A monthly newsletter for strategic-minded investors
The Beta Investment Report is a monthly newsletter, edited by James Picerno. Available by
subscription, BIR is emailed as a PDF file, mid month, 12 times a year.
BIR is intent on finding opportunities in the global capital and commodity markets at the asset class
level. In search of strategic insight, BIR analyzes the world's major asset classes—the so-called betas
of stocks, bonds, real estate (REITs) and commodities as well as their principal subcategories. The
goal is providing readers with an independent research service to aid in the design and management
of globally diversified investment portfolios using index mutual funds and exchange traded funds
(ETFs).
BIR focuses exclusively on analysis of the world's broadly defined market betas and their primary
subgroups. The goal is managing risk and maximizing return through asset allocation. The newsletter's
core philosophy is analyzing a broad definition of the market portfolio and cautiously looking for
opportunities to adjust the passive asset allocation of the world's stocks, bonds, REITs and
commodities in the quest for modestly higher risk-adjusted returns. In pursuit of this goal, we recognize
that risk management is by far the more powerful tool for investment success compared to the
common approach of chasing return. With that in mind, BIR strives to empower readers with timely
analysis and perspective on the critical task of managing asset allocation through time.
At the heart of BIR's strategy is our proprietary benchmark: the Global Market Index. This unmanaged
index of the major asset classes is comprised of the world's equities, bonds, REITs and commodities,
each weighted passively according to their respective market values. A key part of our analysis is
estimating equilibrium returns for this benchmark's components and for the index overall. Equilibrium
return estimates are calculated by analyzing volatility and correlation for the major asset classes.
Finance theory tells us to avoid forecasting equilibrium returns directly. A more reliable approach is
calculating implied returns via the relationship among risk parameters. In effect, we're reverse
engineering the market's prospective long-run return by analyzing risk, an approach that offers more
reliable insights compared with attempting to predict returns directly. We then analyze the individual
asset classes on several levels, looking for clues about the near-term risk and return outlook. When our
intermediate views on an asset class differ substantially from the equilibrium projections, we adjust the
asset allocation in our three model portfolios.
In short, our strategy is focused on modifying the market portfolio modestly in search of enhanced risk-
adjusted results relative to our benchmark, the Global Market Index. Finance theory tells us that in the
very long run the Global Market Index will be the optimal portfolio for the average investor with an
infinite time horizon. The fundamental challenge of investing is customizing the market portfolio to
satisfy each investor's risk tolerance, time horizon, financial situation, etc. With that in mind, we
manage a trio of model portfolios aimed at investor composites with three levels of risk.
Combining the value-minded philosophy pioneered by Ben Graham with the power of indexing and an
updated interpretation of modern portfolio theory, BIR synthesizes the best of both worlds and delivers
a unique source of financial intelligence to subscribers.
Among the features you'll find in BIR:
• A strategic review of return and risk among the major asset classes
• In-depth profiles of individual asset classes and their index mutual fund and ETF proxies
• Interviews with some of the world's smartest investment strategists and money managers as well the
most-celebrated finance professors and other researchers
• Updates on new academic research that enhances our understanding of portfolio theory and
managing asset allocation
• Valuation surveys of the broad asset classes, such as comparing current dividend yields and interest
rates to their historical range
• Strategic and tactical analysis of portfolio rebalancing opportunities
BIR is unlike any other investment publication you've read. The newsletter focuses on the strategic
perspective that only comes from analyzing markets, individually and collectively. Recognizing that
investment success comes from enlightened risk management, BIR brings you what's relevant and
necessary—the numbers, the news and the global context—for achieving strategic investment success
over medium- and long-term horizons with a multi-asset class portfolio strategy.
James Picerno is the editor of BIR. Formerly a financial reporter with Bloomberg and Dow Jones, he's
been writing about investment strategy, markets and economics since the late-1980s. Since 2003,
he's been editing CapitalSpectator.com, a web site that publishes essays and analysis on strategic
portfolio issues. In addition, he's the author of Dynamic Asset Allocation: Modern Portfolio Theory
Updated For The Smart Investor, a book that will be published by Bloomberg Press in February
2010. Dynamic Asset Allocation analyzes the key financial lessons for portfolio strategy based on
financial economic research from the last 50 years. The book also serves as the intellectual foundation
for BIR's investment strategy.
