Luis M. Viceira
George E. Bates Professor
Luis M. Viceira is the George E. Bates Professor at the Harvard Business School, where he teaches in the areas of investment management and capital markets to both graduate students and practitioners. He holds a bachelor degree from the Universidad Autonoma in Madrid, and a M.A. degree and a Ph.D. degree from Harvard University. Professor Viceira has been a member of the faculty of the Harvard Business School since 1998. Prof. Viceira's research studies the design of asset allocation strategies for long-term investors, both individuals and institutions, and the management and organization of large institutional investors, including pension funds, endowments, and large asset managers such as mutual fund companies or wealth management groups. He is the author of multiple articles published in leading academic and practitioner-oriented finance journals, book chapters, Harvard Business School case studies, and the book "Strategic Asset Allocation" (with J. Y. Campbell). His research has received several awards recognizing its contributions to the theory and practice of asset management, including the TIAA-CREF Paul Samuelson Award, the 2005 Graham and Dodd Award by the CFA Institute, and the 2004 Prize for Financial Innovation of the Q-Group, Inquire Europe, and Inquire U.K. He has also served as judge for the TIAA-CREF Paul Samuelson Award, and as a member of the program committee of the Annual Meeting of the American Finance Association, the Western Finance Association, the European Finance Association, and the European Financial Management Association, among others. Professor Viceira is an Associate Editor at Management Science, a Research Associate at the National Bureau of Economic Research (NBER), a Research Fellow of the TIAA-CREF Institute, and a Research Fellow and member of the Scientific Board of NETSPAR, the European Network for Studies on Pensions, Aging and Retirement. Professor Viceira serves as an external consultant, advisor, and director to asset management firms, pension funds, international organizations, and not-for-profit organizations. He is also a trustee of the Financial Accounting Foundation (FAF). The FAF is the independent, private-sector organization responsible for the oversight of the Financial Accounting Standards Board (FASB) and the Governmental Accounting Standards Board (GASB).
-
Article
| International Journal of Forecasting
|
Bond Risk, Bond Return Volatility, and the Term Structure of Interest Rates
Luis M. Viceira
This paper explores time variation in bond risk, as measured by the covariation of bond returns with stock returns and with consumption growth, and in the volatility of bond returns. A robust stylized fact in empirical finance is that the spread between the yield on long-term bonds and short-term bonds forecasts positively future excess returns on bonds at varying horizons, and that the short-term nominal interest rate forecasts positively stock return volatility and exchange rate volatility. This paper presents evidence that movements in both the short-term nominal interest rate and the yield spread are positively related to changes in subsequent realized bond risk and bond return volatility. The yield spread appears to proxy for business conditions, while the short rate appears to proxy for inflation and economic uncertainty. A decomposition of bond betas into a real cash flow risk component and a discount rate risk component shows that yield spreads have offsetting effects in each component. A widening yield spread is correlated with reduced cash-flow (or inflationary) risk for bonds, but it is also correlated with larger discount rate risk for bonds. The short rate forecasts only the discount rate component of bond beta.
Keywords: Bonds;
Volatility;
Forecasting and Prediction;
Interest Rates;
Inflation and Deflation;
Investment Return;
Risk and Uncertainty;
Currency Exchange Rate;
Cash Flow;
Stocks;
-
Article
| Annual Review of Financial Economics
|
Inflation-Indexed Bonds and the Expectations Hypothesis
Carolin E. Pflueger and Luis M. Viceira
This paper empirically analyzes the Expectations Hypothesis (EH) in inflation-indexed (or real) bonds and in nominal bonds in the U.S. and in the U.K. We strongly reject the EH in inflation-indexed bonds and also confirm and update the existing evidence rejecting the EH in nominal bonds. This rejection implies that the risk premium on both real and nominal bonds varies predictably over time. We also find strong evidence that the spread between the nominal and the real bond risk premium, or the breakeven inflation risk premium, also varies over time. We argue that the time variation in real bond risk premia most likely reflects both a changing real interest rate risk premium and a changing liquidity risk premium, and that the variability in the nominal bond risk premia reflects a changing inflation risk premium. We estimate significant time series variability in the magnitude and sign of bond risk premia.
Keywords: Risk Management;
Bonds;
Financial Liquidity;
Inflation and Deflation;
United Kingdom;
United States;
-
Journal Article
| Review of Finance
|
Optimal Value and Growth Tilts in Long-Horizon Portfolios
Jakub W. Jurek and Luis M. Viceira
We develop an analytical solution to the dynamic portfolio choice problem of an investor with power utility defined over wealth at a finite horizon, who faces a time-varying investment opportunity set, parameterized using a flexible vector autoregression. We apply this framework to study the horizon effects in the allocations of equity-only investors, who hold a mix of value and growth indices, and a more general investor, who also has access to Treasury bills and bonds. We find that the mean allocation of equity-only investors is heavily tilted towards value stocks at short horizons, but the magnitude of this tilt declines dramatically with the investment horizon, implying that growth is less risky than value at long horizons. Investors with access to bills and bonds exhibit similar behavior when value and growth tilts are computed relative to the total equity allocation of the portfolio. However, after accounting for the propensity of these investors to increase their total equity allocation as the horizon increases, the mean value tilt of the optimal allocation is shown to be positive and stable across time.
