Webinar – US Stock-Bond Correlation: What Are the Macroeconomic Drivers?
In our on-demand webinar, PGIM experts to explain their research findings, explore how macroeconomic drivers could shift stock-bond correlation.
Welcome to our inaugural bulletin, designed to provide you with color and context about the PGIM Institutional Advisory & Solutions (IAS) group’s mission, recent work and research pipeline.
Maintaining client connectivity during a challenging year: Our group abruptly exited our Newark offices last March and has not met with clients in person for the past year. Yet, like you, we have strived to connect in new ways and grow our capabilities. In 2020, IAS welcomed two new team members, published 10 research papers, completed seven major bespoke portfolio structuring projects, launched a blog focusing on real assets, and initiated a Research Paper Series in conjunction with the SSRN Financial Economics Network.
A look back on 2020: Our research program centers on Real Assets, Portfolio Construction, Manager Allocation and Selection, and Illiquid Private Assets. Our research aims to provide allocators with practical, implementable advice as they make portfolio construction decisions. For example, we launched our asset allocation framework, OASIS, to help CIOs analyze how allocations to illiquid private assets, in combination with commitment pacing strategies and fund-selection skill, affects their portfolios’ ability to respond to liquidity demands. This framework allows a CIO to quantify the interaction between portfolio structure and performance, enabling the CIO to make better, more informed portfolio liquidity decisions. As another example, we developed a methodology to help CIOs determine “What is the optimal number of managers?” A CIO can express preferences across different manager types, incorporate their manager selection skill, management fee function, and surveillance cost to solve for the optimal number of managers and associated manager allocations that can achieve the highest expected information ratio. Links to our recent work, and short summaries, can be found below.
A look ahead to 2021: Several new projects will build upon our efforts to provide helpful advice and portfolio construction tools – the integration of real estate and infrastructure assets, with their unique cash flow properties, into OASIS; analyzing the portfolio allocation implications of the links between macroeconomic policies and the correlation structure of public assets; how real asset holdings of public pension funds have evolved over time; and how to evaluate the diversification benefits of illiquid private assets within a portfolio using our fair comparison framework based on the terminal distribution of wealth. Please be on the lookout for these and other research papers in 2021!
As we set course for the coming year, client needs remain our lodestar. Toward this end, and alongside our colleagues in PGIM’s Institutional Relationship Group, we aim to continue to engage in deep, wide-ranging and dynamic client conversations to inform our research agenda. We look forward to our ongoing partnership, and we wish you continued success in 2021.