Post Modern Investment: Facts and Fallacies of Growing Wealth in a Multi-Asset World

The financial markets have experienced monumental changes over the past decade, changes that have rendered traditional asset management models obsolete. Unfortunately, the news seemingly hasn’t reached many academics and investment professionals who persist in trying, and failing, to apply 20th-century thinking to 21st-century asset management. No longer simply a matter of effecting the right balance of stocks and bonds, portfolio management—if it is to achieve its objective of minimizing risk and maximizing returns—must juggle new, tradable forms of private equity, real estate, managed futures, hedge funds, commodity indices, and derivatives. Moreover, it must take into account the rapid proliferation of internationally marketable securities, which are constantly evolving as the markets in which they trade become increasingly accessible to both foreign and domestic investors.

Clearly a new, more dynamic, empirically based approach to investment management is needed—an approach unconstrained by a particular theory or quantitative model, but, instead, agile, expansive, and capable of adapting, as needed, to today’s more complex, ever-changing global financial marketplace. Written by an all-star team of authors with unparalleled experience as both investment practitioners and academics, Postmodern Investment provides the foundation for such an approach.

Following a concise, historical overview of the markets, the authors cut to the chase with analyses of the business models and risk and return characteristics of both traditional and alternative asset classes. Individual chapters cover equity and fixed income, hedge funds, private equity, managed futures, commodities, and real estate. Within each chapter, the authors explore common myths and misconceptions about the structure and performance of the asset class under discussion as well as its proper place in a multi-asset portfolio. Drawing upon a wealth of historical and up-to-the-minute data, they then definitively debunk those false assumptions and expose the new realities behind the asset class in question. Finally, they offer their expert advice and guidance on how best to strategically deploy that investment class in a multi-asset portfolio tailored to individual investors’ risk tolerances.

Offering an expansive, detailed look at the new realities of today’s increasingly complex global marketplace, this book takes you beyond Modern Portfolio Theory and other outmoded asset management models to provide you with the knowledge and tools you need to survive and thrive in a postmodern world of investment.

“In Postmodern Investment, the authors provide a thoughtful framework for investing in the current and evolving financial markets. They provide a critical, yet even-handed, examination of ‘modern’ investment theories and point out the complexities of today’s markets that require that we go beyond traditional models and asset classes in designing portfolios. The authors also drill down to individual assets, both ‘traditional’ and ‘alternative’, to explore the underlying risk and sources of returns. Most importantly, the book focuses on the complex risks (those known and unknown) that can impact assets and portfolios, such as the risks added to structured products due to the business model and risk management of the product sponsor. This book is a must-read for anyone managing portfolios in today’s dynamic environment.”
—Tom Robinson, PhD, CFA, CAIA, CFP®, Managing Director, Education Division, CFA Institute

“I have waited years for a book that finally admits that investment firms sell the products that they can sell and not the ones they necessarily should and that academics often publish articles that are acceptable and not the ones that are difficult to accept. That wait is thankfully over. This book highlights the fact that individuals need to go beyond and break away from conventional thought to embrace a new investment reality. The authors have done a great service to the many investors who can use this book to educate themselves as to what is often hidden behind the curtain and how better to prepare themselves for the future.”
—Florence Lombard, Chief Executive Officer, Chartered Alternative Investment Analyst Association (CAIA)

“Serious investment advisors and consultants would be well served by reading and absorbing the concepts in this groundbreaking book. We do indeed live in a postmodern investment environment where the certainties of the last 50 years seem more and more untrustworthy. The book provides a strong framework for investing in a different era, using different tools, evolving strategies, and alternative assets. Advisors and consultants need to free themselves from the past in order to best serve their clients in the future.”
—Sean R. Walters, CAE, CEO / Executive Director, Investment Management Consultants Association (IMCA)

“It is not often when a finance book comes along that promises to free our minds from past mistakes and prejudices. The authors remind us to observe economic reality as it truly is, and not be blinded by accounting conventions, or by considerations of computational efficiency or regulatory convenience. This is a provocative, seminal work and represents iconoclasm in the best scientific tradition.”
—Robert F. De Rito, PhD, SVP, Head of Financial Risk Management, APG Asset Management US

“This book serves as a sorely needed guidebook to the ‘postmodern’ world of investing. Equities have disappointed investors over the last decade with low returns and high volatility. Fixed-income investments now offer the lowest yield levels in 30 years. The book explores the features of the wider investment choice set we need today—including hedge funds, managed futures, commodities, and private equity as well as new approaches to risk management and asset allocation. It also addresses the myths and misconceptions that can lead investors astray and to high opportunity costs.”
—Joanne M. Hill, PhD, Head of Investment Strategy, ProShares Advisors LLC

“Good books are informative; great books are provocative, fascinating, and well ahead of their time. The authors have the ability to poke holes in much of the ‘theory’ that the market frequently confuses as ‘fact’ and provides insightful analysis on the current ‘toolkit’ available to today’s investors, as well as helpful advice on how to use those tools appropriately. It should form the foundation of any investor’s collection of portfolio management reference material.”
—Scott Welch, Senior Managing Director, Investment Research & Strategy, Fortigent, LLC

“Traditional investment approaches still dominate the professional fund management industry even though these approaches have often struggled to make sense of the world as it has evolved in the last few years. The authors emphasize issues in the underlying performance and risk of multiple asset classes as well as issues in the application of various risk management and asset allocation approaches. Rather than giving us a framework for operating in the world as it was supposed to be, it gives us a framework for dealing with the world as it actually is.”
—William Dinning, Head of Strategy, Kames Capital