Asset Allocation: From Theory to Practice and Beyond, Second Edition. 2021. William Kinlaw, CFA, Mark Kritzman, CFA, and David Turkington, CFA. Wiley. Key Points: Asset allocators must consider various factors including asset selection, risk and return forecasting, and currency risk management. Seven essential characteristics of every asset class are identified, including stability of composition, direct investment capability, similarity between components, … Read More

“A forecast is a prediction; we’re saying what we think will happen. A scenario is different . . . it generally looks much further out and is trying to build a picture of the future in extreme uncertainty.” — Seb Henbest Predicting the future is impossible without taking into account the level of uncertainty that exists. When making investment decisions … Read More

– The traditional capital asset pricing model (CAPM) doesn’t always work in practice, so a new model called the Holistic Market Model has been developed to address its flaws. – The Holistic Market Model re-engineers the CAPM by measuring the equity risk premium (ERP) correctly and accounting for hidden risk premia embedded in US Treasury bonds. – The model calculates … Read More

Key Points: The greatest challenge in valuing companies is dealing with uncertainty. Uncertainty is highest for younger companies due to less history and infinite potential. As humans, our first reaction to uncertainty is often denial or avoidance. Damodaran recommends learning to deal with biases that lead us astray when facing uncertainty. He suggests a framework of simple valuation rules to … Read More

Key Points: Climate change disproportionately affects women and girls, particularly in developing economies. Applying a gender lens to public funds focused on climate solutions is crucial. Higher levels of women in leadership benefit corporate performance, operations, and risk management. Gender lens equity funds have seen steady growth, with $4.1 billion in assets under management. Renewable energy funds have a low … Read More

The banking sector has experienced a successful year in terms of earnings, with record-breaking results. However, bank stock prices have yet to reach their previous highs. Despite this, it is important to analyze the three key drivers that are currently influencing the industry in order to gain insight into its mid- to long-term outlook. 1. The Transition to a Higher … Read More

Individuals who achieve remarkable success in business or investing often attribute their accomplishments to their skills and hard work. While these factors certainly contribute to their success, luck plays a pivotal role, especially when it comes to extreme levels of achievement. In fact, luck is so integral to extreme success that those who attain it can largely attribute it to … Read More

Investors around the world use the Sharpe Ratio, along with other risk-adjusted metrics, to compare the performance of mutual fund and hedge fund managers, as well as asset classes and individual securities. The Sharpe Ratio is a measure that aims to describe the excess return relative to the risk of a strategy or investment. It is calculated by subtracting the … Read More

Key Points: – Decentralized finance (DeFi) has the potential to transform the traditional financial system by eliminating inefficiencies and increasing access to financial services. – DeFi can solve five inherent problems of the traditional financial system: inefficiency, limited access, opacity, centralized control, and interoperability. – However, DeFi also comes with its own set of risks, including smart-contract risk, oracle risk, … Read More