As if Detroit did not have enough problems, a gap of several billion dollars has appeared in its pension fund (see the New York Times here). Actually, US public funds have long been notorious for using unrealistic return assumptions in their actuarial calculations where it is not unusual to see expected long term returns of […]
Lessons from the Reinhart-Rogoff saga The controversy about the mistakes in the Reinhart and Rogoff 2010 paper has left their reputation somewhat in tatters and has provided ample scope for expressions of Schadenfreude among economists. But there are actually also some interesting lessons in this sad development for those of us who are interested in […]
Risk adjustment is a fundamental element of modern portfolio theory. Alpha is defined as the return left over after the impact of all sources of risk, including strategic biases, has been accounted for (see the examples in my series on alpha). But a positive historical alpha alone is not sufficient to conclude that a particular […]
Their performance has been disappointing lately and they are too expensive but, at least, their managers’ interests are perfectly aligned with ours. This is a widely held view on hedge funds. But in fact, two of the three statements are false. The only one that is correct is that they are too expensive. I will […]
Rolf Banz spent his career in the investment industry in the US, the UK and, most recently, in Switzerland. To older people, he is known as the "father of the small firm effect". This weblog consists of a series of essays and shorter pieces on a range of issues at the intersection of institutional investment and investment theory. Please see this post for a description of the objectives of the weblog and the About page for further information on the author and the site.