CAIA Viewpoints offer a summary-level look at industry trends and models that continue to shape alternative investment strategies. Each Viewpoint links to the full text of the paper as it appeared in CAIA journals.

September 23, 2019
Are the Robots Really Taking Over?

Artificial Intelligence…Machine Learning…Big Data… all of these are popular buzzwords that seem to appear everywhere, from investor presentation decks to conversations with people who believe the robots are coming for us. But, what exactly is A.I.? What are the ramifications? Should we be scared or unimpressed? In their article “Artificial Intelligence,” Frank Beham, CAIA, Roberto Obregon, CAIA, Edmund Walsh, and Timur Kaya Yontar attempt to break down some of these big concepts for our readers and explain how A.I. and Machine Learning might augment the investment profession. Read the full summary below.

September 23, 2019
Making Your Portfolio About #Goals

If you’re a social media junkie, you have probably seen “#goals” in your timeline. In most cases, the hashtag is referring to an attractive couple or an aesthetically pleasing plate of food. But what if people found your investment portfolio to be #goals? What if allocators shifted their thinking to aligning their portfolio allocation to targeted and measurable outcomes? In his article, “Outcome-Oriented Alternative Investments,” Masao Matsuda, CAIA explores this concept. This Viewpoint provides a high-level overview of the applicability of this concept, and shows how investment performance measurement can morph from a “relative to a benchmark” game to more of a “relative to a stated goal” game. Read the full summary below.

September 06, 2019
Real Assets "Inception": Diversification within Diversification

If the movie Inception taught us anything, it’s that Leonardo DiCaprio would likely approve of multiple levels of diversification in a portfolio. Institutional investors have long seen the benefits of including real assets in a portfolio, as they can provide diversification benefits to traditional allocations containing stocks and bonds, while also providing protection against unexpected inflation. But are institutions truly diversified? In other words, is simply owning real assets as a part of a portfolio enough? Read the full summary below.

July 16, 2019
Long Alpha and Activist Strategies

As the debate rages on between the benefits and detractors of active and passive management, institutions are beginning to look for a clearer delineation between the two investment styles. The author explores how concentrated long-only hedge fund strategies, known as long alpha strategies, might be a viable solution for institutions. Read the full summary below.

July 16, 2019
Positioning for Late Cycle with Defensive Equity

As of October 31, 2018, the MSCI World Index delivered an annualized return of 10.02% while cash returned 0.34%, representing an annualized 10-year equity risk premium of 9.68%. There are two big questions on the minds of many investors: where will things go from here, and how we should position our portfolios as we potentially enter the “late cycle?” Read the full summary below.

July 16, 2019
Risk Parity

Mean variance optimization (MVO) is a simple, yet well-regarded asset allocation technique designed to create a portfolio that maximizes it’s expected level of return for a given level of standard deviation. Many institutions construct diversified portfolios using this simple technique, attempting to maximize their risk-adjusted returns. While popular with many practitioners, MVO does have its drawbacks during implementation. The authors of this paper explore the applicability of constructing a portfolio using a risk parity approach, analyze the historical results, and discuss the benefits and issues with following this approach. Read the full summary below.

June 24, 2019
Commercial Real Estate in 2030

In “Technology, innovation and Disruption,” Jack Silbey and Filippo Rean highlight challenges for commercial real estate. As recent innovation in other industries has proceeded at a rapid pace, little has changed in the commercial real estate industry. The holding period for real estate is very long compared to other alternative asset classes, yet there is now a heightened pace of obsolescence. The industry is being disrupted. Commercial real estate is feeling the impact of innovation from exogenous industries and must adapt. Read the full summary below.

June 24, 2019
A Simple Approach to the Management of Endowments

The CAIA Endowment Investable Index released each quarter in the Alternative Investment Analyst Review was introduced by Hossein Kazemi and Kathryn Wilkens in “A Simple Approach to the Management of Endowments.” Endowments and foundations are tax exempt and charitable organizations that rely on permanent pools of capital to fund their activities. Institutions such as colleges, universities, hospitals, museums, scientific organizations, charitable entities, and religious institutions own these pools of capital. Read the full summary below.

May 14, 2019
Matching Sources of Returns to Desired Outcomes

Traditional asset allocation methods don’t work well with alternative assets. This is because when alternative assets are included in a stock/bond portfolio they don’t fulfill requirements of an asset class factor model: 1) mutually exclusive assets, 2) exhaustive coverage of securities, and 3) asset classes each having returns that differ. In “Alternative Alphas and Asset Allocation,” Masao Matsuda argues that there is an artificial boundary between traditional asset classes and alternative assets. Read the full summary below.

May 14, 2019
Does A+ Indicate ICO Excellence?

Perhaps somewhat ironically, in the blockchain space which was originally implemented to eliminate middlemen (or trusted authorities), several intermediaries are now emerging. These middlemen provide a wide range of information on initial coin offerings (ICOs) to assist investors in their assessment of the opportunities. By the end of 2017, there were more than 51 platforms with 18 of them assigning ratings to ICOs.  A natural question regarding the quality of the services provided by these middlemen then arises and is addressed in the paper, “New Blockchain Intermediaries: Do ICO Rating Websites Do Their Job Well?” by Dmitri Boreiko and Gioia Vidusso. Read the full summary below.