Keywords: Decision Choices and Conditions;
Private Equity;
Investment;
Investment Portfolio;
Resource Allocation;
Value;
-
Journal Article
| Journal of Finance
|
Global Currency Hedging
John Y. Campbell, Karine Serfaty-de Medeiros and Luis M. Viceira
Over the period 1975 to 2005, the US dollar (particularly in relation to the Canadian dollar) and the euro and Swiss franc (particularly in the second half of the period) have moved against world equity markets. Thus these currencies should be attractive to risk-minimizing global equity investors despite their low average returns. The risk-minimizing currency strategy for a global bond investor is close to a full currency hedge, with a modest long position in the US dollar. There is little evidence that risk-minimizing investors should adjust their currency positions in response to movements in interest differentials.
Keywords: Currency;
Equity;
Financial Markets;
International Finance;
Investment Return;
Globalized Markets and Industries;
Risk Management;
-
Article
| Brookings Papers on Economic Activity
|
Understanding Inflation-Indexed Bond Markets
John Y. Campbell, Robert J. Shiller and Luis M. Viceira
Keywords: Bonds;
Markets;
Inflation and Deflation;
Financial Crisis;
-
Article
| American Economic Review: Papers and Proceedings
|
Optimal Life-Cycle Investing with Flexible Labor Supply: A Welfare Analysis of Life-Cycle Funds
Francisco J. Gomes, Laurence J. Kotlikoff and Luis M. Viceira
Keywords: Investment;
Labor;
Theory;
Investment Funds;
-
Article
| Financial Analysts Journal
|
The Term Structure of the Risk-Return Tradeoff
John Y. Campbell and Luis M. Viceira
Keywords: Risk and Uncertainty;
Profit;
Citation: Campbell, John Y., and Luis M. Viceira. " The Term Structure of the Risk-Return Tradeoff." Financial Analysts Journal 61, no. 1 (January/February 2005). (Awarded the the Graham and Dodd Award for Excellence in Financial Writing from the Financial Analysts Journal and the CFA Institute.)
-
Article
| Review of Financial Studies
|
Dynamic Consumption and Portfolio Choice with Stochastic Volatility in Incomplete Markets
George Chacko and Luis M. Viceira
Keywords: Decision Choices and Conditions;
Investment;
Markets;
-
Article
| Journal of Economic Dynamics & Control
|
Strategic Asset Allocation in a Continuous-time VAR Model
John Y. Campbell, George Chacko, Jorge Rodriguez and Luis M. Viceira
Keywords: Assets;
Resource Allocation;
Strategy;
-
Journal Article
| Journal of Econometrics
|
Spectral GMM Estimation of Continuous-Time Processes
Luis M. Viceira and George Chacko
-
Article
| Economic Journal (Royal Economic Society)
|
Foreign Currency for Long-Term Investors
Luis M. Viceira, John Y. Campbell and Joshua S. White
Keywords: Currency;
Investment;
-
Article
| Journal of Financial Economics
|
A Multivariate Model of Strategic Asset Allocation
Luis M. Viceira, John Y. Campbell and Y. Lewis Chan
Keywords: Assets;
Resource Allocation;
-
Article
| Journal of Finance
|
Optimal Portfolio Choice for Long-Horizon Investors with Nontradable Labor Income
Luis M. Viceira
Keywords: Decision Choices and Conditions;
Labor;
Investment;
-
Article
| American Economic Review
|
Who Should Buy Long-Term Bonds?
John Y. Campbell and Luis M. Viceira
Keywords: Bonds;
Citation: Campbell, John Y., and Luis M. Viceira. " Who Should Buy Long-Term Bonds?" American Economic Review 91, no. 1 (March 2001): 99–127. (Winner of FAME Research Prize. International Center for Financial Asset Management and Engineering presented by University of Lausanne. Click here for Appendix.)