The Beta Investment Report is a monthly newsletter, edited by James Picerno. Available by
subscription, BIR is emailed as a PDF file, mid month, 12 times a year.
BIR is intent on finding opportunities in the global capital and commodity markets at the asset class
level. In search of strategic insight, BIR analyzes the world's major asset classes—the so-called betas
of stocks, bonds, real estate (REITs) and commodities as well as their principal subcategories. The
goal is providing readers with an independent research service to aid in the design and management
of globally diversified investment portfolios using index mutual funds and exchange traded funds
(ETFs).
BIR focuses exclusively on analysis of the world's broadly defined market betas and their primary
subgroups. The goal is managing risk and maximizing return through asset allocation. The newsletter's
core philosophy is analyzing a broad definition of the market portfolio and cautiously looking for
opportunities to adjust the passive asset allocation of the world's stocks, bonds, REITs and
commodities in the quest for modestly higher risk-adjusted returns. In pursuit of this goal, we recognize
that risk management is by far the more powerful tool for investment success compared to the
common approach of chasing return. With that in mind, BIR strives to empower readers with timely
analysis and perspective on the critical task of managing asset allocation through time.
At the heart of BIR's strategy is our proprietary benchmark: the Global Market Index. This unmanaged
index of the major asset classes is comprised of the world's equities, bonds, REITs and commodities,
each weighted passively according to their respective market values. A key part of our analysis is
estimating equilibrium returns for this benchmark's components and for the index overall. Equilibrium
return estimates are calculated by analyzing volatility and correlation for the major asset classes.
Finance theory tells us to avoid forecasting equilibrium returns directly. A more reliable approach is
calculating implied returns via the relationship among risk parameters. In effect, we're reverse
engineering the market's prospective long-run return by analyzing risk, an approach that offers more
reliable insights compared with attempting to predict returns directly. We then analyze the individual
asset classes on several levels, looking for clues about the near-term risk and return outlook. When our
intermediate views on an asset class differ substantially from the equilibrium projections, we adjust the
asset allocation in our three model portfolios.
In short, our strategy is focused on modifying the market portfolio modestly in search of enhanced risk-
adjusted results relative to our benchmark, the Global Market Index. Finance theory tells us that in the
very long run the Global Market Index will be the optimal portfolio for the average investor with an
infinite time horizon. The fundamental challenge of investing is customizing the market portfolio to
satisfy each investor's risk tolerance, time horizon, financial situation, etc. With that in mind, we
manage a trio of model portfolios aimed at investor composites with three levels of risk.
Combining the value-minded philosophy pioneered by Ben Graham with the power of indexing and an
updated interpretation of modern portfolio theory, BIR synthesizes the best of both worlds and delivers
a unique source of financial intelligence to subscribers.
Among the features you'll find in BIR:
• A strategic review of return and risk among the major asset classes
• In-depth profiles of individual asset classes and their index mutual fund and ETF proxies
• Interviews with some of the world's smartest investment strategists and money managers as well the
most-celebrated finance professors and other researchers
• Updates on new academic research that enhances our understanding of portfolio theory and
managing asset allocation
• Valuation surveys of the broad asset classes, such as comparing current dividend yields and interest
rates to their historical range
• Strategic and tactical analysis of portfolio rebalancing opportunities
BIR is unlike any other investment publication you've read. The newsletter focuses on the strategic
perspective that only comes from analyzing markets, individually and collectively. Recognizing that
investment success comes from enlightened risk management, BIR brings you what's relevant and
necessary—the numbers, the news and the global context—for achieving strategic investment success
over medium- and long-term horizons with a multi-asset class portfolio strategy.
James Picerno is the editor of BIR. Formerly a financial reporter with Bloomberg and Dow Jones, he's
been writing about investment strategy, markets and economics since the late-1980s. Since 2003,
he's been editing CapitalSpectator.com, a web site that publishes essays and analysis on strategic
portfolio issues. In addition, he's the author of Dynamic Asset Allocation: Modern Portfolio Theory
Updated For The Smart Investor, a book that will be published by Bloomberg Press in February
2010. Dynamic Asset Allocation analyzes the key financial lessons for portfolio strategy based on
financial economic research from the last 50 years. The book also serves as the intellectual foundation
for BIR's investment strategy.
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