Macro Factors & Risk-Premia-Based Strategy Performance
A number of alternative (risk-premia-based) strategies have performed poorly in the decade following the Great Financial Crisis (but pre-COVID).
Changes in beliefs — and the crowding that this may lead to — can sometimes exert a powerful effect on the efficacy of risk premia strategies. Consequently, we contend that timing and tilting of exposures to such strategies can meaningfully improve overall portfolio performance. Designing time-varying risk-premia allocation mechanisms requires expert craftsmanship, however, if it is to be successful (2017).