as global investors are eying the segment’s relatively high yield and potential for diversification, but seeking improved credit ratings and transparency in data and pricing.

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Factors in Focus: Go with the Flow? 

Factor Investing

In the latest edition of Factors in Focus, we look at flows into equity factor ETFs and whether it has been profitable, historically, to follow the money, along with our analysis of factor and factor-index performance over the second quarter.

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Purifying Value 

Factor Investing

Unintended exposure to non-value factors was a large contributor to value’s period of underperformance. We investigate value-portfolio construction when controlling for these exposures while maintaining maximum exposure to value factors.

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Translating Climate Goals into Action in Real Estate Portfolios 

Real Estate Investing

Many investors have made bold commitments to transition their real estate portfolios to net-zero carbon emissions and are now developing and implementing plans to achieve this goal. But what could this transition look like in practice for property portfolios?

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Securitized Products’ LIBOR Transition Picking Up Pace 

Fixed Income

In 2021, there has been significant progress in the transition from the LIBOR reference rate to its replacement, SOFR. But investors in securitized products are grappling with the challenge of the LIBOR-SOFR transition and its impact on their analytics.

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CDS Fading as a Measure of Value in Emerging Markets 

Fixed Income

Credit investors use spreads to compare relative value and risk. Studies of emerging-market sovereign debt have shown that credit-default swaps tended to be a better measure of value than spreads computed from bonds. But is it still the case?

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What Can Loan-Level Data Reveal About US Auto-Loan ABS? 

Fixed Income , Risk Management

U.S. regulators required issuers by Nov. 23, 2016, to disclose data on individual loans bundled into auto-loan asset-backed securities. We looked at whether incorporating loan-level data into our model could sharpen our analysis of this ABS segment.

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Escaping to Equities for Yield 

Factor Investing

In today’s low-rate world, some investors shifted toward historically higher-yielding equities. For others, especially in the insurance industry, the greater risk limited their ability to do so. Was a minimum-variance equity approach a viable option?

BLOG

Mining’s Impact on Biodiversity: A Rising Risk? 

ESG Research

Will biodiversity losses become the next crisis facing humanity, possibly surpassing climate change? Growing scrutiny on biodiversity risks could have implications for mines that threaten biodiversity or environments of high conservation value.

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Mining Energy-Transition Metals: National Aims, Local Conflicts 

ESG Research

Investors are scouting for companies that mine the metals needed in new energy technologies. But some mining projects key to the transition from fossil fuels may face opposition from Native Americans for threatening sacred areas or traditional ways of life.

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Momentum on a Value Hunt 

Global Investing , Factor Investing

Momentum, by definition, rotates into securities with recent outperformance. That said, investors who view value and momentum as contra-signals may have questions about the value-momentum convergence and the divergence of momentum and growth.

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Exxon Mobil: Drilling Down on the Proxy Vote 

ESG Research

The historic win of at least two seats on Exxon Mobil’s board by activist shareholder Engine No. 1 signals a dramatic shift in investors’ thinking about climate change — and in their willingness to vote for climate action. But there is a deeper story.

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Bitcoin: Good as Gold? 

Factors , Risk Management

During inflationary periods, equity investors, historically, have turned to gold as a hedge and diversifier. As the issue of inflation becomes more pressing, we ask whether cryptocurrencies, such as Bitcoin, could have played a similar role.

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Real Estate’s Climate-Transition Risk: The Path to Net-Zero 

Real Estate Investing , Risk Management , Global Investing

The 2015 Paris Agreement seeks to keep the rise in global temperature to well below 2 degrees Celsius above pre-industrial levels, and many governments are aiming for 1.5°C through nationally determined contributions. What are the implications for real estate markets?

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Race & Ethnicity Disclosure: US Companies’ Rocky Start 

ESG Research

Violence against the Black and Asian American communities in the U.S. has put racial injustice in the global spotlight. But the lack of standardization in reported data on race and ethnicity has greatly hindered comparability.

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The Pressure of the Crowd: Stress Testing Thematic Indexes 

Equity Themes , Risk Management , Global Investing

Some investors may be concerned about crowding within the fast-growing thematic-investing segment. Using MSCI’s stock-crowding model, we identify crowded themes and run stress tests to understand how they might respond to an equity sell-off.

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What Really Drove Value and Growth Fund Performance? 

Factor Indexes , Factors

Many look to market-cap indexes when comparing the performance characteristics of growth and value funds — including manager skill. We found a switch to style indexes reduced industry- and style-factor contributions and made manager skill more apparent.

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Are Your Clients Ready for US Tax Day? 

Risk Management

Given the complexity of U.S. tax regulation, wealth advisers continue to grapple with how to build tax-efficient portfolios while balancing clients’ other objectives. We propose a rules-based way of doing so and analyze its benefits and trade-offs.

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Why Is Climate-Transition Risk High in High Yield? 

ESG Research , Fixed Income , Risk Management

Investors increasingly focus on building greener portfolios. Some might expect bonds to be less exposed to climate-transition risk compared to equities, due to the seniority of bonds in the capital structure. But does that logic hold at the portfolio level?

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The Theory of (Value) Relativity 

Factor Investing

Whether constructing a fundamental factor model, a value strategy or a value index, valuation ratios need context. Time-series and cross-sectional approaches each have pros and cons. But combining the two may have presented a clearer picture. 

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Bringing Value to the 21st Century 

Factors , Global Investing

In the second post in our series, we further probe value’s underperformance over the past decade and ask if the historic definition of value remains relevant. We specifically look at whether a company’s valuation can be enhanced by reflecting R&D investments. 

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How Office Real Estate Performed amid COVID 

Real Estate Investing

COVID-19 disrupted real estate across countries and property segments. The biggest initial impacts were felt in retail, leisure and hotels. But more recently, the performance of listed offices has lagged.

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Modern Slavery: The Unseen Risks 

ESG Research , Global Investing

Modern slavery occurs all over the world and can impact virtually all industries. Meanwhile, regulations requiring more detailed reporting on potential supply-chain exposure is increasing. How can investors identify portfolio holdings most at risk?

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Factor Investing Held in High-Volatility/-Concentration Period 

Factor Indexes , Factors , Risk Management

U.S. equity markets have experienced increased volatility coupled with concentration in a handful of megacap companies. Has this hampered investors’ ability to capture factors effectively? Have stock-specific risks dominated factor indexes?

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Some ESG Funds Are Not Like the Others 

ESG Research , Global Investing

ESG funds’ holdings can vary significantly, depending on their objectives, methodologies and geographic exposures. We examined the 20 largest equity funds in our coverage universe.

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Could Investment Grade Be as Risky as High Yield? 

Fixed Income , Risk Management

Do high-yield and investment-grade bonds carry the same level of risk? For investors using common measures like value-at-risk models, IG- and HY-bond portfolios’ risk levels appear to have converged. But traditional models may miss important aspects of HY risk.

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Innovation Remix: Adding Thematics to Equity Programs 

Equity Themes , Factor Indexes , Global Investing

How can investors incorporate transformative, but volatile thematic investments while seeking to control for valuation and total and active risk? We examine three approaches that improved a portfolio’s “innovation profile” with modest changes to risk.