-
Article
| European Finance Review
|
Stock Market Mean Reversion and the Optimal Equity Allocation of a Long-Lived Investor
Luis M. Viceira, John Y. Campbell, Francisco Gomes and Pascal J. Maenhout
Keywords: Stocks;
Markets;
Price;
Assets;
Equity;
Investment;
-
Journal Article
| Quarterly Journal of Economics
|
Consumption and Portfolio Decisions When Expected Returns Are Time Varying
Luis M. Viceira and John Y. Campbell
-
Chapter
| Spain and the Euro. The First Ten Years
| 2010
The Euro as a Reserve Currency for Global Investors
Luis M. Viceira and Ricardo Gimeno
This article explores the demand for the euro for risk management purposes and the evidence of stock market integration in the euro area. We define a reserve currency as one that investors demand either because it helps them hedge real interest risk and inflation risk, or because it helps them reduce the volatility of their portfolio of stocks and bonds because its return is negatively correlated with the returns on those assets. This article re-examines the role of the euro as a reserve currency in the sense of Campbell, Viceira, and White (2003), updating their evidence, and reviews the evidence of Campbell, Serfaty-de Medeiros, and Viceira (2010) in detail. Consistent with the intuition that an integrated capital market is one in which there is a common discount factor pricing securities, we also investigate whether stocks in the euro area have moved from a regime in which national stock markets were priced with discount rates that were predominantly country specific, to a regime in which national stock markets are predominantly priced by a euro area-wide common discount rate. We adopt the beta decomposition approach of Campbell and Vuolteenaho (2004) and Campbell, Polk, and Vuolteenaho (2010) to test for capital market integration and find robust evidence of increased capital market integration in the euro zone and, consequently, improved risk sharing among euro zone economies.
Keywords: Volatility;
Inflation and Deflation;
Capital Markets;
Currency;
Stocks;
Financial Markets;
Financing and Loans;
Investment Return;
Investment Portfolio;
Risk Management;
-
Chapter
| Evaluating the Financial Performance of Pension Funds
| 2010
Pension Fund Design in Developing Economies
Luis M. Viceira
Keywords: Compensation and Benefits;
Developing Countries and Economies;
Citation: Viceira, Luis M. " Pension Fund Design in Developing Economies." In Evaluating the Financial Performance of Pension Funds, edited by Richard Hinz, Heinz P. Rudolph, Pablo Antolin, and Juna Yermo. World Bank, 2010.
-
Chapter
| Overcoming the Saving Slump: How to Increase the Effectiveness of Financial Education and Saving Programs
| 2008
Life-Cycle Funds
Luis M. Viceira
The U.S. retirement system has experienced a substantial transformation in recent years. It has evolved from a system in which employees relied mainly on Social Security and professionally managed defined benefit (DB) pension plans sponsored by their employers to provide for their retirement to a system in which employees must rely on their own saving and investment decisions to fund their own retirement. Defined contribution (DC) plan participants and IRA holders decide how much to contribute (up to a legally established maximum limit) to their plan, and how to invest their contributions and the contributions that their employer might make on their behalf. Thus the benefits they get at retirement depend on their own accumulation and investment decisions. DC plan sponsors are only responsible for the design of the plan and for its administration and record-keeping. Current regulations grant sponsors considerable freedom in their selection of the number and type of investment options available to participants. In practice, most plan sponsors have chosen to offer a menu of plain vanilla mutual funds plus company stock. Thus mutual funds have become the main retirement investment vehicle in the United States, and mutual fund companies the main managers of retirement assets.
Keywords: Retirement;
Personal Finance;
Investment Funds;
Compensation and Benefits;
United States;
Citation: Viceira, Luis M. " Life-Cycle Funds." Chap. 5 in Overcoming the Saving Slump: How to Increase the Effectiveness of Financial Education and Saving Programs, edited by Annamaria Lusardi. University of Chicago Press, 2008.
-
Chapter
| Global Perspectives on Investment Management: Learning from the Leaders
| 2006
Developments in Asset Allocation Modeling
Luis M. Viceira
Keywords: Assets;
Resource Allocation;
Mathematical Methods;
Citation: Viceira, Luis M. "Developments in Asset Allocation Modeling." In Global Perspectives on Investment Management: Learning from the Leaders, edited by Rodney N. Sullivan, 145–157. CFA Institute, 2006.
-
Chapter
| Oxford Handbook of Pensions and Retirement Income
| 2006
Strategic Asset Allocation for Pension Plans
Luis M. Viceira and John Y. Campbell
Keywords: Compensation and Benefits;
Resource Allocation;
Strategy;
Citation: Viceira, Luis M., and John Y. Campbell. "Strategic Asset Allocation for Pension Plans." In Oxford Handbook of Pensions and Retirement Income, edited by Gordon Clark, Alicia Munnell, and Michael Orszag. Oxford University Press, 2006.
-
Working Paper
| HBS Working Paper Series
| 2013
Return Predictability in the Treasury Market: Real Rates, Inflation, and Liquidity
Carolin E. Pflueger and Luis M. Viceira
This paper decomposes excess return predictability in U.S. and U.K. inflation-indexed and nominal government bonds. We find that nominal bonds reflect time-varying inflation and real rate risk premia, while inflation-indexed bonds reflect time-varying real rate and liquidity risk premia. These three risk premia exhibit quantitatively similar degrees of time variation. We estimate a systematic liquidity premium in U.S. inflation-indexed yields over nominal yields, which declined from 100 bps in 1999 to 30 bps in 2005 and spiked to over 150 bps during the crisis 2008–2009. We find no evidence that shocks to relative inflation-indexed bond issuance generate return predictability.
