Does Blame Predict Performance?

The science of manager selection really is about what Charley Ellis calls “the loser’s game.” So how can investors improve their odds of picking successful managers? For one thing, avoid asset managers that have a culture of blame.

A Framework for Examining Asset Allocation Alpha

Despite the large body of literature on the importance of asset allocation as a primary determinant of portfolio performance, the definition of asset allocation “alpha” remains a poorly defined concept. In this article, we show that a portfolio’s total alpha can be decomposed into alpha from asset allocation and manager selection. The asset allocation alpha…

Year-End Capital Markets Forecast

What looks best for 2013? Emerging market local currency sovereign bonds are likely to outperform developed market government debt. For equities, both developed (ex-U.S.) and emerging markets offer more attractive valuations and better dividend yields than U.S. stocks. Here’s why.

The Role of Risk in Asset Allocation

A traditional asset allocation framework allocates to various asset classes with the goal of matching important risk exposures. In reality, many asset classes share exposures to common risk factors and thus are highly correlated, particularly with equities. This article explains how investors can achieve more intuitive and perhaps more sensible portfolios with an approach based on risk factors.