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Long-Horizon Risk: The Past 50 Years 

Fixed Income , Risk Management

For long-horizon investors that aim to ride out volatility, short-term risk measures may be insufficient. We used multiperiod stress testing to evaluate one- and five-year returns of hypothetical multi-asset-class portfolios using 50 years of history.

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Including Microcaps in Benchmark Indexes: Japan vs. US 

Equity Themes , Global Investing , Factor Investing

Selecting an equity benchmark may mean balancing market coverage and investability. For example, exhaustive coverage may include microcap stocks, with lower liquidity and investment capacity. But excluding them may reduce low-size-premium exposure.

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Factors in Focus: Value Springs into Action 

Factor Indexes , Factor Investing

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. 

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Reopening Economies and the Resurgence in Value 

Factor Indexes , Global Investing , Factor Investing

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.

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Open- vs. Closed-End Real Estate Funds: How the Choice Mattered 

Real Estate Investing

The aggregate performance of closed- and open-end real estate funds in the U.S. was strikingly similar in recent years, despite large differences in their strategy and roles in portfolios. But did some investors gain an edge through fund selection?

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Value-Performance Anxiety 

Global Investing , Factor Investing

Despite a recent performance lift, many still ask whether the value factor is broken. We analyze the reasons behind its underperformance and start exploring the potential of updates to value definitions and approaches to value-portfolio construction.

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CEO Compensation: Paying Up for Mediocrity 

ESG Research

Are companies aligning CEO pay with long-term performance? Or, put another way, are directors incentivizing executives to drive the long-term success of the companies they run? We found evidence that pay and performance are misaligned for many U.S. CEOs.

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Considerations for Dedicated China Equity Allocations 

Emerging Markets , Global Investing

China provides global equity investors a unique set of opportunities and challenges as they evaluate a potential dedicated investment program and how to approach asset allocation from policy configuration to portfolio implementation.

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中国专业股票配置的要点 

Emerging Markets , Global Investing

鉴于中国进一步开放金融市场，一些投资者指定了一个专门计划来负责处理与中国相关的一系列投资机会。

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Managing the Risks of LIBOR Replacement 

Fixed Income , Risk Management , Global Investing

Investors now have clarity on the process of transitioning away from LIBOR and falling back on replacement benchmark rates. We used stress tests to show that fallback modeling may be necessary to measure and manage the risks of LIBOR instruments.

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The Pace of Fast Change: Growth vs. Thematic Investing 

Factor Indexes , Factors , Global Investing , Factor Investing

Investors considering thematic investments to gain exposure to firms whose fortunes may not be captured by fundamental growth measures, may ask: What are the key opportunities – and challenges – that distinguish thematic from growth investing?

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Is There a Hedge-Fund-Crowding Factor? 

Factor Investing

Hedge funds held heavy, relatively illiquid short positions in crowded stocks before the January 2021 short squeeze. We created a risk factor that added explanatory power and may provide insights into potential short squeezes and other risks.

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Are Growth and Value Indexes Still in Style? 

Factor Investing , Risk Management , Global Investing

Growth and value indexes were created in the 1980s as finer tools than market-cap indexes to measure the performance of growth and value funds. Are style-specific indexes still a relevant choice to use as benchmarks for these funds?

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Women on Boards: The Hidden Environmental Connection? 

ESG Research

With social inequality gaining prominence ahead of the 2021 proxy season, investors and other stakeholders are increasingly vocal about the need for greater diversity in corporate boardrooms. How successful have boards been globally?

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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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How Have Stocks Responded to Changes in Climate Policy? 

ESG Research , Global Investing

To what extent has climate risk been priced into equity markets? Is there a “brown” discount and a “green” premium? Has this shifted over time? How can we model such risks as the world moves toward net-zero targets? We examine the financial impact of climate transition risk on global equity markets.

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Factoring in ESG 

ESG Research , Factor Investing , Factors

How much does ESG contribute to portfolio risk and return? We looked at whether ESG performance was influenced by other factors or helped explain returns as a factor in its own right, using the MSCI Global Equity Factor Model + ESG.

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Finding the Sentiment Hidden in Regulatory Filings 

Factor Investing

Using natural language processing techniques, we constructed a sentiment factor that quantifies changes in the tone and content of company filings, and may be an indicator of future risks facing a company.

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Climate Transition and Bonds: Risk or Opportunity? 

ESG Research , Fixed Income , Risk Management

The transition to a low-carbon economy could significantly redirect the flow of investments toward greener companies and technologies that limit carbon emissions. We consider the potential risk — and opportunity — for bond investors.

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Currency-Risk Hedging in Real Estate Benchmarks 

Real Estate Investing , Risk Management , Global Investing

Global real estate investors can expose themselves to currency risk. Using a hedged index, they may better align their benchmark and investment approach and ensure currency risk is accurately treated in allocation modeling and performance attribution.

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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 (Stock) Bubbles Rising? 

Factor Investing

How does one identify or quantify a bubble? We propose a framework for assessing the “bubbliness” of stocks and portfolios, rooted in the idea that bubbles are driven by the same forces, and share characteristics with crowded trades.

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Cross-Currency Credit Spreads: Mind the Gap 

Fixed Income , Risk Management

An issuer’s credit spread should be consistent when measured in the USD- or EUR-denominated markets, because both are measuring the same credit risk. Yet divergence can occur as a result of liquidity or supply-demand imbalances, such as those in the COVID crisis.

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How Are High-ESG-Rated Bond Portfolios Distinct? 

Fixed Income , Risk Management , ESG Research

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.

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COVID Stimulus Helped Resilience of US ABS 

Risk Management , Fixed Income

Issuance of U.S. asset-backed securities fell by a quarter in 2020 from the previous year, as credit tightened during the COVID-19 crisis. The performance of loans underpinning ABS proved resilient, however, as economic relief helped support consumers.

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Stress Testing Climate-Change Scenarios 

Global Investing , ESG Research

Regulators around the world are upping the ante on climate-related financial disclosures. How can investors stress test potential exposures to these changes in policy? We take a look within Europe.

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An ‘ESG-First’ Approach to Portfolio Construction 

ESG Research

A new administration in the U.S. and ESG-related regulations in Europe may further increase investors’ sustainability focus. We examine an “ESG-first” approach to integrating measurable ESG and climate considerations into portfolios.

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What Biden’s Climate Plan Means for US Utilities 

ESG Research

Joe Biden is targeting net-zero carbon emissions in the United States by 2050, but the target date for electricity generation would come 15 years sooner. Are the U.S. utilities sector and investors prepared for net-zero emissions by 2035?

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Carrying on Through a Crisis, with Factors 

Factor Investing , Risk Management , Fixed Income

Factors have long had a place in constructing equity portfolios, but investors increasingly use factors in sovereign and corporate bonds, commodities and currencies. Which non-equity factors have been the best performers coming out of recent crises, and why?

