Norway commissions risk premia report from MSCI for SWF
MSCI has produced a research report on behalf of the Norwegian Ministry of Finance, which looks into risk premia as they can be used for allocation decisions affecting large portfolios.
The Ministry is responsible for the performance of the country’s sovereign wealth fund – the Government Pension Fund Global – which is managed day-to-day by Norges Bank Investment Management.
Harvesting Risk Premia in Large Scale Portfolios looks at whether risk premia indices can be used for allocating to so-called factor strategies such as value, size, low volatility and momentum.
MSCI’s researchers studies the performance and investability of risk premia indices across global and regional developed markets over a 20 year period, 1992-2002. The results suggest that it is indeed possible to use risk premia indices to assist in allocation, but that for portfolios of more than $100bn, investability becomes increasingly important.
Remy Briand, managing director and global head of MSCI Index and ESG Research, said: “For decades, academic research has demonstrated that risk factors can deliver substantial excess returns in comparison to cap-weighted equity market portfolios over a long horizon. However, these academic studies remain largely theoretical. In this report, we investigate for the first time implementation issues for risk premia strategies and their investability for very large scale portfolios.”
To read the report click here: [asset_library_tag 6685,Harvesting Risk Premia in Large Scale Portfolios]