Variations on Minimum Variance

Presentation Summary:

Analysis shows that the performance of certain minimum variance portfolios can provide an after-transaction-costs annual return significantly higher than the S&P 500 with much less volatility. Leveraging our style-based US Fundamental Risk Model, we demonstrate how the minimum variance portfolio can be used in combination with style tilts. We discuss the difficulty in beating the unconstrained minimum variance portfolio, and how style tilts can be implemented to achieve higher levels of return without commensurately higher risk. By extension, our research suggests that for many active strategies the inclusion of a minimum variance objective, while maintaining strong tilts to the original strategy, is likely to enhance manager performance.

About the Speaker:

Ruben Falk, Senior Product Manager, Capital IQ, has been with Standard & Poor’s Capital IQ and ClariFI in Europe and the US since 2006. Prior to that he was Founder and CEO of marketscalpel.com. From 1995-2002, Ruben was a Director with UBS Investment Bank after having served 3 years with LEK Consulting. Ruben has his masters degree in finance from the Walter Haas School of University of California at Berkeley.

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