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2021 Real Estate Trends to Watch 

Real Estate Investing

COVID-19 has caused a severe and rapid economic contraction and accelerated secular changes already hitting parts of the real estate markets. Investors face a fundamental question: How will real estate evolve as a sector and asset class? Here are our 2021 real estate trends to watch.

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

Factor Investing

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.

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A Thematic Lens for Portfolios 

Global Investing

We show how MSCI Thematic Exposure relevance scores helped position growth funds, as an example, alongside thematic funds, and highlighted key megatrends that drove performance. A thematic lens can help analyze other categories and strategies as well.

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The Doctor Is Making House Calls: Capturing Exposure to Telehealth 

Factor Investing , ESG Research

Telehealth has the potential to reduce inequalities in access to care as well as relieve strain on health systems. We tested an approach that combines natural-language processing and MSCI ESG Ratings screens.

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Kuwait’s Move from Frontier to Emerging Market 

Global Investing

Kuwait’s reclassification from frontier to emerging market and inclusion in the MSCI Emerging Markets Index provides investors exposure to yet another Gulf Cooperation Council member, one that has worked to open its doors to foreign investors.

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Accounting for Revenue Sources Tells a Richer Story 

Global Investing , Emerging Markets , Economic Exposure

Despite North America’s outsized weighting in the MSCI ACWI Index, companies in the index generated only 30% of their global revenues there. We explore how examining revenue sources may help uncover opportunities of economic growth around the world.

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Is ESG Investing a Price Bubble? Probably Not. 

ESG Research

Inflows into ESG funds have soared in recent years and months, in part motivated by outperformance since the COVID-19 pandemic erupted. But have these inflows become a self-fulfilling prophecy, creating an ESG bubble?

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Private-Infrastructure Risk: Tilting at Windmills 

Risk Management

Private-infrastructure investments are often treated as comparable to relatively safe long-duration bonds with attractive yields, but this approach can mislead investors as they evaluate risk, yield and portfolio hedges.

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2021 ESG Trends to Watch 

ESG Research

Climate. ESG bubbles. Disclosure. Social inequality. Biodiversity. The topics don’t get much bigger — or more systemic. Here’s our analysis of the five ESG trends that will matter most to companies and their investors in 2021.

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2021年ESG 趋势展望 

ESG Research

ESG投资已日趋成熟，炒作和怀疑已经消退，但寻求实现《巴黎协定》目标的投资者开始发现，符合《巴黎协定》要求的投资机会越来越少。

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China Tech Investing: An Indexed Approach 

Global Investing

China’s emergence as a tech leader holds great potential. But its technology value chain isn’t limited to IT firms. Opportunity lies across sectors, from electric vehicles to medical devices. How does one effectively gain exposure?  

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中国科技投资：一种股指编制方法 

Global Investing

经过数十年的快速经济增长，中国开始将发展重点从出口和固定资产投资转移到国内消费和技术创新。

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COVID-19 and Office Income: What Could Lie Ahead? 

Real Estate Investing

With new COVID-19 lockdowns and swaths of white-collar workers working from home, many office tenants are contemplating whether the future of work includes office space. This could have significant impact on office demand and income from leases.

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How Diversified Are US Equity Investors? 

Global Investing

The universe of stocks represented by the MSCI USA Index comprises over 600 securities. U.S. investors might assume there are ample opportunities for diversification and potential risk reduction in the domestic market. Is this assumption correct?

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The CDS Market Stayed Healthy amid COVID 

Risk Management

Since the global financial crisis, many have expressed concern about the health and future of credit-default swaps. Could institutional investors find the liquidity they need to hedge credit risk in subsequent periods? We examine CDS liquidity during the COVID-19 crisis.

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Stress Testing Multiperiod Inflation Scenarios 

Fixed Income , Risk Management

Will inflation rear its ugly head in the U.S.? Although the outcome of the U.S. elections might have lowered inflation expectations, investors can prepare for scenarios where inflation goes up. In this stress test, we examine three scenarios for inflation over varying time horizons.

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Investor Reaction to US Elections and COVID-Vaccine Progress 

Factor Investing , Risk Management , ESG Research

To gauge investor expectations after Joe Biden was declared winner of the U.S. election and good news broke about COVID vaccines, we surveyed 151 U.S.-based financial advisers. We examine the advisers’ views on the next 12 months and markets’ reaction since Election Day.

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Did Size Matter for Small-Cap Outperformance? 

Factor Indexes , Factor Investing , Factors

Good vaccine news on Nov. 9 drove unusual equity-index and factor returns, including in small caps. The MSCI USA Small Cap Index returned 3.03% that day vs. 0.82% for the MSCI USA Index. Was this due to the size factor, or was there a bigger story?

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Are Momentum’s Wings Finally Starting to Melt? 

Factor Investing , Factors

Positive vaccine news on Nov. 9 caused big moves in industry and style factors. Those hit hardest this year jumped, while previous high performers slumped. Did this mark new factors leadership and a long-awaited rotation from momentum to value?

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Chinese Government Bonds: Higher Yield, Less Risk? 

Global Investing , Risk Management

Global investors’ interest in Chinese government bonds has risen, as these bonds offer higher yields than developed-market sovereign debt. For investors thinking about adding Chinese bonds to their portfolios, what could be the impact on portfolio risk?

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What ESG Ratings Tell Us About Corporate Bonds 

ESG Research , Risk Management

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?

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ESG 评级告诉我们有关公司债券的哪些信息? 

ESG Research , Risk Management

我们探讨了将环境、社会和治理相关（ESG）因素纳入考量，对公司债券投资组合风险和表现的影响。

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Will Interest Rates Surge? Evidence from Options Markets 

Fixed Income , Risk Management

With long-term interest rates near record lows, conventional wisdom suggests that they can only go up. But the interest-rate option markets seem to be telling a different story — that rate decreases are also a distinct possibility.

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China A Shares: What Have We Learned? 

Emerging Markets , Global Investing

In this first of a series of blogs covering specific index-inclusion stories, we explore China A shares’ inclusion in the MSCI Emerging Markets Index by looking back at how it occurred and what’s happened since with market and investor reaction.

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Zombies on Board: Investors Face the Walking Dead 

ESG Research

Investors may think that zombies live only in people’s imaginations, but these brain-munching monsters can haunt corporate boardrooms for years, eating away at a fundamental shareholder right: the right to duly elected representation.

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Was Infrastructure Solid During COVID-19? 

Real Estate Investing , Risk Management

Infrastructure investments have not been spared the effects of the pandemic. A closer look across investment types, subsectors and risk levels over time may provide useful perspective as private-capital firms and their investors manage through.

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Aligning with the Paris Agreement: An Index Approach 

ESG Research , Global Investing

Institutional investors are under pressure to align their strategies with a maximum global temperature increase of 1.5oC as targeted by the Paris Agreement. We examine how they can approach this while respecting other investment constraints.

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Is US Equity Overvalued? A Macro View 

Equity Themes , Risk Management

Headed into what some see as “the second wave” of COVID-19, U.S. equity investors may ask: Is this a sustainable market recovery, or a bubble that may burst? We examine the question with our model for market-implied U.S. equity risk premium.

