I enjoyed the write-up! Quick question: when you're building an all-Beta portfolio with equal risk-contribution, aren't you implicitly assuming that all assets have the same Sharpe? That seems reasonable for most assets, but how do you reconcile that for commodities and FX? I would greatly appreciate your insight.
Alex, amazing stuff, thank you! In your list of potential ways to leverage the portfolio, you don’t mention doing so with an overlay of options , whether as stock replacement (ITM Leaps or zebras) or to smooth out the vol, add delta etc . Realizing this adds complexity and requires more hands on management and adds theta burn etc - any high level comments on this approach to levering?
yeah non dollar investors you are trying to make the same portfolio out of your domestic assets, if possible. For europe, japan, the uk, canada or australia it’s doable though less liquid. For em it’s harder, and you probably want more ‘foreign’ (aka western) assets in the portfolio and I would go 50/50 ratio of domestic/foreign as opposed to 80/20
Interesting. I’d like to learn more about AQR risk parity. Does it make sense to add AQR Long-Short equity? Or momentum strategies?
This article is for noobs
Yes, that’s the idea. The second one is much more technical and will alienate a lot of non mathy folks so we’re setting the stage.
I enjoyed the write-up! Quick question: when you're building an all-Beta portfolio with equal risk-contribution, aren't you implicitly assuming that all assets have the same Sharpe? That seems reasonable for most assets, but how do you reconcile that for commodities and FX? I would greatly appreciate your insight.
Alex, amazing stuff, thank you! In your list of potential ways to leverage the portfolio, you don’t mention doing so with an overlay of options , whether as stock replacement (ITM Leaps or zebras) or to smooth out the vol, add delta etc . Realizing this adds complexity and requires more hands on management and adds theta burn etc - any high level comments on this approach to levering?
Thanks again, greatly enjoying the content!
How would construction be any different for a non USD portfolio, if at all? I enjoyed the write-up, thank you for the clear layout.
yeah non dollar investors you are trying to make the same portfolio out of your domestic assets, if possible. For europe, japan, the uk, canada or australia it’s doable though less liquid. For em it’s harder, and you probably want more ‘foreign’ (aka western) assets in the portfolio and I would go 50/50 ratio of domestic/foreign as opposed to 80/20