AQR Capital Management
Commentary
Caveat Investor? The “Fiduciary Rule” and Unintended Consequences
Who could argue with an advisor having to act in the best interest of his or her client? Well, I’m indeed going to argue that it’s at least less obvious than it first appears. Even if the rule turns out to be a net positive, I’m going to argue that there are potential large unintended consequences to worry about. This is not a screed against such a rule.
Commentary
Understanding Risk Parity
The outperformance of Risk Parity strategies during the recent credit crisis has confirmed the benefits of a truly diversified portfolio. Traditional diversification focuses on dollar allocation; but because equities have disproportionate risk, a traditional portfolio?s overall risk is often dominated by its equity portion. Risk Parity diversification focuses on risk allocation. We find that by making significant investments in non-equity asset classes, investors can achieve true diversification ? and expect more consistent performance across the spectrum of potential economic environments.
Commentary
Inflation in 2010 and Beyond? Practical Considerations for Institutional Asset Allocation
Traditional institutional portfolios with risk characteristics similar to a 60/40 stocks/bonds allocation are not well-positioned for unexpected inflation. Stocks are not effective inflation hedges, particularly in the short and medium term. Meanwhile, traditional institutional allocations resemble a 'bet' on low inflation. A risk-based approach to strategic asset allocation, however, may generate more balanced performance across both inflationary and deflationary periods.
Commentary
Inflation in 2010 and Beyond? Practical Considerations For Institutional Asset Allocation
The monetary stimulus has justifiably focused investor attention on potential inflation. Despite significant growth in the U.S. monetary base, however, the money supply has grown only modestly. Furthermore, there is excess capacity in the economy, as evidenced by an approximate 70 percent capacity utilization and a 10 percent unemployment rate. Inflation rates remain below pre-crisis levels, and the trend in the CPI index is not currently showing signs of a dramatic increase in inflationary pressures.