Keywords: Expectations Hypothesis;
term structure;
Real interest rate risk;
Inflation risk;
Inflation-Indexed Bonds;
Financial Crisis;
Inflation and Deflation;
Financial Liquidity;
Bonds;
Investment Return;
Risk and Uncertainty;
United Kingdom;
United States;
-
Working Paper
| HBS Working Paper Series
| 2013
Inflation Bets or Deflation Hedges? The Changing Risks of Nominal Bonds
John Y. Campbell, Adi Sunderam and Luis M. Viceira
The covariance between U.S. Treasury bond returns and stock returns has moved considerably over time. While it was slightly positive on average in the period 1953–2009, it was unusually high in the early 1980s and negative in the 2000s, particularly in the downturns of 2000–2002 and 2007–2009. This paper specifies and estimates a model in which the nominal term structure of interest rates is driven by four state variables: the real interest rate, temporary and permanent components of expected inflation, the "nominal-real covariance" of inflation, and the real interest rate with the real economy. The last of these state variables enables the model to fit the changing covariance of bond and stock returns. Log bond yields and term premia are quadratic in these state variables, with term premia determined by the nominal-real covariance. The concavity of the yield curve―the level of intermediate-term bond yields, relative to the average of short- and long-term bond yields―is a good proxy for the level of term premia. The nominal-real covariance has declined since the early 1980s, driving down term premia.
Keywords: Inflation and Deflation;
Bonds;
Interest Rates;
Investment Return;
Risk Management;
United States;
-
Working Paper
| 2008
Optimal Life-Cycle Investing with Flexible Labor Supply: A Welfare Analysis of Life-Cycle Funds
Francisco J. Gomes, Laurence J. Kotlikoff and Luis M. Viceira
We investigate optimal consumption, asset accumulation and portfolio decisions in a realistically calibrated life-cycle model with flexible labor supply. Our framework allows for wage rate uncertainly, variable labor supply, social security benefits and portfolio choice over safe bonds and risky equities. Our analysis reinforces prior findings that equities are the preferred asset for young households, with the optimal share of equities generally declining prior to retirement. However, variable labor materially alters pre-retirement portfolio choice by significantly raising optimal equity holdings. Using this model, we also investigate the welfare costs of constraining portfolio allocations over the life cycle to mimic popular default investment choices in defined-contribution pension plans, such as stable value funds, balanced funds, and life-cycle (or target date) funds. We find that life-cycle funds designed to match the risk tolerance and investment horizon of investors have small welfare costs. All other choices, including life-cycle funds which do not match investors' risk tolerance, can have substantial welfare costs.
Keywords: Risk Management;
Financial Management;
Investment Portfolio;
Personal Finance;
Retirement;
Investment Funds;
-
Working Paper
| HBS Working Paper Series
| 2007
The Excess Burden of Government Indecision
Francisco J. Gomes, Laurence J. Kotlikoff and Luis M. Viceira
-
Supplement
| HBS Case Collection
|
2013
Grantham, Mayo, and Van Otterloo, 2012: Estimating the Equity Risk Premium (CW)
Samuel Gregory Hanson, Erik Stafford and Luis M. Viceira
-
Case
| HBS Case Collection
|
2013
(Revised from original 2012 version)
Grantham, Mayo, and Van Otterloo, 2012: Estimating the Equity Risk Premium
Samuel Hanson, Erik Stafford and Luis Viceira
Keywords: investment banking;
Equity Valuation;
-
Supplement
| HBS Case Collection
|
2011
The Long and Short of Apollo Group and the University of Phoenix
Luis M. Viceira, Andrew S. Holmes and Damian M. Zajac
Keywords: Education Industry;
-
Supplement
| HBS Case Collection
|
2012
(Revised from original 2011 version)
The Long and Short of Apollo Group and the University of Phoenix (B)
Luis M. Viceira, Joel Heilprin, Andrew S. Holmes and Damian M. Zajac
Keywords: Education;
Corporate Finance;
Citation: Viceira, Luis M., Joel Heilprin, Andrew S. Holmes, and Damian M. Zajac. "The Long and Short of Apollo Group and the University of Phoenix (B)." Harvard Business School Supplement 212-054, July 2012. (Revised from original November 2011 version.)
-
Supplement
| HBS Case Collection
|
2011
High Noon at Vail Mountain, Spreadsheet
Albert Sheen, Luis Viceira and Joshua Coval
-
Case
| HBS Case Collection
|
2011
High Noon at Vail Mountain
Joshua Coval, Albert Sheen and Luis Viceira
Citation: Coval, Joshua, Albert Sheen, and Luis Viceira. "High Noon at Vail Mountain." Harvard Business School Case 212-035, November 2011.
