The authors of The Endowment Model of Investing provide an overview in this chapter of the traditional versus modern methods of endowment investing as a basis for understanding diversification and managing equities for endowments today. It is meant as a brief introduction to the topic and book. Discussed is how the tradition of the long term policy portfolio with relatively fixed asset categories was at one point ubiquitous in the endowment and foundation World but how now with increased market volatility and the appearance of attractive new asset classes, this tradition of overly rigid allocations and fixed asset buckets is questioned and put into old news. The late Peter L. Bernstein was one of the earliest and most articulate authors arguing for a rethinking of the policy portfolio concept.
This chapter includes topics on:
* Institutions working in a more flexible fashion with allocations
* wider allocation bands
* using assets that do not necessarily fit into the traditional categories
Autorentext
Martin L. Leibowitz is Managing Director in the U.S.
Research Department at Morgan Stanley. Prior to working at Morgan
Stanley, he was vice chairman and chief investment officer of
TIAA-CREF. Leibowitz is a leading authority in the fields of
security analysis and portfolio allocation. He is the author of
four books, including Franchise Value, and 138 articles,
eight of which have won the prestigious Graham and Dodd Award for
excellence in financial writing.
Anthony Bova is a Vice President in the Morgan Stanley
Research Department, focusing on institutional portfolio strategy.
He recently won the ninth annual Bernstein Fabozzi/Jacobs Levy
Award for coauthoring the article "Gathering Implicit Alphas in a
Beta World," which ran in the Spring 2007 issue of the Journal
of Portfolio Management.
P. Brett Hammond is a Managing Director and Chief
Investment Strategist for TIAA-CREF Asset Management. His group is
responsible for asset allocation modeling, institutional advising,
economic and market commentary, and investment product and
portfolio research. Within TIAA-CREF, Hammond has also published
extensively on pension issues, developed new approaches to
performance attribution, and played a key role in the creation of
the company's life-cycle inflation-linked bond funds.
Zusammenfassung
The authors of The Endowment Model of Investing provide an overview in this chapter of the traditional versus modern methods of endowment investing as a basis for understanding diversification and managing equities for endowments today. It is meant as a brief introduction to the topic and book. Discussed is how the tradition of the long term policy portfolio with relatively fixed asset categories was at one point ubiquitous in the endowment and foundation World but how now with increased market volatility and the appearance of attractive new asset classes, this tradition of overly rigid allocations and fixed asset buckets is questioned and put into old news. The late Peter L. Bernstein was one of the earliest and most articulate authors arguing for a rethinking of the policy portfolio concept.
This chapter includes topics on:
- Institutions working in a more flexible fashion with allocations
- wider allocation bands
- using assets that do not necessarily fit into the traditional categories
Inhalt
Preface.
Acknowledgments.
PART ONE Alpha/Beta Building Blocks of Portfolio Management.
Chapter 1 The Modern Endowment Allocation Model.
Truly Long-Term Orientation.
Novel Asset Classes and Special Access.
Remaking the Investment Manager Relationship.
More Market-Sensitive Allocations.
Asset Allocation.
Beta-Based Risk and Return: The Sigma and Beta Lines.
Notes.
References.
Chapter 2 Structural Betas and Alphas.
Finding the Beta in the Black Box.
The Structural Beta.
Return Components of Asset Classes.
Risk Components of Asset Classes.
Portfolio Beta Values.
Modern Allocations with Alternatives.
The Extreme Allocation.
Return Components at the Portfolio Level.
Comparison of Portfolios' Risks and Returns.
Implications for Institutional Portfolios.
Beta as the Key Risk Factor.
Notes.
PART TWO Beta-Based Asset Allocation.
Chapter 3 Beyond Diversification: Dragon Risk.
The Nature of Diversification.
Dragon Risk.
A Diversification Model.
Diversification in Sources of Return.
Potential Diversification Costs.
Overdiversification versus Dragon Risk.
Chapter 4 Reverse Asset Allocation Using Alpha Cores.
Simplifying the Portfolio Optimization Process.
The Alpha Core.
The Swing Assets.
The Fixed Alpha Core Segment.
Generality of the Alpha Core Representation.
Varying the Core Parameters.
The Cash Line Segment.
The Bond Bridge.
The Equity Extension Segment.
The Three-Segment Frontier.
The Frontier Slope.
The Uplifted Frontier.
Channel Risk.
Risk Mitigation and Asset Class Inclusion.
Conclusion.
Appendix.
References.
Chapter 5 The Efficient Frontier with Bonds as the Risk-Free Base.
The Equity Risk Premium.
Bond-Relative Alphas and Betas.
Risk Analysis.
Portfolio Level Analysis.
The Alpha Core.
Efficient Frontier Analysis.
The Alpha Effect.
Appendix.
Chapter 6 Expanding the Alpha Core.
Inherent Constraints on Alternative Assets.
Building an Alpha Core.
Maximum-Return Alpha Cores.
The Flower Diagram.
Expanding the Alpha Core.
Moving beyond Beta Domination.
Dual Active-Allocation Alphas.
Conclusion.
Chapter 7 Alpha-Driven Efficient Frontiers.
The Efficient Frontier in Alpha Space.
Increasing the Alpha Core Percentage.
Conclusion.
Chapter 8 The Societal Efficient Frontier.
Standard Efficient Frontiers.
The Swing Asset Frontier.
The Concept of a Societal Frontier.
Total Betas and the Diversification Paradox.
Dragon Risk Constraints and Climbing the Alpha Wall.
A Societal Frontier of Quantum Risk States.
Active Alphas and Other Risk-and-Return Tradeoffs.
Societal Gaps and Opportunities.
References.
Chapter 9 Equilibration.
Beta Domination and Constrained Alternatives.
Alpha Decay under Beta Domination.
Realized Returns versus Going-Forward Alphas.
Sharpe Ratio Decay.
Sequential Alpha Erosion.
Equilibration across the Societal Frontier.
References.
Chapter 10 Shortfall Risks and Efficient Frontiers.
Importance of Shortfall Risk in Portfolios.
Efficient Frontiers Using Fixed Alpha Cores.
Shortfall Probabilities.
Shortfall Regions in Risk-a...