David Blitz was named winner of the Peter L. Bernstein Award for his research paper in the summer 2018 edition of The Journal of Alternative Investments entitled ‘Are hedge funds on the other side of the low volatility trade?’ The award is for the “best paper published in 2018” drawn from more than 300 articles published across about a dozen journals in the ‘Portfolio Management Research’ series.
The 4,200-word piece assesses the degree to which hedge funds attempt to exploit the low-volatility anomaly, in which low risk stocks tend to have returns that are too high. Robeco offers investors access to low risk stocks through its range of Conservative Equities funds.
Blitz noted that various practical constraints might prevent many investors from being able to exploit the anomaly, but that hedge funds generally should be able to do so, given their higher sophistication and flexibility. However, Blitz found that rather than benefiting from the anomaly, hedge funds overall tended to bet against it.
He concluded that by favoring high volatility stocks to their low volatility counterparts, this may be a key factor for explaining the overall performance of hedge funds, which had been poor in many instances in the run-up to when the article was published.
The journal’s award is made in honor of Peter Bernstein, an American economist whose work on the efficient-market hypothesis made him a world expert on investment economics and one of the pioneers of quant investing.
The winning article was chosen through a blind review process by an independent committee that comprised Gary Gastineau of ETF Consultants, William Goetzmann of the Yale School of Management, and Ronald Kahn of BlackRock.
“This paper impressed me along dimensions that Peter Bernstein would have appreciated,” says Kahn. “Hedge funds don’t face the usual investor constraints. It’s very surprising then that the low volatility anomaly – which we believe arises due to those constraints – negatively and significantly contributes to their aggregate performance.”
“This is a nice public recognition for the quality of our quantitative research,” says Blitz. “I use this paper a lot in presentations to clients, and have noticed that it is very well received. We always get the question who is on the other side of the low volatility trade, and now we can answer: over three trillion dollars of hedge fund assets!”
He jokingly adds: “When I received a mail with the subject line ‘you have won a prize’ my finger already veered towards the delete button, because it smelled like spam. As it turned out, however, this time I really did win something!”
Blitz won a prize of USD 5,000, which has been donated to the Robeco Foundation.
This report is not available for users from countries where the offering of foreign financial services is not permitted, such as US Persons.
Your details are not shared with third parties. This information is exclusively intended for professional investors. All requests are checked.
Please read this important information before proceeding further. It contains legal and regulatory notices relevant to the information contained on this website.
The information contained in the Website is NOT FOR RETAIL CLIENTS - The information contained in the Website is solely intended for professional investors, defined as investors which (1) qualify as professional clients within the meaning of the Markets in Financial Instruments Directive (MiFID), (2) have requested to be treated as professional clients within the meaning of the MiFID or (3) are authorized to receive such information under any other applicable laws. The value of the investments may fluctuate. Past performance is no guarantee of future results. Investors may not get back the amount originally invested. Neither Robeco Institutional Asset Management B.V. nor any of its affiliates guarantees the performance or the future returns of any investments. If the currency in which the past performance is displayed differs from the currency of the country in which you reside, then you should be aware that due to exchange rate fluctuations the performance shown may increase or decrease if converted into your local currency.
In the UK, Robeco Institutional Asset Management B.V. (“ROBECO”) only markets its funds to institutional clients and professional investors. Private investors seeking information about ROBECO should visit our corporate website www.robeco.com or contact their financial adviser. ROBECO will not be liable for any damages or losses suffered by private investors accessing these areas.
In the UK, ROBECO Funds has marketing approval for the funds listed on this website, all of which are UCITS funds. ROBECO is authorized by the AFM and subject to limited regulation by the Financial Conduct Authority. Details about the extent of our regulation by the Financial Conduct Authority are available from us on request.
Many of the protections provided by the United Kingdom regulatory framework may not apply to investments in ROBECO Funds, including access to the Financial Services Compensation Scheme and the Financial Ombudsman Service. No representation, warranty or undertaking is given as to the accuracy or completeness of the information on this website.
If you are not an institutional client or professional investor you should therefore not proceed. By proceeding please note that we will be treating you as a professional client for regulatory purposes and you agree to be bound by our terms and conditions.