-
Case
| HBS Case Collection
|
2012
(Revised from original 2011 version)
The Long and Short of Apollo Group and the University of Phoenix (A)
Luis M. Viceira, Joel Heilprin, Andrew S. Holmes and Damian M. Zajac
Keywords: Higher Education;
Web;
Online Technology;
Education Industry;
Technology Industry;
Citation: Viceira, Luis M., Joel Heilprin, Andrew S. Holmes, and Damian M. Zajac. "The Long and Short of Apollo Group and the University of Phoenix (A)." Harvard Business School Case 212-045, December 2012. (Revised from original November 2011 version.)
-
Case
| HBS Case Collection
|
2011
Shelley Capital and the Hedge Fund Secondary Market
Luis Viceira, Elena Corsi and Ruth Dittrich
An advisory company has to decide how to sell their client's hedge fund holdings in the secondary market, and thinks about their future. Shelley Capital was a a European advisory company operating in the hedge fund secondary market, a market that boosted in 2008 with the world financial crisis. Shelley had identified four final bidders for the $84.5 million portfolio of illiquid hedge fund holdings that one of their clients had commissioned them to sell and had now to decide to whom they should sell the holdings, if they should split up the portfolio, or if they should postpone the sale. At the same time, they needed to decide about their future business. The financial crisis was behind the exceptional growth of the hedge funds' secondary market, yet another crisis could follow and boost the secondary market again. What direction should Shelley take once the hedge fund industry fully recovered? But what if a second global crisis threw the hedge fund industry into disarray once again?
Keywords: Insolvency and Bankruptcy;
Investment Funds;
Marketing Strategy;
Financial Crisis;
Sales;
Leadership Development;
Financial Markets;
Crisis Management;
Business Processes;
Risk and Uncertainty;
Globalized Economies and Regions;
Financial Services Industry;
Service Industry;
Europe;
-
Case
| HBS Case Collection
|
2011
(Revised from original 2010 version)
MacroMarkets LLC
Robin Greenwood and Luis M. Viceira
MacroMarkets co-founder and CEO Samuel Masucci III is meeting with a strategic partner for his firm. Co-founded with Yale University Professor Robert Shiller, MacroMarkets' main innovation is the "MacroShare," which allows investors to take long or short, levered or unlevered, positions based on the value of any index. Both Shiller and Masucci are hopeful that MacroShares can help investors hedge all kinds of macroeconomic risks, including exposure to residential housing. The firm has ”battle-tested” two products—one linked to oil, and one linked to housing—with mixed success and is evaluating its strategy going forward. Specifically, Masucci wonders whether the MacroShare structure might come to replace the ETF as the predominant technology for index trading.
Keywords: Macroeconomics;
Financial Instruments;
Financial Markets;
Investment Funds;
Investment Portfolio;
Innovation and Invention;
Risk Management;
Product Positioning;
Demand and Consumers;
Financial Services Industry;
Citation: Greenwood, Robin, and Luis M. Viceira. " MacroMarkets LLC." Harvard Business School Case 211-006, January 2011. (Revised from original July 2010 version.)
-
Teaching Note
| HBS Case Collection
|
2012
(Revised from original 2011 version)
Martingale Asset Management LP in 2008, 130/30 Funds, and a Low-Volatility Strategy (TN)
Robin Greenwood and Luis M. Viceira
Teaching Note for 209-047.
-
Case
| HBS Case Collection
|
2012
(Revised from original 2010 version)
Windward Investment Management
Luis M. Viceira and Ricardo Alberto De Armas
Windward Investment Management has experienced rapid growth in assets under management in just ten years, from under $30 million at year-end 1999 to $3.6 billion in 2010. Windward is one of the leading firms in the Registered Investment Advisor (RIA) industry that seeks value for its investors through asset diversification and active macro-level investing. The firm implements its proprietary investment model by trading exclusively exchange-traded funds (ETF). Windward is considering a range of future growth opportunities and how to finance those opportunities, including raising external capital. The case focuses on the decision of what opportunities Windward should consider and on the valuation of the firm if it decides to raise external capital.
Keywords: Asset Management;
Valuation;
Investment;
Growth and Development Strategy;
Financial Services Industry;
Citation: Viceira, Luis M., and Ricardo Alberto De Armas. " Windward Investment Management." Harvard Business School Case 211-005, May 2012. (Revised from original September 2010 version.)
