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Systematic Alpha – A Managed Approach to Smart Beta

By Timothy Atwill, Parametric, Director of Research - Alternative Strategies

While passive “buy and hold” investing has long been a staple for investors, there is growing concern that traditional capitalisation weighted approaches may be too risky. Markets fluctuate between boom and bust cycles. Concentrations in the market build up, and then collapse.

Examples include global banking and real estate stocks in the 2000s, technology stocks in the 1990s, and Japanese stocks in the 1980s. 

These cycles can cause both passive and active strategies to become dangerously concentrated in just a few stocks, sectors, or countries. In reaction to this, many investors have become interested in a third style of asset management, often referred to as “Smart Beta,” which falls between the pure active and passive paradigms.

Smart beta strategies are often used to replace a pure passive capitalisation-weighted portfolio, or to complement existing passive and active strategies. There is a broad range of strategies, including minimum volatility, equal-weighted, and fundamentally-weighted strategies, among others. While these strategies use very different methodologies, they all focus on portfolio construction as the...Read More

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An introduction to Risk Factor Portfolios

By Fred Vosvenieks, Consulting Actuary, Milliman & Russell Ward, Consulting Actuary, Milliman

There is growing interest in risk factor based investment portfolios as an alternative to traditional asset allocation methods. In this article, we look at how risk factors directly address some of the main weaknesses of traditional methods and review the practical challenges that will need to be tackled ahead of more widespread adoption.

Traditional Thinking

Investment portfolio construction has traditionally centred on the idea that a superior outcome in terms of risk versus return can be achiev...Read More

Effective LDI in a Rapidly Changing Environment

John Dewey, Managing Director, Client Strategy Team, BlackRock Solutions

Unprecedented events have become a regular feature in the financial markets since the Lehman default in 2008, putting further pressure on already stretched funding ratios and heightening the need for an effective LDI approach.

Pension schemes and other institutional investors continue to face challenging times. Economic conditions remain tough and despite some progress, persistent uncertainty in relation to the eurozone continues to weigh on investors’ minds. This in turn has led to a toxic combination ...Read More

Milliman Protection Strategy and liability-driven investing

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Lifestyle Actuary

The trappings of fast paced city lifestyles rarely take into account the charm and elegance that a room, a dinner or a cup of tea can afford; characteristics lost to a by-gone era of debutante balls and black tie for dinner.

The Luddite

Sam Richardson looks into the up and coming and the outgoing of the technology and gadgetry world in 2014.

Travelling Actuary

This month's Travelling Actuary takes us to the iconic Boston to experience New England at it’s very best.

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