Windham Insights Series

Case Study: Asset Management Group of Top 10 National Bank

October 3rd, 2018|

We spoke with Samantha*, the Chief Investment Strategist in the Asset Management division of a large national bank* to discuss how the Windham Portfolio Advisor helps her and her team achieve their goals. Samantha and her team are responsible for developing all of the formal strategic and tactical asset allocation recommendations across the asset management business at her company. They develop 10-year and multi-year capital market assumptions and produce thought-leadership content for various publications. Q: What caused your team to look for a tool like the WPA? What [...]

Two Things About Performance Fees

September 6th, 2018|

Two Things About Performance Fees Institutional investors continue to allocate a significant and growing fraction of their portfolios to alternative investments such as hedge funds, private equity, and real estate, notwithstanding the challenges these relatively illiquid assets posed to them during the financial crisis. We suspect that investors now pay considerable attention to their liquidity needs and factor these needs into their decision to invest in alternative investments. We are fairly confident, though, that most investors do not fully appreciate the consequences of a second feature of alternative [...]

Investment Policy Statements

August 22nd, 2018|

The Benefits of Using an Investment Policy Statement An investment policy statement is a written agreement between a portfolio manager and a client, outlining the client’s expectations and how the advisor intends to fulfill those expectations. It formalizes the investment goals of the client, solidifying and defining a plan before the fiduciary relationship begins. An investment policy statement is typically drafted after the portfolio manager has met with the client and established their investment objectives, liquidity requirements, and risk tolerance. It displays all of the information that the [...]

Global Market Portfolios, Part Two: Methodology

August 8th, 2018|

Global Market Portfolios Part Two: Market Portfolio Methodology Introduction The global market portfolio is a market capitalization weighted representation of all tradable and non-tradable asset classes in the world market, displaying the average portfolio held by investors. It isn’t affected by unsystematic risk and can therefore be used to measure the amount of systematic risk within the framework of the Capital Asset Pricing Model (CAPM). If you’re interested in further reading on the importance and usage of the global market portfolio, please visit part one. Since the true [...]

Global Market Portfolio: Part One

July 30th, 2018|

The global market portfolio is a market capitalization weight representation of all tradable and non-tradable asset classes available in the world market, in proportion to their presence in the market. It represents an aggregation of every investor’s opinion about the valuation of assets. More simply, it displays the average portfolio held by investors. The global market portfolio protects against unnecessary risks because it is only exposed to systematic risk, or the risk that inherently affects the market as a whole. The global market portfolio serves as both a [...]

Portfolio Diversification: What You Need To Know

July 19th, 2018|

Investing is a stressful and fickle business. Technology changes, fads end, and people experience losses. Investing becomes even more intimidating by the fact that it is often subject to unpredictable factors, such as natural disasters, geopolitical relationships, and scandal. The most efficient and effective way to protect oneself (or one’s client) against these risks is through portfolio diversification. The principle of portfolio diversification was first formalized in Harry Markowitz’s seminal article, Portfolio Selection. In this article, Markowitz introduced his modern portfolio theory, a framework for portfolio construction that achieves [...]

An Appetite for Factors

June 20th, 2018|

It is often said that a good way to make sure you’re eating healthy is to have a colorful plate. A mix of vegetables (often green), starches (yellow), and protein (pink/red) make for a balanced and nutritional meal, correct? Diversify your ingredients, so to speak, and you’ll be sure to get all of the vitamins and minerals you need. For example, let’s look at the cheeseburger. The juicy, colorful cheeseburger. The toasted, brown bun atop golden yellow cheese, bright red ketchup, green lettuce, ripe red tomatoes, and of [...]

Full-scale Optimization

June 5th, 2018|

Many assets and portfolios have return distributions that display significantly non-normal skewness and kurtosis. For example, hedge fund returns are typically negatively skewed and fat-tailed. Because mean-variance optimization does not account for skewness or kurtosis, it mis-allocates assets for investors who are sensitive to these features of return distributions. However, with the aid of computational efficiency, we can now perform full-scale optimization as an alternative to mean-variance optimization. With this approach, we calculate a portfolio’s utility for every period in our sample, considering as many asset mixes as necessary, [...]

Six Tools Every Advisor Should Be Using

May 24th, 2018|

As the financial technology (“fintech”) industry continues to grow, it can be difficult to understand the difference between tools that are essential to your business and tools that are simply trendy. Tools for financial advisors are marketed with such urgency that you may end up with a product you don't need! To evaluate the level of necessity of certain fintech solutions, focus on three criteria: Grow your business Build client trust Increase efficiency In this article, you will find six tools for financial advisors do all of the [...]

Asset Allocation Defined

April 6th, 2018|

If you’ve ever sought to learn more about investing, you have probably come across the term “asset allocation” more than a few times, in a lot of conflicting ways. You've probably read it in a long, complicated article that didn't actually define what asset allocation is, which was likely followed by a few not-so-subtle suggestions on where you can find the “best allocation for you” and where to invest your (or your clients) hard-earned money. Here, we seek to answer the very simple question: What is asset allocation? [...]