-
Case
| HBS Case Collection
|
2010
(Revised from original 2009 version)
The Investment Fund for Foundations (TIFF) in 2009
Luis M. Viceira and Brendon Christopher Parry
In late June 2009, management at The Investment Fund for Foundations (TIFF) was considering expanding the footprint of the TIFF Diversified Fund (TDF), the first truly comprehensive endowment management vehicle offered under the TIFF banner. The recent large capital losses suffered by most endowments, including those of Harvard and Yale, had motivated some to question the two basic premises of the endowment investment model—that investors get rewarded for bearing illiquidity, and that a diversified blend of asset classes and strategies provides meaningful protection against capital losses under virtually all market conditions. Despite this questioning, the investment professionals at TIFF were convinced that this model remained viable as a means of generating superior long-term returns, and that TDF was a vehicle that provided TIFF's current and potential clients access to this model. But they were aware that they would need to increase their efforts to educate their clients on the benefits of this comprehensive approach to investing and also reflect on whether to modify the current structure of TDF, particularly regarding its liquidity provisions.
Keywords: Financial Crisis;
Asset Management;
Financial Strategy;
Investment Funds;
Risk Management;
Product Marketing;
Financial Services Industry;
United States;
-
Case
| HBS Case Collection
|
2012
(Revised from original 2008 version)
Martingale Asset Management LP in 2008, 130/30 Funds, and a Low-Volatility Strategy
Luis M. Viceira and Helen Tung
In early July of 2008, William (Bill) Jacques, Chief Investment Officer at Martingale Asset Management, a quantitative value-oriented investment manager in Boston, Massachusetts, was busy preparing for an upcoming meeting with the group that made new product decisions within the firm. The objective of the meeting was to review the backtesting and real-time investment results of a new minimum-variance strategy within the framework of a 130/30 fund. The performance results were very encouraging, but Bill still wondered if they were a fluke of the data, a result of data mining rather than the reflection of a true market anomaly. He wanted to discuss several possible explanations of the phenomenon and to decide whether Martingale should offer the strategy to its clients.
Keywords: Volatility;
Asset Management;
Stocks;
Financial Strategy;
Investment Funds;
Product Development;
-
Case
| HBS Case Collection
|
2008
(Revised from original 2007 version)
The Vanguard Group, Inc. in 2006 and Target Retirement Funds
Luis M. Viceira
The Vanguard Group is one of the largest asset managers in the U.S., with over $1 trillion in assets, ninety percent of which are mutual fund assets, and more than 12,000 employees at year-end 2006. Vanguard has built a strong reputation as the manager of reference for low-cost investing and high-quality customer service which always does what it thinks is best for its clients. Vanguard has recently launched a family of life-cycle funds called Target Retirement Funds. Life-cycle funds, which have proven popular both with investors in company-sponsored defined-contribution pension plans and with individual investors, are built on the idea of “age-based investing,” or the notion that investors should allocate more of their long-term savings to stocks when they are young and have longer retirement horizons, and decrease this allocation as they approach retirement. The management at Vanguard is examining the central role of these funds may play in some initiatives aimed at growing Vanguard's retail, defined contribution and client advisory services. The pending approval of the Pension Protection Act will make it possible for sponsors of defined-contribution plans to take a more active role in advising plan participants, and the assets in individual retirement accounts and defined-contribution pension plans are expected to continue their rapid growth moving forward. Should Vanguard promote these funds as the next step in Vanguard's quest to make investing as simple, low-cost, and effective as it can possibly be? At stake is Vanguard's brand and client trust, and the welfare of millions of Americans now responsible for providing for their own retirement.
Keywords: Asset Management;
Investment Funds;
Personal Finance;
Brands and Branding;
Retirement;
Trust;
Financial Services Industry;
United States;
-
Background Note
| HBS Case Collection
|
2008
(Revised from original 2007 version)
The U.S. Retirement Savings Market and the Pension Protection Act of 2006
Luis M. Viceira and Helen Tung
Provides an overview of the evolution of the private retirement savings market in the U.S. since 1990; the management and administration of defined-contribution (DC) plans; the existing evidence about the investment and savings decisions of participants in DC plans; and the Pension Protection Act of 2006.
Keywords: Investment;
Personal Finance;
Saving;
Government Legislation;
Retirement;
Business and Government Relations;
Financial Services Industry;
United States;
-
Case
| HBS Case Collection
|
2007
(Revised from original 2007 version)
Barclays Global Investors and Exchange Traded Funds
Luis M. Viceira and Alison Berkley Wagonfeld
Provides an overview of the Exchange Traded Funds (EFT) industry and highlights the leadership role that Barclays Global Investors (BGI) has played in this developing asset class. BGI launched its first ETFs under the iShares brand name in 2000, and by mid-2007 BGI was the global leader in the $600 billion ETF market. BGI's success had started attracting the interest of other large asset management firms, and Lee Kranefuss, CEO of BGI's iShares business was thinking about how BGI should compete in the increasingly crowded market. Should BGI expand into Europe and Asia more aggressively? Should BGI, already a large manager of 401(k) assets for corporations, pursue the 401(k) market with its iShares products? Would BGI need to cut its fees as other competitors such as Vanguard started marketing its "low-cost" ETF products?
