Brendan McCurdy: The return of quant analysis

Financial advisers cannot take risks with their portfolios the way hedge fund managers do. Instead, it is important for them to measure and control the amount of active risk allowed into their portfolios - what we call ‘active risk budgeting'. Efficient portfolio construction requires thoughtful active risk budgeting.  When a chief investment officer builds their strategic asset allocation, they set the amount of risk their client is willing to take. Then they choose the asset class exposures and weight them - using measurements such as standard deviation and beta - to fit that target...