Building a Better Passive Portfolio Management Mousetrap

在最近的博客文章中，“Passive Management Does Not Equal Passive Investing,“我们展示了actu被动管理的投资组合ally create an active investment in which volatility is not benign and risk exposures can vary wildly over time. So if we could fix the problem and reduce exposure to spikes in market volatility, would a passive portfolio deliver better results?

为了解决这个问题，让我们了解被动投资是如何在第一位置创造价值的。成功被动投资的关键是多元化。这是一个简单的想法：在投资和时间蔓延的平等风险，以便投资组合以持续的风险水平和暴露运行。获奖者应该超过输家。

But varying risk exposures and risk levels are the enemy of the traditional passive approach. That’s because they lead to leaps in volatility. When a portfolio’s exposures are constantly changing, diversification isn’t given a chance to work.

For any investor, volatility can be especially damaging because of the effects of compounding. For example, a $100 investment in a high-volatility stock that rises 50 percent and falls 50 percent has lost $25. Yet an investment in a low-volatility stock that goes up 5 percent and falls 5 percent has only lost 25 cents. This pattern is caused by a phenomenon known as “risk drag.” Over the five largest down markets since 1926, the U.S. market-cap-weighted equities index lost 50 percent on average, which each time took nearly five years to recoup. This recovery period is known as the pain of risk drag. Diversification is supposed to reduce risk drag, which is the source of its value.

虽然这些示例是极端的，但它们有助于说明传统被动管理的投资组合的缺陷，其中不同的位置随着时间的推移不等于，并且由于世界市场和事件的动态而波动。好消息是，通过创建一个在行业中采取静态和不断的风险的投资组合可以解决这个问题。

To test the theory, we constructed a model portfolio — a “Balanced S&P 500” index tracker — that rebalanced each month to equalize risk exposures for each market-cap-weighted S&P 500 sector. We also operated the portfolio at the average long-term risk level of the index. Then we compared this portfolio with the S&P 500 index. As the chart shows, we found that by consistently maintaining equal risk exposures and constant overall risk, the portfolio would have returned 1.5 percent more per year on average than the S&P 500. And the drawdown — the peak-to-trough decline — would have been 20 percent lower, so an investor would have enjoyed higher returns with lower drawdown risk.

There are, of course, challenges to this approach. For example, as shown in the chart, as the Internet bubble inflated, the Balanced S&P 500 trailed the S&P 500 by a significant amount. At that time the S&P 500’s volatility was very high, and under such a condition taming the turbulence restrained market gains.

In fact, volatility is not always the best measure of risk because it acts to reduce not only outsize losses but also, unfortunately, outsize gains. But over time, our research suggests, clamping down on volatility and maintaining diversification should prevail. Investors should always remember that “winning the loser’s game” — as described in the classic book of that name by Greenwich Associates founder Charles D. Ellis — is all about losing less in down markets.

Traditional passive portfolios are susceptible to large drawdowns and unstable performance. We think that a better passive mousetrap can be built by striving for static risk across industries — and over time — to reduce risk drag and give diversification time to deliver results.

Ashwin Alankar and Michael DePalma are co–chief investment officers of tail-risk parity services, and Richard Abramson is managing director of client solutions, all atAllianceBernstein.

See AllianceBernstein’s disclaimer.

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