Nicolas Rabener

Drive your investment success with intelligent analytics.

[Nicolas Rabener @Finominally]

Managed Futures vs Factor Investing: A 100-Year Perspective. Rethinking traditional asset allocation.
https://t.co/SqkKtFgPZN

[Nicolas Rabener @Finominally]

Can we replicate the fund? Given the tactical allocation strategy, a simple fund replication is challenging. However, we can create a better benchmark as the fund had a minor but consistent positive beta to the stock market. A combination of the S&P 500 (20%) and T-Bills (80%) would be more appropriate than only T-Bills. The return since 2016 would have been similar, but the benchmark had only half the volatility of PBAIX, thus generating a much higher Sharpe ratio.
https://t.co/cZIHVK43fO

[Nicolas Rabener @Finominally]

Product Review: BlackRock's $4bn Tactical Opportunities Fund (PBAIX).

What is the fund's strategy and performance?
PBAIX is a liquid alternative fund that aims to provide returns that are only weakly correlated with stocks and bonds. The fund can allocate long and short across asset classes and geographies. The fund has a track record dating back to 1993, but it changed to its current strategy in January 2016, so we will only analyze it from then onward.

The fund's factsheet takes U.S. T-Bills as the benchmark index, which is reasonable for an alternative fund, assuming it offers completely uncorrelated returns. PBAIX has outperformed its benchmark significantly since 2016.
https://t.co/pPbnOk2cxI

[Nicolas Rabener @Finominally]

The fund has generated minor diversification benefits, as adding a 25% allocation to a portfolio comprised exclusively of the S&P 500 would have increased the Sharpe ratio from 0.84 to 0.88. Adding T-Bills would have generated a similar increase in risk-adjusted returns.
https://t.co/MTIHFjzAOY

[Nicolas Rabener @Finominally]

Bonds vs Managed Futures: A 100-Year Perspective.
Rethinking traditional asset allocation.
https://t.co/nxbx78xf6h

[Nicolas Rabener @Finominally]

Can the portfolio be simplified? Yes, reduce the portfolio from 7 funds to 2 by buying the S&P 500 (SPY, 25%) and MSCI ACWI (ACWI, 75%). There are very few cases where a global equities portfolio requires more than one or two funds.
https://t.co/8wP3Yhfll8

[Nicolas Rabener @Finominally]

Portfolio Review: Franklin Templeton's Core Multi-Manager 100% Equity ETF Portfolio. What are the current holdings? Franklin Templeton's portfolio provides exposure to global equities via 7 ETFs, with the three largest allocations being the Franklin US Equity Index ETF (USPX, 39%), Franklin US Large Cap Multifactor Index ETF (FLQL, 18%), and iShares Core MSCI EAFE ETF (IEFA, 11%). The portfolio is cheap with 0.12% pa.
https://t.co/nRgMqtHikj

[Nicolas Rabener @Finominally]

Can fees be reduced? Yes, we can reduce the portfolio fees from 0.12% to 0.07% by replacing the expensive ETFs with cheaper alternatives. For example, we can replace the Vanguard Russell 1000 Growth Index Fund (VONG) with the Schwab US Large-Cap Growth ETF (SCHG). They provided similar returns, but the former charges 0.07% vs 0.04% for the latter. The cheaper portfolio performed better.
https://t.co/9a9RVhDpI9

[Nicolas Rabener @Finominally]

@choffstein Thanks for the inspiration! We referenced your research. Unfortunately, there is still so little focus on this, despite its importance.

[Nicolas Rabener @Finominally]

Timing Luck in Factor Investing.
How robust are your backtests, really?
https://t.co/mhXJ44GSlk

[Nicolas Rabener @Finominally]

However, the Sharpe ratio of QDSIX was slightly higher with 1.58 vs 1.48 for the equal-weighted portfolio of the AQR strategies. Stated differently, AQR has created value via fund selection, which is not often observed.
https://t.co/GVhOTZls20

[Nicolas Rabener @Finominally]

Product Review: AQR's $7.6bn Diversifying Strategies Fund (QDSIX). What is the fund's strategy and performance? QDSIX is a fund-of-funds that provides exposure to multiple alternative strategies via AQR funds, with some added tactical positioning. The core strategies are global macro, managed futures, equity market neutral, style premia, multi-asset, and diversified arbitrage. The management fee is 0.14% pa, but 1.2% pa on a look-through basis. 

The fund's factsheet features T-Bills as the benchmark index, which is appropriate for purely market-neutral strategies. However, QDSIX's largest allocation (30%) is to the AQR Multi-Asset Fund (AQRIX), which is essentially a global equities-bond fund, making this an odd benchmark. QDSIX has significantly outperformed T-Bills since its inception in 2020.
https://t.co/ht7JP3TyEG

[Nicolas Rabener @Finominally]

Can we replicate the fund? Given the complex underlying strategies, a simple replication is challenging. However, we can evaluate whether AQR has created value with its tactical allocations compared to an equal-weighted portfolio of the six underlying funds. The total return of QDSIX vs. the EW portfolio has been almost identical since 2021.
https://t.co/VpURO9ch5v