Despite the popularity of multi-asset strategies, especially after the global financial crisis in 2008, very few books have been written about the topic. The few books available, with their heavy use of mathematical formulas, are intended mostly for quants. There appears to be a void in terms of a multi-asset investing book for the majority of investors. This book is our attempt to fill that void.
When we first discussed this project with Paul Smith, CFA, president and CEO of CFA Institute, Paul’s advice was that we should aim to produce the book on the subject, not just a book. This is our first attempt at achieving that goal.
We focused on three features in putting this book together: (1) concise: each chapter is short enough to be read in 15–20 minutes, (2) accessible: the book is written in plain English and is entirely formula-free, and (3) authoritative: we have engaged the help of some of the brightest minds in this area from around the world. If our readers think we have succeeded in these three endeavors, we shall be quite content.
This book is about both concepts and practices in multi-asset investing. Part I focuses on two important concepts. Part II includes a few institutional case studies.
Chapter 1 sets the stage for the entire book. It explains the types of products under the multi-asset umbrella, highlighting how (properly managed) multi-asset-strategy products are different from the more traditional balanced funds and funds of funds.
In Chapter 2, Jason Hsu and Phillip Wool discuss how risk factor allocation can add value for investors who use asset classes in their asset allocation analysis. Although quants may find talking about this concept challenging without formulas, the two authors do just that. For the more quantitatively inclined, references to the more advanced papers are included.
In Chapter 3, Brian Singer, CFA, examines the role of both dynamic asset allocation (DAA) and tactical asset allocation using his overall investment taxonomy. DAA is a challenging topic, and a significant number of investors confuse it with market timing. Brian disputes that misperception, citing authorities ranging from John Maynard Keynes to Gary Brinson.
We dedicate Chapter 4 to risk parity, given its popularity among investors. Greg Allen analyzes both the theory and the historical performance of risk parity and provides a balanced and convincing assessment of the strategy.
Risk factor allocation has long been the domain of academics and quants. The Morningstar Style Box is an intuitive illustration of how average investors can put the concept to use in their daily investing. In Chapter 5, Jeff Ptak looks under the hood and gives readers an overview of both the methodology and the application of this useful tool for retail investors.
The last three chapters focus on real-life investor stories: A prominent Asian sovereign wealth manager and two veteran portfolio managers share their experiences in managing multi-asset portfolios.
A key theme that we try to convey is that all roads lead to Rome. There is no single “best” or even “right” way to manage multi-asset strategies. And getting started does not require that you possess all the needed skills (of course, the more edge you have, the more likely you are to succeed).
In Chapter 6, three GIC senior executives present GIC’s well-structured approach. GIC’s focus on the long term is an important feature and is appropriate given the long-term nature of its portfolio. GIC’s risk-and-return targets clearly reflect its emphasis on growing purchasing power over the long run.
Chapter 7 consists of an interview with Dennis Stattman, CFA, a veteran portfolio manager at BlackRock. Dennis started managing global asset allocation funds as early as 1989 and is a true pioneer in the field. He goes into the details of how he manages the products as well as how he has performed over the years. We believe the conversation to be deeply rewarding and hope our readers agree.
The book’s final chapter comprises a conversation with Ben Inker, CFA, a longtime portfolio manager at GMO who took over asset allocation products from Jeremy Grantham, the famed founder of the firm. Ben has a rather unique approach to investing, in general, and multi-asset strategies, in particular, that is rooted in both economic analysis and fundamental analysis and is implemented with a quantitative flair.
|In the latest issue (Issue 13 – August 2017), it covers the stories of:|
|Financial Crime Risk : Anti-Money Laundering Practices in Banking
To understand anti-money laundering, we have to understand what money laundering is. Money Laundering is the process of converting illegal funds into seemingly legitimate assets with the purpose of concealing the ownership or original source of these funds. This makes it difficult for the authorities to trace the origins of the funds. To counter this, the banking sector has established a set of internal regulations and system known as anti-money laundering. These are legal controls taken by financial institutions to investigate suspicious transactions to help prevent money laundering activities within the banking sector.
|The Rise of Text Mining in Financial Markets
The world is awash in data. Financial markets are awash in data. We are generating around 2.5 quintillion (2.5×1018) bytes of information every day, and there is an average of 4,000 brokerage reports a day comprising around 36,000 pages in 53 languages. As market participants try to maximize their competitive edge from the growing mountain of information, the nancial world increasingly feels there is a need to harness the power of big data and it has been shaping the way they acquire, analyze and utilize data. The recent development is the rapid expansion of text mining. Hence, this article will focus on the development of Text Mining technology as well as Text Mining technique.