How much business risk is hiding in your portfolio?

This is the second in an occasional series of posts on how to build a robust investment process. Part 1 was addressed to the individual investor and trader (see The ways your trading system could lead you astray). This posts explores the issues that face the professional and institutional investor. I had illustrated in the...

Do you have what it takes to succeed in finance? (Dani Rodrik trilemma edition)

Dani Rodrik of the Harvard Kennedy School has outlined a trilemma of the global economy.     The Economist explained the trilemma this way: Dani Rodrik of Harvard University is the author of the best-known such critique. In the late 1990s he pointed out that deeper economic integration required harmonisation of laws and regulations across...

Peak robo?

We all know about how the business model of the robo-advisor works. First, determine the appropriate asset mix based on the risk, return, tax regime and other specific needs of the client. Then, build the portfolio and rebalance it on a periodic basis. The typical investment process can be summarized by the following steps: Determine...

The dirty little secret behind “smart beta” investing

Some minor buzz has arisen among finance academics and professionals as a result of a paper by Ronald Kahn and Michael Lemmon, both of whom are employed by Blackrock, entitled The Asset Manager’s Dilemma: How Smart Beta Is Disrupting the Investment Management Industry. Here is the abstract: Smart beta products are a disruptive financial innovation...