Insights & Research
We have published widely and carried out a long list of research projects. Below is a sample of our insights and research.
Insights
Illiquid assets encompass a wide array of investments that are difficult and costly to transact. Examples of Illiquid assets include publicly registered bonds and stocks that trade infrequently, or non-registered assets such as real estate and ownership interests in private companies. These assets appeal to financial investors for their potential diversification opportunities beyond the traditional asset classes: stocks and bonds As a result, illiquid investments have gained considerable attention in recent years and they have been involved in a number of legal cases.
In many legal cases where an investor allegedly suffers economic harm due to deficiency or inappropriateness of an investment, the question arises how to measure the economic harm and therefore the economic damages that arise. While the exact procedure can be subjective, there are several general principles that need to be adhered to in order to estimate sensible and economically defensible damages.
There has recently been a wave of litigation against corporate and university defined contribution (DC) pension plans for violating their fiduciary duty. Some of the largest pension plans in the nation have been affected. DC plan sponsors have a fiduciary duty. They always need to act in the best interest of plan participants. Plan sponsors have increasingly been challenged in the courts on various fronts. The main issues are discussed here.
We make the case that due to the general lack of consistency in performance of active mutual funds and hence the complexity of the task of identifying active funds that are likely to outperform in the future, most fiduciaries and plan participants would be better served by selecting passive rather than active funds. Selecting and monitoring passive funds is substantially more straightforward and less time consuming than for active funds.
Research
Buffer Funds – An Expensive Insurance Policy
Buffer ETFs are funds that seek to provide investors with the upside of an asset’s returns (generally up to a capped percentage) while also providing downside protection on the first predetermined percentage of losses (for example, on the first 10% or 15%).
Should pension plans include cryptocurrencies
We explore the investment properties of crypto currency in the context of retirement investment solutions. The importance of defined contribution 401(k) and 403(b) plans is unrivaled - they are critical for workers' financial security and preservation of living standard during the retirement years. Thus, they are protected under the highest investment standard - the fiduciary duty owed to participants by the plan sponsor. Placing speculative investments in a plan menu carries significant risks for the plan sponsor. We investigate the question why plan sponsors would risk liability by including crypto currency in the plan lineup. We find that the risk of cryptocurrency investments does not justify their inclusion - both from the perspective of plan sponsors as well as plan participants.