Topical Research

Few investors have implemented Responsible Investing initiatives, according to a survey conducted by NEPC, LLC.  In addition, these organizations expect Responsible Investing to comprise a small part of their investment programs even five years from now.  These low implementation rates are at odds with the increased interest in and greater awareness around this type of investing. At NEPC we see anecdotal evidence of the potentially bigger role Responsible Investing may play in long-term portfolios.

The research paper examines low volatility equity investing by assessing the case for a continuing anomaly and its potential causes. It considers whether such an anomaly is likely to persist and the role, if any, of low volatility equity investing in long-term investment portfolios.

NEPC's annual asset allocation letter highlights an investment landscape fraught with risk but short on returns. The solution: a strategic approach to asset allocation with the flexibility to act when opportunities do appear.

NEPC recently completed our annual survey of all the hedge funds used by our clients.  This survey focuses on back office areas and internal operations.  Click the blue rectangle above to download a summary.

Over time there have been substantial developments in the responsible investing area. As a result, responsible investing looks and sounds quite different from what was predominantly a negative screening approach many years ago.

NEPC's annual asset allocation letter.

A re-issue of our paper released in August with the 2011 5-7 year Capital Market Expectations.

The recent market environment has led Endowment and Foundation Trustees to re-evaluate the key aspects of their investment oversight.  For most Trustees, the challenge is to balance the two competing financial objectives of an institution: meeting current spending needs while maintaining the long term “real” value of the assets.  This paper focuses on ways to create an ideal spending policy. 

NEPC's annual asset allocation letter.

In the fall of 2008 Securities Lending programs came under increased scrutiny from institutional investors.  At that time NEPC published our outlook on Securities Lending programs focusing on the factors underpinning the crisis and our future expectations for securities lending in institutional portfolios.  In the last two years since the collapse of Lehman Brothers in September 2008 a cascade of events helped illuminate the embedded risks within the majority of securities lending programs.  The purpose of this paper is to revisit our original comments, to provide further guidance on securities lending programs and to develop a framework which investors can use to help inform their decisions surrounding securities lending program structure.

NEPC conducted a survey of healthcare investment professionals. The goals were to understand healthcare investment portfolios’ governance structure, staffing models, resources and complexity. While responses varied, two themes emerged: dissatisfaction with current staffing and the need for more investment expertise.  This paper analyzes the results.

NEPC's annual asset allocation letter.

With the widespread acceptance of modern portfolio theory by investors, asset-allocation decisions are often driven by the quest to select a portfolio that maximizes long-term risk-adjusted returns. The recent financial crisis, however, has intensified investors’ focus on  understanding the risks embedded in their portfolios.

Recent changes in the rules governing U.S. corporate pension plans (the Pension Protection Act of 2006 for contribution funding, and FASB 158 for balance-sheet accounting) move plans closer to “mark-to-market” measurement of assets and liabilities. These rule changes have prompted much discussion on the role of LDI in pension plans.

This paper outlines the main types of Liability Driven Investment (LDI) products and discuss issues to consider in implementing LDI.

When the Pension Protection Act (PPA) was released in 2006, the general thrust for defined benefit retirement plans was to require more stringent funding requirements with less flexibility in setting the assumptions used to calculate plan contributions.  The new regulations also created many questions on various implementation approaches and calculations.  Yet, when PPA became effective for pension plan years beginning in 2008, many of these questions were left unanswered. 

An allocation to Real Assets can play an important role in a long-term investment portfolio.  Real Assets encompass an array of investment strategies whose values are sensitive to inflation and include TIPS, commodities, commodities-linked stocks, commodities-oriented hedge funds and hedge funds of funds, and direct investments in real estate, energy, farmland, timber, and infrastructure.

Higher prospective tax rates are renewing interest in Roth 401(k)s and 403(b)s. This paper summarizes the technical aspects of the Roth feature, illustrates the tax diversification value, and sets out things to think about before adding the option to your plan.

2008 reminded us that human beings have limited ability to peer into the future.  As investment professionals we have attempted to enhance this limited ability by using various models and theories as lenses through which to form views of future risks and returns, and to select investment strategies in light of those views.  Yet many of us were caught off guard by 2008.  Does this mean that our lenses were cloudy, that our models were flawed? 

NEPC's annual asset allocation letter.

A significant aspect of the current global financial crisis is a lack of liquidity across most markets. As a result, redemption restrictions have been imposed on a broad array of pooled investment vehicles ranging from short-term fixed income products to hedge funds.