lerie’s Reviews > Asset Management: A Systematic Approach to Factor Investing > Status Update
lerie
is on page 99 of 720
Interesting points:
Identifying underlying factor risks is crucial in maximising diversification benefits
Giving invt vehicles group like PE/hedge funds do not make them asset classes
- alt invt but may share same factor risks as traditional ivts
Variance optimiser; not treating them as asset classes
Diversification is often overstated
— Dec 19, 2020 11:32AM
Identifying underlying factor risks is crucial in maximising diversification benefits
Giving invt vehicles group like PE/hedge funds do not make them asset classes
- alt invt but may share same factor risks as traditional ivts
Variance optimiser; not treating them as asset classes
Diversification is often overstated
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Random qns off the top of my head @ 4AM:- can real assets (I.e art) act as a true diversification benefit?
- how closely r/d is the art market with other mkts?
- how can we calculate future E(R) specifically for blue chip pieces?
- cov of art & eq for example?
- is the weight of art in UHNWI portfolios enough to substantiate the need for it as a hedge?
- can it rly be an inflationary hedge?
- risks involved? (Fire, destruction, theft, depreciation, material loss, storage)
- external and indirect costs included in holding art as an asset?
Economic framework approach - delivers est. of reasonable E(R)
Black @ Litterman: observe market caps/weights
- Market is a mean-variance portfolio implied by CAPM equilibrium theory
- Mkt wt.: suggest mkt’s expectations of future returns
B&L used the CAPM - to reverse engineer future E(R) [unobservable] from markets caps [observable]
- indv investors can adjust the mkt-based wt. according to their own beliefs