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How Portfolio-Weighting Schemes Affected Factor Exposures 

Factor Investing , Factor Indexes , Factors , Risk Management

Single-factor portfolios seek high exposure to a target factor and limited exposure to non-target ones. We assess the impact that common portfolio weighting schemes have on these exposures, as well as on portfolio efficiency, concentration and investability.

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Using Factors As a Magnifying Glass for Equities 

Factor Indexes , Factor Investing , Factors

Factors have been shown to be important systematic sources of risk and return. We examine how factor analysis can help identify investment characteristics that lie beneath the surface of seemingly similar stocks and equity portfolios.

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Could COVID-19 Topple Global Cities' Dominance? 

Real Estate Investing

Property investors turned to global gateway cities to diversify portfolios and generate capital growth in the years since the 2008 global financial crisis. We assess whether COVID-19 could jeopardize the relative dominance of these power cities.

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Factors in Focus: Impact of Inflation on Style Factors 

Factor Investing , Global Investing , Risk Management

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

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Banks, ESG and Nonperforming Loans During Covid-19 

ESG Research

Have banks with stronger ESG risk management practices been more financially resilient during the COVID-19 pandemic? We look at the asset quality, profitability and capitalization of banks around the world.

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Hertz So Good? 

Fixed Income , Risk Management

We look at the unusual bankruptcy of Hertz Global Holdings Inc. — whose equity rallied in early June, when holders of Hertz bonds were expecting losses as high as 90% in default — to discuss the importance and subtleties of firms’ capital structures.

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Can MBS Duration Turn Negative? 

Fixed Income , Risk Management

As mortgage rates have hit record-breaking lows, prepayment speeds have doubled. With the combination of a high price premium and elevated prepayment speed, could duration of mortgage-backed securities stray into negative territory?

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Stress Testing Inflation Scenarios 

Fixed Income , Risk Management

Market-implied expectations indicate modest inflation. But some observers are concerned inflation may significantly rise, while others fear deflation. We discuss four inflation scenarios — and their potential implications for stocks and bonds.

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Corporate ESG Disclosure: A Health & Safety Case Study 

ESG Research

How good a job are corporations doing in disclosing ESG policies and data to investors and other stakeholders? We took an in-depth look at reporting of health & safety disclosures. Our findings confirmed some common assumptions and upended others.

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Scope 3 Carbon Emissions: Seeing the Full Picture 

ESG Research

How can investors identify emissions throughout the value chain of companies in their portfolios? We explain what these “Scope 3” emissions are, why they are so important and what actions investors can take as they seek to manage resulting risks.

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Bond Liquidity: How Bad Was COVID? 

Risk Management

Was bond liquidity worse during the COVID-19 outbreak or the 2008 global financial crisis? We analyzed transaction costs from the forced selling of USD 10 million of U.S. corporate bonds, throughout the two crises.

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Assessing Company Alignment with UN SDGs 

ESG Research , Global Investing

Five years ago, the United Nations adopted 17 UN Sustainable Development Goals (SDGs) in an effort to end extreme poverty, reduce inequity and protect the planet by 2030. Using a new tool, we examine whether companies are walking the walk.

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Missed Rents’ Impact on Real Estate 

Real Estate Investing , Fixed Income

Some commercial tenants have stopped paying rent amid COVID-19. Without rental income, property funds are not able to pay distributions to shareholders and borrowers cannot service their debt. We analyzed property-fund data to assess the impact on investors.

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How to Describe a Factor 

Factor Indexes , Factor Investing , Factors

How to define a factor? It’s a challenge for asset owners and wealth managers in evaluating how well factor products meet investment objectives. We found an improved and more robust measure can be formed by combining multiple descriptors. 

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Identifying Emerging “Hot Spots” for Physical Risk in the US 

ESG Research

Climate change is expected to increase the frequency and severity of physical climate risks such as extreme temperatures, tropical cyclones, torrential rainfall and flooding. Our map identifies emerging climate risk hotspots in the U.S. 

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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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ESG in Mexico: At a Fork in the Road? 

ESG Research , Emerging Markets , Global Investing

Mexican companies’ ESG risk-mitigation practices have come a long way over the past decade, but there has been some slippage over the past two years. We examine the current status and why investors may want to pay attention.

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Alternative Views of Equity-Market Liquidity During COVID-19 

Emerging Markets , Global Investing , Risk Management

Institutional investors have typically used traded volume as a way to assess market liquidity. Adding alternative measures that gauge market impact and trading costs can provide a more comprehensive view for portfolio managers and traders.

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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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Is There a Green-to-Fossil-Fuel Premium? 

ESG Research

As investors evaluate the possible reallocation of capital around the transition toward a low-carbon future, we analyzed the characteristics and performance of companies engaged in green versus carbon-intensive activities. Was there evidence of a “green-to-fossil-fuel premium”?

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绿色能跑赢化石燃料吗？ 

ESG Research

从 2013 年 12 月到 2020 年 5 月，“绿色”公司的表现大致与 MSCI全球市场可投资市场指数（IMI）持平，而化石燃料公司的表现则逊于该指数。

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Understanding the Industry-Momentum Factor 

Factor Investing , Risk Management , Global Investing

When COVID-19 first swept through global equity markets, many factors exhibited unprecedented performance swings. How could institutional investors interpret the industry-momentum factor’s moves in the context of the underlying market dynamics?

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Growth Without the Side Effects 

Factor Indexes , Factor Investing , Factors

Growth has sometimes been viewed as the opposite of value. By extending the concept of growth at a reasonable price, we were able to capture the growth premium without it being lost to unintended factor exposures.

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The Risk of Risk Limits 

Risk Management

In times of heightened volatility, risk limits can protect against equity-market drawdowns. While such measures can dampen portfolio losses, they may also have an impact on long-term returns, particularly in case of a sharp V-shaped market recovery.

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Index Futures and the Expansion of Equity Markets in EM and Asia 

Global Investing , Emerging Markets

Given equity market growth in the emerging markets and Asia, and the dispersion of returns across individual subregions and countries, some have looked beyond traditional long-only approaches, to others, such as futures. We explore those options.

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Did Bonds Deliver? Leveraging Fixed Income During the COVID Crisis 

Fixed Income , Risk Management

Investors may employ leverage with lower-risk asset classes such as bonds to seek higher risk and returns. We assessed the effects of leverage on the returns of three hypothetical multi-asset-class portfolios during the COVID-19 crisis.

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Corporate Bonds Through a Factor and ESG Lens 

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

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?

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Managing Climate Risk in Equity Portfolios: A Case Study 

ESG Research , Global Investing

Institutional investors are increasingly focused on mitigating their climate-related risks. How could a “typical” active global equity manager have managed these exposures without disturbing the portfolio’s risk and return characteristics?

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Measuring Firms’ Remote-Workforce Abilities 

Factor Investing , Factors

It’s clear that some companies were better positioned to take advantage of a remote work environment than others. We built a hypothetical “remote-operation capacity” factor to seek to measure the effect on different firms.

