Six Easy Pieces: Fundamentals of Asset Allocation Explained

Figuring out the best split for your assets often seems daunting. But it doesn’t have to be. This template can help you get started.

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Better Beta Is No Monkey Business

The infinite monkey theorem states that a monkey hitting keys at random on a typewriter keyboard for an infinite amount of time will almost surely type a given text, such as the complete works of William Shakespeare. This makes perfect sense to me, but says more about infinity than it does about monkeys.

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Time to Bench the Equity Benchmark Too?

While fixed-income investors are growing increasingly aware of the risks of benchmark-oriented bond portfolios in a period of rising rates, equity investors have recently also started to question the wisdom of cap-weighted indices. We would go even further and argue that the performance of a cap-weighted benchmark may be irrelevant for the long-term goals of [...]

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Ease the Burden of Managing Risk

Risk remains important for many institutional investors, but dealing with it effectively takes time and energy. How investors approach it should therefore depend on their governance capacity.

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Active Management: Don’t Drop the Pilot

For years, we’ve advised clients to hold diversified portfolios with balanced allocations to stocks, bonds and other assets. Lately, it’s been a hard sell, especially after years of underperformance by active equity managers. But the tide may be turning.

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The Death of Equities Redux

A famous Business Week article, “The Death of Equities,” concluded, “Today, the old attitude of buying solid stocks as a cornerstone for one’s life savings and retirement has simply disappeared.” Sound familiar? The article was published in August 1979.

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Manager Diversification: Why Conventional Wisdom Is Wrong

There’s a strong case to be made that investors should diversify their exposure to passive managers more—not less—than they diversify their exposure to active managers. 

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Don’t Blame Theory for the Credit Crunch

A paper published this week entitled The Death of Common Sense: How elegant theories contributed to the 2008 market collapse has garnered a fair bit of coverage in the financial media, resulting in headlines such as “Modern portfolio theory failing institutional investors” in Investment & Pensions Europe. But is it really true that theory led [...]

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Allocating to Hedge Funds Should Be a Two-Step Process

The experience of two bear markets in the past decade reminded investors of the importance of diversification. This, coupled no doubt with some envy of the “endowment model” of the likes of Yale and Harvard universities, has caused many to increase their allocation to hedge funds. While this often makes sense, we think it’s important [...]

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Big Data, Big Opportunity

A “big data” revolution is under way, transforming the volume and nature of data generated throughout the economy. This trend—driven by the data-intensive nature of innovations such as social networking—is highly disruptive to the tech sector, creating fresh challenges and opportunities for investors, as my colleague Chris Toub explains below.

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