Keywords: History;
Venture Capital;
Asset Management;
Stocks;
Investment Funds;
Leading Change;
Expansion;
Competitive Strategy;
Capital Markets;
Global Strategy;
Financial Strategy;
Banking Industry;
Financial Services Industry;
Asia;
Europe;
-
Case
| HBS Case Collection
|
2007
(Revised from original 2000 version)
Harvard Management Company and Inflation-Protected Bonds, The
Luis M. Viceira
In March 2000, the board of The Harvard Management Co. (HMC) approved significant changes in the policy portfolio determining the long-run allocation policy of the Harvard University endowment. These changes included a sharp reduction of the allocation to U.S. equities and U.S. nominal bonds and a significant investment in the new U.S. Treasury Inflation-Protected Securities (TIPS). This case focuses on the analysis that led HMC management to recommend such changes to the board.
Keywords: Bonds;
Investment Portfolio;
Investment Funds;
Asset Management;
Corporate Governance;
Capital Markets;
Financial Services Industry;
United States;
-
Module Note
|
2006
Asset Allocation: A Half-Course Module Note
Luis M. Viceira
Provides an overview of the main ideas and structure of a 15-session module on long-term asset allocation designed for MBA graduate students and investment professionals. This module is taught as part of a full-length, 30-session elective class on investment management at the Harvard Business School. This module can also be taught as a stand-alone 15-session course on asset allocation. The module is structured around a discussion of three interactive sessions and nine Harvard Business School cases, all of which have companion teaching notes. The module starts with traditional mean-variance analysis and it develops the main ideas underlying the modern theory of long-term investing. Also, emphasizes the practical implementation of investment decisions and the management of long-term institutional investors and investment vehicles.
Keywords: Asset Management;
Investment;
Decisions;
Management;
Management Analysis, Tools, and Techniques;
Teaching;
Theory;
-
Teaching Note
| HBS Case Collection
|
2006
(Revised from original 2006 version)
General Motors U.S. Pension Funds (TN)
Luis M. Viceira
Keywords: Retirement;
Auto Industry;
-
Teaching Note
| HBS Case Collection
|
2006
Investment Policy at New England Healthcare (TN)
Luis M. Viceira
Keywords: Investment Funds;
Health Industry;
-
Teaching Note
| HBS Case Collection
|
2006
Investment Policy at the Hewlett Foundation (2005) (TN)
Luis M. Viceira
Keywords: Investment;
-
Teaching Note
| HBS Case Collection
|
2006
The Harmonized Savings Plan at BP Amoco (TN)
Luis M. Viceira
Keywords: Energy Industry;
-
Teaching Note
| HBS Case Collection
|
2006
Pension Policy at the Boots Company PLC (TN)
Luis M. Viceira
Keywords: Retirement;
-
Case
| HBS Case Collection
|
2006
(Revised from original 2005 version)
Investment Policy at the Hewlett Foundation (2005)
Luis M. Viceira
In early January 2005, Laurance Hoagland Jr., VP and CIO of the William and Flora Hewlett Foundation (HF), and his investment team met to finish their recommendations to the HF Investment Committee for a new asset allocation policy for the foundation's investment portfolio. If the proposal was approved, HF would adopt a new asset allocation policy that included a substantial reduction in the overall exposure of the investment portfolio to domestic public equities and a significant increase in the allocation to absolute return strategies and TIPS. Hoagland and this team also needed to decide on a complementary recommendation to the HF Investment Committee to pledge approximately 5% of the total value of the portfolio to Sirius V, the latest fund at Sirius Investments, which specialized in global distressed real estate investments.
Keywords: Investment Portfolio;
Risk and Uncertainty;
Public Equity;
Globalization;
Investment;
Property;
Risk Management;
Asset Management;
Financial Services Industry;
-
Case
| HBS Case Collection
|
2005
(Revised from original 2005 version)
General Motors U.S. Pension Funds
Luis M. Viceira and Helen Tung
In June 2003, General Motors Corp. (GM) successfully marketed the largest corporate debt offering in U.S. history, worth $17.6 billion. The offering included $13.6 billion worth of debt denominated in dollars, euros, and pounds and $4 billion dollars denominated in convertibles. GM announced that it would use the majority of these proceeds to shore up its heavily underfunded U.S.-defined pension plans. GM considered investing the entire contribution to its U.S. pension funds coming from the debt offering not in traditional investment grade bonds or stocks, but in a broad category GM called "alpha." GMAM believed this would help meet its new target annual return of 9%, reduce the probability of a negative return in any given year from 20% to 10%, and reduce the volatility of plan assets by 40%.