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Up in Smoke? Brazil’s Wildfires May Affect Bond Spreads 

ESG Research , Fixed Income , Risk Management

Clearing Brazilian forests to make way for agriculture may spur a backlash to soy and beef producers if purchasers impose deforestation-free rules. What are the potential implications for debt of affected companies and for Brazilian sovereign debt?

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Measuring Climate Risk in Real Estate Portfolios 

ESG Research , Real Estate Investing

By evaluating real estate portfolios in terms of different physical risks as well as under different transition-risk scenarios, investors may be able to build a more complete picture of their exposure.

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Would Integrating ESG in Chinese Equities Have Worked? 

ESG Research , Emerging Markets , Global Investing

ESG ratings have reflected financial risk and returns in developed-market and emerging-market equities. But was this true in China, where ESG considerations are still in their infancy?

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将 ESG 融入到中国股票的成效如何? 

ESG Research , Emerging Markets , Global Investing

过去两年，中国企业的 ESG 评级大幅提升。通过回测，剔除一些 ESG 评级低的股票，能够有助于一批聚焦中国的主动型基金在过去五年半时间内降低风险和提高投资回报。

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Factors in Focus: How Trendy Is Your Style Factor? 

Factor Investing , Risk Management

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.

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Surging Corporate-Bond Supply: Reason to Worry? 

Fixed Income , Risk Management

In the months since the onset of the COVID-19 pandemic, companies issued a large amount of corporate bonds. As a result of this surge, corporate debt has grown substantially — a burden that institutional credit investors may wish to monitor closely.

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Did Value-Factor Exposure Deliver for Value Funds? 

Factor Investing , Global Investing

Building on previous MSCI research into the nuanced performance of the value factor, including the impact of sectors and other style factors, we look at how exposure to value drove the performance of actively managed value funds.

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ESG Ratings: How the Weighting Scheme Affected Performance 

Global Investing , ESG Research

Our recent research suggests that environmental and social issues were more industry specific and tended to show up in financial measures over a longer time frame compared to governance issues. How can E, S and G issues be combined?

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Short Interest Factor Performance in Times of Crisis 

Factors , Factor Investing

Given recent short interest factor performance, we asked: What has been the relationship between this factor and large market drawdowns? Were there changes in short selling during COVID-19? Did short-selling bans affect short interest factor performance?

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COVID-19 and Real Estate: The Devil Is in the Dispersion 

Real Estate Investing , Risk Management

Many real estate markets were showing signs of a slowdown even before COVID-19’s negative impact on property portfolios. Has this correction been similar to previous ones? We looked at dispersion of returns, within and across real estate sectors, for the answer.

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Which ESG Issues Mattered Most? Defining Event and Erosion Risks 

Global Investing , ESG Research

Very different ESG issues can be material for different industries. Our research suggests that risks can be divided into two main types: “event” risks and “erosion” risks to companies’ long-term competitiveness. Which ones mattered most for E, S and G?

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Is ESG All About the ‘G’? That Depends on Your Time Horizon. 

Global Investing , ESG Research

The conventional wisdom has it that governance is the most dominant of the three E, S and G pillars. But our analysis finds different results when looking at contribution to performance over different time horizons.

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Consumer ABS: Recovering from Coronavirus? 

Risk Management , Fixed Income

After the U.S. COVID-19 lockdown, new monthly remittance reports for asset-backed securities indicated performance deterioration and signaled potential challenges ahead. Meanwhile, in China, ABS showed signs of recovery.

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中国A股市场ESG研究与实践 

ESG Research

ESG作为一项非常重要且日益受关注的内容，已经整合到投资过程中，与指数和分析工具相结合，参与投资组合构建。通常投资组合管理会考虑风险和收益等维度，而如今ESG正成为一个新的维度对最优化组合进行重新定义，并帮助投资人加强对投资组合ESG视角的审视和管理。

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Equity-Market Dislocation and Index-Based Investing 

Emerging Markets , Global Investing

Market turbulence amid COVID-19 presented risks and opportunities. We explore how indexes , combined with the use of fundamental data, provided a wealth of information to help identify potential market dislocations.

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Outcome-Oriented Factor Investing with a ‘Barbell’ Approach 

Factor Indexes , Factor Investing , Global Investing

Though relatively new to wealth investors, index-based factor investing has some similarity to a high-conviction, outcome-oriented approach. We explore combining the two when seeking outcomes such as equity growth, yield enhancement and risk mitigation.

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Can AI Model the Complexities of MBS Prepayment? 

Fixed Income , Risk Management

Machine learning using neural networks has been successfully applied to fields in which extremely complex patterns can prove challenging for other algorithms. Are neural networks suited for modeling prepayment risk in agency mortgage-backed securities?

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Building Better ESG Indexes: 30 Years On 

Global Investing , ESG Research

How ESG indexes have evolved over the past 30 years: A Q&A with Stuart Doole, head of new index development at MSCI, about his conversations with investors since the COVID19 crisis started, the growth of ESG investing and how MSCI Research uses AI and machine learning in developing its ESG indexes.

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Robust Selection Paid Dividends 

Global Investing

Dividend cuts following the COVID-19 slowdown led to approximately USD 194 billion of lost dividends between February and April 2020. An approach that looked beyond dividend-yield ranking would have avoided some affected companies, based on our analysis.

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Four COVID-19 Scenarios: What Might Happen Next? 

Fixed Income , Risk Management

Our latest COVID-19 stress test looks at four potential financial-market outcomes ranging from a swift V-shaped recovery to a pessimistic L-shaped scenario, in which outbreaks recur and lockdowns return well into 2021.

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Five lessons for investors from the COVID-19 crisis 

ESG Research , Factors , Global Investing

COVID-19 unleashed a torrent of sharp movements across global financial markets. We highlight five key lessons for investors regarding global investing, managing factors, active management, indexed investing and ESG investing.

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Using Risk Analytics to Highlight Opportunities in Volatile Markets 

Risk Management , Fixed Income

Risk analytics can serve many functions for an institutional investor, including compliance, risk management, portfolio management and trading and strategy development. They may also highlight new opportunities that may be unique to volatile markets.

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Real Estate Asset Selection Mattered — Especially in a Crisis 

Real Estate Investing

As real estate strategies become more complex and market disruption continues, attribution analysis may prove a valuable tool. We looked at asset selection’s role in driving portfolios’ relative returns during relatively calm and disruptive periods.

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Index Rebalancing During High Volatility: A Balancing Act 

Global Investing , Emerging Markets

Significant volatility during COVID-19 highlights a need for index reconstitution, but some may worry about trading costs and excess turnover. We investigate the balance between appropriate market representation and avoiding high index turnover.

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Consumer ABS Under Coronavirus in the US and China 

Emerging Markets , Fixed Income , Global Investing , Risk Management

Beyond COVID-19’s steep human toll, the pandemic’s disruption of economic life has led to widespread loss of income and impaired some borrowers’ ability to repay loans. What could the impact be for investors in consumer asset-backed securities in the U.S. and China?

