The Ten Best Articles You Probably Missed
Great articles don’t always get the readership they deserve. We’ve posted the 10 most-widely read investment and planning articles for the past year here and the top practice management articles here. Below are another 10 that you might have missed, but I believe merit reading.
Examining the Performance of Stone Ridge’s High-Yield Reinsurance Fund
The Stone Ridge High Yield Reinsurance Fund (SHRIX) was introduced a decade ago to provide pure exposure to catastrophe-reinsurance risk that had historically delivered excess returns. Let’s look at how it performed over that period.
Examining the Performance of AQR’s Style Premia Alternative Fund
The AQR Style Premia Alternative Fund (QSPIX) was introduced a decade ago to provide pure exposure to four market factors that had historically delivered excess returns. Let’s look at how it performed over that period.
How to Select PE Investments
Private equity (PE) has become a staple of institutional portfolios, but its performance has often been disappointing. New research shows that the levels of specialization and portfolio diversification should be important considerations when selecting a manager to implement a PE strategy.
New Research Helps Explain the Underperformance of Active Managers
By applying artificial intelligence and Chat GPT to statements made by active fund managers, researchers have found that their underperformance can be partly explained by overconfidence that led to, among other things, excessive risk taking.
The Dangers of Private Equity Investing
The performance of PE funds has been disappointing. New research explains why this happened: Instead of driving operational efficiencies (as PE investors typically claim they do), those funds relied heavily on increasing the debt burden for the companies they bought.
“Green” Bonds Have Lower Yields
I’ve written previously about how positive (“green”) ESG metrics have increased the prices of stocks, reducing their expected returns. New research examines a similar effect in bonds, where a “greenium” (lower yield on green bonds versus non-green equivalents) reduces returns for investors.
Why Artificial Intelligence Has Failed to Outperform
New research has documented the persistent failure of investing based on artificial intelligence (AI). This is unsurprising, given the challenges of active management and the widespread inadequacy of humans to outperform an index fund.
Economic Forecasting is a Waste of Time
Ignore the “noise” of the market and adhere to your well-thought-out asset-allocation strategy that acknowledges both the virtual certainty of recessions and bear markets while also recognizing that trying to time the market based on economic forecasts is likely to prove counterproductive.
Short Sellers Are More Informed Investors
Short sellers are informed investors who play a valuable role in keeping market prices efficient – short selling leads to faster price discovery. Fund families that invest systematically have found ways to incorporate the research findings to improve returns.
The Global Underperformance Facing ESG Investors
Sustainable investing continues to gain in popularity, with investors worldwide frequently attracted not only by ethical concerns but also by the lure of superior returns. Unfortunately, new research focused on global stocks showed that they did not get what they were sold.
The Evidence Against Favoring Dividend-Paying Stocks
My research confirms what academic theory predicts: There has been no historical alpha among dividend-paying stocks, including those with a history of increasing dividends. Investors are better served by “tilting” allocations to factors that have historically outperformed (e.g., value).
Beware of Low-Volatility Portfolios
Low-volatility strategies are often cited as an anomaly offering higher returns without a corresponding increase in risk. But the so-called low-volatility factor is well explained by other factors, and new research shows it does not reduce exposure to “systemic,” broad-economic risks.