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2nd Quarter 1999
IN THIS ISSUE
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- Articles
Ulf LindahlThe author argues that the need for increased foreign investment exposure
means increased exposure to potential currency losses, but also potential
increases in total return of up to 190 basis points per year from more
sophisticated management of currency risk. To Lindahl, that means pension funds
and other large investment managers can no longer afford to leave their currency
exposure unmanaged or passively hedged. Nathan MostModest-looking but crucial modifications to the fundamental design of
Universal Investment Trusts and mutual funds are at the root of SPDRs, WEBS and
Diamonds. They have given the American Stock Exchange a new lease on life. The
reason is simple: The new structures allow professional investors and money
managers to reap important benefits. Robert Fernholz, Ph.D.Diversity weighting, the author’s alternative to capitalization weighting,
should add 45 basis points per year to returns on average, by his calculation.
After 1998, when the U.S. equity markets became concentrated in a small number
of the largest companies to a historic degree, this method might have even
greater potential value if there is regression toward the historical mean. Todd MillerThe author reviews the major pluses and minuses of using futures contracts to
track an index in a passive portfolio and concludes the balance is heavily in
favor of the pluses. He goes beyond futures to describe a strategy for
outperforming the benchmark index using options. Peter Jankovskis, Ph.D., Janna Sampson, Giri CherukuriExisting growth and value indexes have been criticized for failing to deliver meaningful differences in return from the broad market James ClunieCan a series of indexed country portfolios be actively managed at the allocation level and outperform the sum of the indexes? John BlinConstructing an index to include the correlations you want and exclude those you don’t want can be more complicated than it seems. Eric Brandhorst, Paul DuncombePlans, in general, have widely differing characteristics and objectives depending on plan maturity,
workforce/retiree ratio, risk tolerance, legal restrictions, etc. There is no single currency policy that
will be optimal for all. Each needs to develop a currency policy that suits its particular characteristics
and objectives. Creating a currency policy requires that a number of decisions be made, and this
article explores those decisions and their impact.
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BROWSE ARCHIVES
 1999 
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