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How Hedge Funds Navigated the Start of COVID-19 Volatility 

Factor Investing , Factors , Risk Management

How did hedge funds navigate the initial volatility amid COVID-19? Though holdings information is limited, and delayed, we gained insights into their reaction by examining the change in hedge-fund portfolios between the end of January and end of February.

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Credit in the COVID Crisis: Contagion, Valuation, Default 

Fixed Income , Risk Management

As the COVID-19 crisis unfolded, credit markets deteriorated under the stress of a sharply diminished economic outlook. We analyze three indicators of credit-market conditions: default risk, relative value and contagion risk.

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Was the Treasury Price Right? Yield Dispersion Amid COVID-19 

Fixed Income , Risk Management

Despite appearances, Treasury yield curves are statistically estimated using price data from hundreds of Treasurys. We compared recent yield dispersion — or the degree to which individual bond yields fall away from the curve — to historical levels.

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Using Derivatives to Manage Volatile Markets 

Emerging Markets , Global Investing , Risk Management

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?

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Hunting a COVID-19 factor 

Factor Indexes , Factor Investing , Factors

Can we identify a COVID-19 factor and quantify companies’ exposure to it? We explored three ways to do so — from very simple to more complex methods.

BLOG

Did hedging tail risk pay off? 

Risk Management

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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MSCI ESG Indexes during the coronavirus crisis 

ESG Research , Emerging Markets , Global Investing

The COVID-19 outbreak is the first real-world test since the 2008 global financial crisis of the resilience of companies with high MSCI ESG Ratings. We analyze the performance of four standard MSCI ESG Indexes over Q1 2020 and longer periods.

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新冠疫情期间的 MSCI ESG 指数 

ESG Research , Emerging Markets , Global Investing

在新冠疫情的恐慌抛售期间以及更长时期内，我们将四个全球 MSCI ESG 指数与其母指数进行了比较。

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US inflation: The market’s implied view 

Fixed Income , Risk Management

Dramatic declines in oil prices, the Federal Reserve’s aggressive monetary policy and higher fiscal deficits may create a confusing outlook for U.S. inflation. We examine what the market is telling us about where inflation may be heading.

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How COVID-19 could impact private real estate values 

Real Estate Investing

Real estate has not historically been immune to growth shocks, but the impact of COVID-19 has been harder to establish than it has for public equities. Discounted-cash-flow scenarios may help investors understand the potential sensitivity of their portfolios.

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Resilient stocks during the dog days of March 

Factor Investing , Factor Indexes , Factors

While many stocks were in the red in mid-March, as COVID-19 and oil-market shocks took hold, some were “redder” than others. We examine global markets to better understand the characteristics of the more resilient stocks during this period.

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Can diversification help weather the coronavirus storm? 

Emerging Markets , Factor Indexes , Factor Investing , Factors , Global Investing

Whether investors include a tactical approach or invest strategically for the long term, diversifying across factors, sectors and geographies has historically played an important role in portfolio construction. 

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Could coronavirus depress US housing prices? 

Risk Management , Fixed Income

The large economic shocks unleashed by the coronavirus pandemic could be comparable to or even exceed those of the 2008 global financial crisis (GFC). We used our models to assess whether these shocks could hurt U.S. housing prices as much as the GFC did.

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Green bonds: Growing bigger and broader 

ESG Research , Fixed Income , Global Investing

As the green-bond market matures, it is developing offshoots. The types of projects financed, as well as the emergence of innovative types of bonds and loans linked to the ESG targets, is growing. These initiatives may broaden the market for green investment options.

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Corporate-bond performance by factors and ESG 

ESG Research , Factor Indexes , Fixed Income , Risk Management

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.

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For target-date funds, hindsight was 40/60 

ESG Research , Factor Indexes , Fixed Income , Risk Management

Recent market volatility has been especially unkind to those closest to and early in retirement, as the sequence of returns matters for retirement income. Would low-volatility and ESG investments have benefited target date funds during volatile periods?

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Bond ETFs and underlying price uncertainty 

Risk Management , Fixed Income

In the recent market meltdown, some fixed-income ETFs traded at discounts as high as 6% to net asset values, a level not seen since 2008. Could ETF prices deviate from the value of the underlying portfolio during market stress and leave investors exposed to losses on top of the falling bond prices?

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Quantifying ESG fund performance 

ESG Research , Factors

One challenge facing investors is how to quantify the impact ESG has had on their investment process. We analyzed top ESG funds to better understand the contribution of the ESG factor to their performance.

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What out-of-cycle write-downs may mean for real estate yields 

Real Estate Investing

As real estate investors seek to understand how the COVID-19 crisis could affect their portfolios, several large Australian pension funds recently wrote down their property portfolios by up to 10%. What could a 10% write-down imply for yields?

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Will coronavirus reduce emissions long term? 

ESG Research , Global Investing

Has COVID-19 affected carbon emissions? Using satellite imagery from NASA and the European Space Agency, we examined the empirical data so far to understand the potential impact, and if there may be a decline in global greenhouse-gas emissions in 2020.

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

Factor Indexes , Factor Investing , Factors , Fixed Income

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?

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Could coronavirus lead to default contagion in CLOs? 

Risk Management , Fixed Income

The market for collateralized loan obligations is under severe stress during the COVID-19 pandemic. We used MSCI’s loan and CLO models to assess a sample CLO’s loan-default risk characteristics. Could a wave of defaults harm CLOs?

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

Risk Management , Fixed Income

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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Managing risk-model uncertainty through a crisis 

Risk Management

The impact on risk policy has been similar across market crises, as investors consider how to use their models in the new regime. We describe adaptive modeling for internal and external risk policy, and long-view backtesting to support decision-making.

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‘Nowcasting’ private equity in the coronavirus crisis 

Risk Management

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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How could coronavirus impact credit markets? 

Risk Management , Fixed Income

While newspaper headlines are focused on volatile stock markets stemming from the COVID-19 pandemic, credit markets are not immune. Our latest stress test asks, “What would it mean for portfolios if losses reached 2008 levels?”

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Asset allocation and index futures during market crises 

Emerging Markets , Global Investing , Risk Management

During market crises, institutional investors have employed derivatives contracts to hedge market risks or express views on certain performance/risk characteristics. We explore prior use of futures for exposure management and tactical asset allocation.

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市场危机中的资产配置与指数期货 

Emerging Markets , Global Investing , Risk Management

机构投资者通常利用期货、期权等衍生品合约对冲市场风险，或在某些特定市场环境中表达投资观点。

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Updating the MSCI Agency MBS model for the COVID-19 crisis 

Fixed Income , Risk Management

The COVID-19 pandemic has severely strained U.S. housing finance, distorting near-term prepayment speeds for mortgage-backed securities. With MBS in uncharted territory, we updated the MSCI Agency MBS Model to help investors during the crisis.

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How coronavirus could hurt Chinese consumer ABS 

Risk Management , Global Investing , Fixed Income , Emerging Markets

The slowing Chinese economy and trade uncertainty had already put strains on the performance of Chinese consumer asset-backed securities. The COVID-19 pandemic could further harm the performance of these securities. Investors may wish to gauge the risks.

