The New Science of Asset Allocation: Risk Management in a Multi-Asset World (Hardcover)

Preface.

Acknowledgments.

Chapter 1 A Brief History of Asset Allocation.

In the Beginning.

A Review of the Capital Asset Pricing Model.

Asset Pricing in Cash and Derivative Markets.

Models of Return and Risk Post-1980.

Asset Allocation in the Modern World.

Product Development: Yesterday, Today, and Tomorrow.

Notes.

Chapter 2 Measuring Risk.

What Is Risk?

Traditional Approaches to Risk Measurement.

Classic Sharpe Ratio.

Other Measures of Risk Assessment.

Portfolio Risk Measures.

Other Measures of Portfolio Risk Measurement.

Value at Risk.

Notes.

Chapter 3 Alpha and Beta, and the Search for a True Measure of Manager Value.

What Is Alpha?

Issues in Alpha and Beta Determination.

Problems in Alpha and Beta Determination.

Multi-Factor Return Estimation: An Example.

Tracking Alternatives in Alpha Determination.

Notes.

Chapter 4 Asset Classes: What They Are And Where To Put Them.

Overview and Limitations of the Existing Asset Allocation Process.

Asset Allocation in Traditional and Alternative Investments: A Road Map.

Historical Return and Risk Attributes and Strategy Allocation.

Traditional Stock/Bond Allocation versus Multi-Asset Allocation.

Risk and Return Comparisons Under Differing Historical Time Periods.

Extreme Market Sensitivity.

Market Segment or Market Sensitivity: Does It Matter?

How New Is New?

Notes.

Chapter 5 Strategic, Tactical, and Dynamic Asset Allocation.

Asset Allocation Optimization Models.

Strategic Asset Allocation.

Tactical Asset Allocation.

Dynamic Asset Allocation.

Notes.

Chapter 6 Core and Satellite Investment: Market/Manager Based Alternatives.

Determining the Appropriate Benchmarks and Groupings.

Sample Allocations.

Core Allocation.

Satellite Investment.

Algorithmic and Discretionary Aspects of Core/Satellite Exposure.

Replication Based Indices.

Peer Group Creation – Style Purity.

Notes.

Chapter 7 Sources of Risk and Return in Alternative Investments.

Asset Class Performance.

Hedge Funds.

Managed Futures (Commodity Trading Advisors).

Private Equity.

Real Estate.

Commodities.

Notes.

Chapter 8 Return and Risk Differences among Similar Asset Class Benchmarks.

Making Sense Out of Traditional Stock and Bond Indices.

Private Equity.

Real Estate.

Alternative REIT Investments Indices.

Commodity Investment.

Hedge Funds.

Investable Manager Based Hedge Fund Indices.

CTA Investment.

Index versus Fund Investment: A Hedge Fund Example.

Notes.

Chapter 9 Risk Budgeting and Asset Allocation.

Process of Risk Management: Multi-Factor Approach.

Process of Risk Management: Volatility Target.

Risk Decomposition of Portfolio.

Risk Management Using Futures.

Risk Management Using Options.

Covered Call.

Long Collar.

Notes.

Chapter 10 Myths of Asset Allocation.

Investor Attitudes, not Economic Information, Drive Asset Values.

Diversification Across Domestic or International Equity Securities is Sufficient.

Historical Security and Index Performance Provides a Simple Means to Forecast Future Excess Risk-Adjusted Returns.

Recent Manager Fund Return Performance Provides the Best Forecast of Future Return.

Superior Managers or Superior Investment Ideas Do Not Exist.

Performance Analytics Provide a Complete Means to Determine Better Performing Managers.

Traditional Assets Reflect “Actual Values” Better Than Alternative Investments.

Stock and Bond Investment Means Investors Have No Derivatives Exposure.

Stock and Bond Investment Removes Investor Concerns as to Leverage.

Given the Efficiency of the Stock and Bond Markets, Managers Provide No Useful Service.

Investors Can Rely on Academics and Investment Professionals to Provide Current Investment Models and Theories.

Alternative Assets Are Riskier Than Equity and Fixed Income Securities.

Alternative Assets Such as Hedge Funds Are Absolute Return Vehicles.

Alternative Investments Such as Hedge Funds Are Unique in Their Investment Strategies.

Hedge Funds Are Black Box Trading Systems Unintelligible to Investors.

Hedge Funds Are Traders, Not Investment Managers.

Alternative Investment Strategies Are So Unique That They Cannot be Replicated.

It Makes Little Difference Which Traditional or Alternative Indices Are Used in an Asset Allocation Model.

Modern Portfolio Theory Is Too Simplistic to Deal with Private Equity, Real Estate, and Hedge Funds.

Notes.

Chapter 11 The Importance of Discretion in Asset Allocation Decisions.

The Why and Wherefore of Asset Allocation Models.

Value of Manager Discretion.

Manager Evaluation and Review: The Due Diligence Process.

Madoff: Due Diligence Gone Wrong or Never Conducted.

Notes.

Chapter 12 Asset Allocation: Where Is It Headed?

An Uncertain Future.

What Is the Definition of Order?

Costs and Benefits.

Today's Issue.

Possible Governmental and Private Fund Responses to Current Market Concerns.

Note.

Appendix: Risk and Return of Asset Classes and Risk Factors Through Business Cycles. 

Glossary: Asset Class Benchmarks.

Bibliography.

About the Authors.

Index.