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.

November 26, 2019
Applying Factors in Chinese Equity Markets

With recent increased visibility into the China A-shares market, quantitative investors may finally have what they need to build a diversified equity portfolio. However, while investors can better link fundamental data to price returns, factor investing in the China A-share market brings its own set of unique challenges and results. In this Viewpoint, we discuss some of the takeaways from Rohit Shrivastava, Jaime H. Lee, and George D. Mussalli’s article, “Factor Investing In the China A-Share Market”, which as published in Volume 8, Issue 3 of the Alternative Investment Analyst Review. Read the full summary below.

November 26, 2019
Be Direct with Me, Please!

In an effort to decrease fees and increase access to attractive opportunities in the private markets, allocators are getting more creative with their private market allocations, opting for co-investing opportunities or even directly investing in portfolio companies. While seemingly attractive in some ways, direct investing comes with other complications and for consideration. In this Viewpoint, we discuss some of the takeaways from Paul Kenny’s article, “Direct Investments”, which as published in Volume 8, Issue 3 of the Alternative Investment Analyst Review. Read the full summary below.

October 28, 2019
Transforming a Solid into a Liquid

The rapid pace of technology has helped the democratization process of financial markets, benefiting the end investor in my ways. This is especially true for investors that buy and sell shares in public markets; transparency has increased while transaction costs and investment minimums have decreased. However, the same cannot necessarily be said for investors in private markets, specifically real assets. Investors who wish to participate in private real assets often must have deep wallets and a high tolerance for long lockup periods. What if there was a way to democratize private markets in a manner analogous to what’s happened in public markets? “Tokenizing Real Assets,” by Jeroen van Oerle of Robeco explores this concept. Read the full summary below.

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.