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Real estate is about more than location during uncertain times 

Real Estate Investing

With real estate now occupying a greater slice of multi-asset-class portfolios, factors such as lease length, may be more systematic drivers of return than previously thought. 

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Integrating ESG in emerging markets and Asia 

ESG Research , Emerging Markets , Global Investing

Previously, we have examined the relationship between ESG characteristics and financial performance in developed markets. In this blog post, we explore whether ESG characteristics  have had financially significant effects in emerging markets and Asia.

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将ESG融入新兴市场和亚洲市场 

ESG Research , Emerging Markets , Global Investing

在我们研究的时间区间内，ESG 评级较高的股票在新兴市场和亚洲（日本除外）地区表现较好，整合ESG 提高了这些地区的回报。

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What scenarios has the US equity market priced in? 

Risk Management

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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Coronavirus and oil hit equities — how low can we go? 

Risk Management , Global Investing

We compare the market turmoil sparked by the coronavirus pandemic with levels of volatility, drawdown and recovery after 9/11 and the global financial crisis (the two other similarly severe economic and market shocks of the last 20 years).

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Have corporate green bonds offered lower yields? 

ESG Research , Risk Management , Fixed Income

Green bonds tended to offer lower yields than comparable non-green corporate bonds. What could explain green bonds’ lower yields? And is there any relationship between green-bond issuers’ environmental scores and bond yields?

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Coronavirus and a potential MBS convexity whipsaw 

Risk Management

Amid rising fears that the human toll of coronavirus will have a significant impact on the global economy, investors have sought safety in Treasurys and driven yields to all-time lows. This rate rally has posed a hedging challenge for investors in mortgage-backed securities.

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The coronavirus market impact spreads globally 

Factor Investing , Global Investing

Fear of a coronavirus pandemic and ensuing economic impacts caused sharp drops in global markets after an initially mild response. We look at recent performance from a factor perspective and how quickly factor returns and volatility reverted in past crises.

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A coronavirus stress test for global markets 

Fixed Income , Global Investing , Risk Management

After the coronavirus spread to multiple continents, markets recorded the worst week since the crisis. How much further could markets drop if epidemic turns into pandemic? Our stress test indicates room for further losses.

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SEC’s proxy proposal: Who would benefit? 

ESG Research

The SEC has proposed reforms to the proxy process that would curb the number of proposals submitted by small shareholders. But such a change may disadvantage all shareholders, who have provided significant levels of support for these initiatives.

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Navigating market volatility with agency MBS models 

Fixed Income , Risk Management

We performed our annual review of MSCI’s model for managing prepayment and interest-rate risk in agency mortgage-backed securities. How closely did the model’s forecasts anticipate what we observed in the market?

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ESG and the cost of capital 

ESG Research , Global Investing , Emerging Markets

We know a lot about the relationship between companies’ ESG characteristics and financial performance. But was there a correlation between ESG scores and cost of capital?

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The coronavirus epidemic: Implications for markets 

Economic Exposure , Emerging Markets , Factor Investing , Fixed Income , Global Investing , Risk Management

The toll from the coronavirus has been felt throughout societies, leading to repercussions on the global economy and financial markets. We examine investor impact through markets’ economic exposures to China and factors and by stress testing portfolios.

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What’s driven capital growth in real estate portfolios? 

Real Estate Investing

In real estate investing, capital growth has historically been responsible for most of the observed volatility in total returns. Could breaking capital growth into its components help tell a more detailed story of property portfolios’ performance?

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How climate change may ‘flood’ global equities 

ESG Research , Emerging Markets

Of all the threats to the environment from climate change, sea-level rise may be one of the most devastating and permanent. The question for global equity investors is how coastal-flooding risks may affect their portfolios.

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Aramco IPO shows importance of timely index inclusion 

Emerging Markets , Global Investing

Saudi Aramco’s IPO showed why single-country index providers may sometimes need to include companies (especially larger ones) outside of scheduled reviews, as they work to bridge gaps between a country’s equity index exposure and economic drivers.

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塑造下个十年的关键ESG议题（下篇） 

ESG Research

谁来监管环境、社会与公司治理（ESG）？如果我们砍掉所有的森林会怎样？

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塑造下个十年的关键ESG议题（上篇） 

ESG Research

谁将成为碳减排领军者？上市公司由私人控制将产生哪些影响？公司董事会性别多样化是未来趋势，将助推公司发展。

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Did private capital deliver? 

Global Investing

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 

Risk Management , Fixed Income , Global Investing , Emerging Markets

The 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? 

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

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?

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Counterparty credit risk and the initial-margin big bang 

Risk Management

A 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 

Fixed Income , Risk Management

Drawing 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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2020 Emerging Real Estate Trends 

Real Estate Investing

From managing climate risk to advances in analytics, 2020 may be a watershed year for real estate. Read our top five emerging trends likely to be front of mind for global real estate investors in 2020 and beyond

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2020 ESG trends to watch 

ESG Research

ESG themes are long-term, but some can emerge with sudden force. We are watching five trends we believe will unfold in 2020 to catapult ESG investing into the new decade.

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Factors in Focus: Will 2020 vision sharpen exposures? 

Factor Indexes , Factor Investing , Factors

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.

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Synthetic CDOs: Back in vogue but not without risk 

Fixed Income , Risk Management

As 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 

Global Investing , Risk Management , Economic Exposure , Emerging Markets

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?

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Has global sovereign rates momentum headed in reverse? 

Risk Management , Fixed Income

Momentum 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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Emerging markets since China A shares’ inclusion 

Global Investing

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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The value of standards in the investment process 

Global Investing

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? 

Economic Exposure , Fixed Income , Risk Management

The 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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Digging deeper into pan-European property funds’ performance 

Real Estate Investing

Property investors who invest across a broad region, like Europe, can use a peer-group benchmark to gauge relative performance. But to determine the specific drivers of returns, detailed asset-level performance attribution can help shed light.

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Factors behind value’s underperformance 

Factor Indexes , Factor Investing , Factors

As 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 

Fixed Income , Risk Management

Asset 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? 

Factor Investing , Factors , Risk Management

Company 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? 

Economic Exposure , Emerging Markets , Fixed Income , Global Investing , Risk Management

The 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? 

Global Investing

Global 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 

Economic Exposure , Emerging Markets , Global Investing

Financial 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 

Emerging Markets , Global Investing , Economic Exposure

Investors 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? 

Economic Exposure , Emerging Markets , Global Investing

Did 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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CEO Pay: Trick or Treat? 

ESG Research

Some large asset owners are increasingly coming to believe that many executive pay schemes don’t align the interests of CEOs and investors. There appears to be an increasing focus on pay plan simplicity and transparency.

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Exploring the ‘what ifs?’ in real estate 

Real Estate Investing

The opacity of real estate markets and the wide spectrum of potential outcomes makes it hard to understand performance. Running a historical “what if” analysis may help institutional investors understand how different choices could have impacted outcomes.