Keywords: Strategic Planning;
Currency;
Consolidation;
Financial Statements;
Investment Activism;
Decisions;
Bonds;
Investment Return;
Borrowing and Debt;
Corporate Finance;
Auto Industry;
United States;
Citation: Viceira, Luis M., and Helen Tung. " General Motors U.S. Pension Funds." Harvard Business School Case 206-001, December 2005. (Revised from original July 2005 version.)
-
Case
| HBS Case Collection
|
2003
(Revised from original 2003 version)
Investment Policy at New England Healthcare
Jay O. Light, Luis M. Viceira and Akiko M. Mitsui
The Investment Committee of New England Healthcare must decide how to invest three long-term investment pools: a long-term, endowment-type fund and two pension plans. In particular, the committee is evaluating whether the two pension funds--one is a "final salary" pension plan, the other a "cash balance" pension plan--should have special investment considerations due to the unique characteristics of these plans' liabilities.
Keywords: Decisions;
Asset Management;
Investment;
Investment Portfolio;
Policy;
Taxation;
Health Industry;
England;
-
Case
| HBS Case Collection
|
2003
(Revised from original 2003 version)
Pension Policy at The Boots Company PLC
Luis M. Viceira and Akiko M. Mitsui
In early 2000, the trustees of the pension scheme at Boots considered a proposal to move 100% of the pension assets into a bond portfolio, which would be passively managed. The Boots Co. PLC was a leading retailer of cosmetics and toiletries in the United Kingdom, and the company pension scheme was one of the largest in the country, with 2.3 billion British pounds in assets. If implemented, Boots would depart significantly from its prior pension investment strategy, which had been similar to that of other large U.K. pension funds. In general, such funds used external managers for active and passive portfolios of roughly 75% equities, 17% bonds, 4% real estate, and 4% cash. This unprecedented investment policy change would more closely align pension assets and liabilities and, according to long-standing academic principles of corporate pension fund management, it might also have significant effects on Boots itself, its shareholders, and other stakeholders. In making their decision, the trustees would have to consider these effects as well as the practical feasibility of such a plan.
Keywords: Performance Productivity;
Employees;
Asset Management;
Capital Structure;
Investment Portfolio;
Consumer Products Industry;
United Kingdom;
-
Case
| HBS Case Collection
|
2003
Investing in Japan
Peter A. Hecht and Luis M. Viceira
The evolution of the macroeconomic environment, capital markets, financial institutions (including banks, public and private pension funds, and mutual funds), and financial regulation in Japan during the period 1980 to 2002, are examined long-term demographic projections for Japan are presented.
Citation: Hecht, Peter A., and Luis M. Viceira. " Investing in Japan." Harvard Business School Case 203-036, March 2003.
-
Teaching Note
| HBS Case Collection
|
2002
Harvard Management Company and Inflation-Protected Bonds,The (TN)
Luis M. Viceira
Teaching Note for (9-201-053).
Keywords: Financial Services Industry;
United States;
-
Supplement
| HBS Case Collection
|
2000
Harvard Management Company & Inflation-Protected Bonds
Luis M. Viceira
Spreadsheet to (9-201-053). Download only.
-
Supplement
| HBS Case Collection
|
2000
Harmonized Savings Plan at BPAmoco
Luis M. Viceira
Spreadsheet to (9-201-052). Download only.
Keywords: Financial Services Industry;
United States;
North and Central America;
-
Case
| HBS Case Collection
|
2000
(Revised from original 2000 version)
Harmonized Savings Plan at BP Amoco, The
Luis M. Viceira
On August 11, 1998, United States' Amoco Corp. (NYSE: AR) and the British Petroleum Co. (BP) p.l.c. (NYSE: BP) announced the BPC merger with Amoco. This deal was the largest industrial merger to date, and created the world's third-largest oil company, BP (NYSE: BP). This case focuses on the issues surrounding the integration of the employee-defined contribution plans at Amoco and the U.S. subsidiary of BP. One of them was that the premerger plans had very different investment structures. Whereas Amoco had offered its employees only low--cost index funds, BP America had relied on actively managed mutual funds. The new plan, which would have more than 40,000 participants and $7 billion in assets, would have to either choose one of these approaches or integrate them into one single structure.
Keywords: Financial Strategy;
Mergers and Acquisitions;
Compensation and Benefits;
Energy Industry;
North and Central America;
-
Case
| HBS Case Collection
|
2000
Dell Computer Corporation: Share Repurchase Program
George C. Chacko and Luis M. Viceira
Dell Computer Corp. announced a share repurchase program shortly after a significant stock price drop. In this announcement, the company also states that it will use options contracts. This case looks at the options transactions and how they relate to Dell's employee stock option program and the share repurchase program.
Keywords: Financial Strategy;
Stock Options;
Employee Stock Ownership Plan;
Computer Industry;
|
|