Changing Risks in Global Equity Portfolios

摘要

Given recent changes in sector and style risk and in manager betting behavior in the global equity markets, we analyzed the relative importance of the major active-risk drivers and the implications of their relative importance for global multimanager portfolio construction. Using cross-sectional regressions and multimanager portfolio simulations, we found that the effect of style and sector bets on active manager risk increased after 1998 and that using style-balanced portfolios could have substantially reduced active risk during the 1998-2002 period. Most of the risk reduction, however, would have come from the diversification of stock/sector selection risk, because growth and value managers make different bets on certain sectors. Common bets on major countries, such as Japan or the United States, persisted during this period, but their importance decreased because of smaller benchmark-relative bets and country risk. In light of the changes, using multiple risk-control strategies to construct multimanager portfolios may be an effective way to thrive in different market environments.