With bonds yields near all time lows and stock valuations near all time highs, the future returns of the 60/40 portfolio don't look promising. This has led many investors to move up the risk curve in an effort to boost their returns. But that increased risk also comes with an increased chance of significant problems in future market drawdowns.
This week, we talk to two guests who have come up with an interesting approach that attacks the problem of lower future expected returns in a very different way. We talk to Corey Hoffstein of Newfound Research and Rodrigo Gordillo of Resolve Asset Management about their new paper, Return Stacking: Strategies For Overcoming a Low Return Environment. We discuss how the combination of prudent leverage and uncorrelated return streams can potentially add return to a portfolio without a substantial increase in risk.
We hope you enjoy the discussion.
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Excess Returns is an investing podcast hosted by Jack Forehand (@practicalquant) and Justin Carbonneau (@jjcarbonneau), partners at Validea. Justin and Jack discuss a wide range of investing topics including factor investing, value investing, momentum investing, multi-factor investing, trend following, market valuation and more with the goal of helping those who watch and listen become better long term investors.
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