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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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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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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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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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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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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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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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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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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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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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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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What Would a “No deal” Brexit Mean for Markets? 

Global Investing , Integrated Risk Management

Financial markets are increasingly edgy about prospects for the U.K. Parliament’s expected Dec. 11 vote on a Brexit deal with the European Union.

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Brexit and the Risks of Home Bias 

Economic Exposure , Global Investing

Every so often, a country can be hit by a negative event — a tidal wave, a terrorist attack, a political uproar.

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From credit crunch to liquidity crunch: managing liquidity 

Models/Client Cases , Fixed Income , Risk Management

Volatility of credit spreads in both emerging- and developed-market debt increased significantly in 2018. Large rises in credit spread levels were followed by increased bid-ask spreads, making it expensive to reduce exposure within a short time frame.

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Beaten-Down Beta 

Factor Investing

U.S. and international equity markets fell sharply to close out 2018. The MSCI USA Index fell 15% in the fourth quarter alone. (It fell a total of 6% for the year.) As we previously examined, investors began rotating from cyclical sectors and factors to defensive ones in June. This pattern continued, in earnest, until October.

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U.S. Real yields: Opportunities and Warning Signs 

Fixed Income , Integrated Risk Management

Despite the recent rally in the U.S. government bond market, real U.S. bond yields (i.e., nominal yield minus the market-implied rate of inflation) still remain substantially higher than at the beginning of the year. This may be both a blessing and a curse for investors.

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Factor Investing Goes Multi-Asset Class 

Factor Indexes , Factors , Factor Investing

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