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Beware high dividend yield traps 

Factor Investing , Factors , Risk Management

During 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 

Fixed Income , Risk Management

Investors 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? 

Factor Indexes , Factor Investing , Factors , Global Investing

Value 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 

Emerging Markets , Fixed Income , Global Investing , Risk Management

Amid 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 

Factor Indexes , Factor Investing , Factors

Technological 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? 

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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Is Europe more than the sum of its parts? 

Equity indexes

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? 

Real Estate Investing , Global Investing

Real 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 

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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Is the US tech sector ignoring minority talent? 

ESG Research

Looking in one’s backyard for human capital.

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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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Growth’s recent outperformance was and wasn’t an anomaly 

Factor Investing , Factor Research Group , Factors

Growth 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. 

ESG Research , Global Investing

When 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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Underwater assets? Real estate exposure to flood risk 

ESG Research , Real Estate Investing

Real estate investors are buying and leasing assets that might be jeopardized by a climate-changed world. A new analysis can help investors identify high-risk U.K. locations.

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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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Real estate may be yielding less than you thought 

Global Investing , Real Estate Investing

Income 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? 

Fixed Income , Risk Management

Despite 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 

Global Investing , Risk Management

Investors 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 

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.

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Looking inside ESG indexes 

ESG Research

Many investors want to stick to their values or beliefs, as well as meet certain financial objectives. How can ESG indexes  help them address these goals?

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The last straw: Will plastic become the next stranded asset? 

ESG Research

Oil and gas companies are accelerating investment in plastics, in response to the shift away from fossil fuels. But is this pivot sustainable? Could plastic become the next stranded asset?

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Where were the (factor) crowds this summer? 

Factor Investing , Factors

When 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 

Risk Management , Fixed Income , Models/Client Cases

Empirical 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 

Global Investing , Real Estate Investing

Office 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 

Fixed Income , Models/Client Cases , Risk Management

Risk 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 

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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Have appraisers been too bullish on retail real estate? 

Real Estate Investing

Media commentary has fixated on the shuttering of shops, while retail-focused REITs are priced at substantial discounts to the value of their assets. Have appraisers of retail real estate been excessively bullish?

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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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Three scenarios for Fed rate cuts 

Economic Exposure , Fixed Income , Models/Client Cases

A 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 

Factor Research Group , Factor Investing , Factors

Among 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? 

Global Investing , Risk Management

When 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 

ESG Research , Global Investing

Nearly $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 

Fixed Income , Risk Management , Models/Client Cases

China’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? 

Real Estate Investing , Global Investing

Industrial 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? 

Risk Management , Models/Client Cases , Fixed Income

Do 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 

Factor Investing , Factor Research Group , Factors

We 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? 

Risk Management , Fixed Income , Models/Client Cases

In 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. 

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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Resilient carbon-transition portfolios: a road map 

ESG Research

Is your portfolio ready for the transition to a low-carbon economy? Which companies, industries and sectors are positioned to benefit? Which ones entail greater risks? The answers are a lot more complicated than alternative energy is in and coal is out. 

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Uber vs. Lyft: Who’s at the Wheel? 

ESG Research

Two companies, one highly disruptive business model, multiple big challenges looming. Few IPOs in recent memory have attracted more attention – or disappointed more decisively, initially – than the IPOs of ride-sharing groups Uber and Lyft. At the end of June 7, 2019, two months following its IPO, Lyft’s share price traded at 17.7% below its IPO price, while Uber’s ended that same day 1.9% lower. Could ESG considerations have played into investors’ thinking?

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European securitization at the regulatory crossroads 

Fixed Income , Risk Management

Have 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 

Factor Investing , Factors

The 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 

Emerging Markets , Factor Investing , Global Investing

Commonly 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 

Risk Management , Real Estate Investing , Fixed Income

Amid 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? 

Global Investing , Risk Management , Economic Exposure , Emerging Markets

Emerging-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 

Economic Exposure , Emerging Markets , Global Investing

Our 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 

Factor Indexes , Factor Investing

Foreign 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? 

Equity Themes , Models/Client Cases , Global Investing

Can 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) 

Models/Client Cases , Fixed Income , Risk Management

Aligning 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 

Fixed Income , Risk Management

Could 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? 

Real Estate Investing , Global Investing

You 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 

Equity Themes , ESG Research , Risk Management

A 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) 

Models/Client Cases , Fixed Income , Risk Management

Fannie & 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 

Equity Themes , Economic Exposure , Fixed Income

Inversion 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 

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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Factors in Focus: Risky start. Quality finish. 

Factors , Global Investing , Factor Investing

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.

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Saudi Arabia inclusion and emerging markets 

Equity Themes , Emerging Markets , Global Investing

Saudi 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? 

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.

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A New Day for Monetary Policy? 

Emerging Markets , Fixed Income , Global Investing

Listen 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 

Economic Exposure , Real Estate Investing , Global Investing

Measuring 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 

Models/Client Cases , ESG Research , Factor Investing

There 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? 

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

Banco 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 

Fixed Income , Integrated Risk Management

The 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 

Equity Themes , Global Investing

The 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 

ESG Research , Global Investing

We 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? 

Models/Client Cases , Economic Exposure , Fixed Income

Investors 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 

Real Estate Investing , Global Investing

When 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 

Equity Themes , Emerging Markets , Global Investing

Emerging-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 

Fixed Income , Global Investing , Factor Investing

Venezuela 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 

Factors , Factor Research Group , Factor Investing

As investors continue to focus on factor investing in periods of heightened volatility, we ask how volatility has affected factor performance.

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ESG investing is here to stay 

ESG Research

Historically, environmental, social and governance (ESG) investing was about excluding stocks of undesirable companies from portfolios — often because they violated one’s sense of ethics or values. ESG investing has since expanded to include consideration of ESG criteria alongside financial ones. ESG is growing in importance among institutional, wealth and retail investors. In recent years, institutional and high-net-worth investors’ adoption of ESG, along with the subsequent growth in ESG assets under management, has accelerated.

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How mortgage fees affect rates and spreads 

Models/Client Cases , Real Estate Investing , Fixed Income

How 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 

Factors , Factor Research Group , Factor Investing

As 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 

ESG Research , Real Estate Investing , Global Investing

For 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? 

Factors , Factor Research Group , Factor Investing

Early 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? 

Factor Indexes , Factors , Factor Investing

As 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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Measuring real estate capital growth isn’t rocket science, is it? 

Real Estate Investing

In September 1999, NASA’s Mars Climate Orbiter was lost, at a reported cost of USD 125 million, due to a mix-up in measurements.

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CDS Hedging: Exploring all the Options 

Models/Client Cases , Fixed Income , Risk Management

The 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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2019 ESG趋势展望 

ESG Research

ESG投资者的漫漫长途已经开始，有很多人也开始支持这个长征。我们2019年要关注的五个ESG趋势中的每一个，都包含可能被忽视的成本和机遇。

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2019年に注目すべきESGトレンド 

ESG Research