Utility functions offer a means to encode objectives and preferences in investor portfolios. The functions allow one to place a score on outcomes and then identify optimal portfolios by maximizing utility. The central theme of this article is that utility functions should be tailored to the...

This paper investigates how the nature of risk changes as investment horizon lengthens, and what it means for investors. Accumulated wealth is analyzed in terms of four drivers: expected return, cash flow innovations, discount rate innovations, and reinvestment rates. This perspective highlights...

We address how investment management organizations might be built to successfully pursue long-term investing. A variety of recommendations and suggestions are put forward that address four building blocks: organizational; incentives; investment approach; and discretion over trading. A key...

The literature on investment horizon is reviewed in order to enhance the understanding of potential influences on long-term investing by institutional investors. Investment horizon reflects an inter-connected web of influences related to an investor's circumstances, the design of the investing...

We present a framework for deciding when to choose an alternative to passively investing in capitalization-weighted indices within any particular asset class. Five reasons are identified for seeking an alternative. Three of these reflect situations where a capitalization-weighted index is either...

We use portfolio holdings data to examine the performance of 143 global equity funds over the period 2002 to 2012. We find that the average global equity manager outperforms their benchmark by 1.2% to 1.4% per annum before fees. Attribution analysis reveals that the prime source of excess return...

An integrated approach to portfolio construction and performance evaluation is developed to support investment programs based around long-term cash flow projections and associated expected returns. Performance is evaluated by attributing realized returns into components reflecting the initial...

We investigate the existence and sources of performance persistence for Australian equity funds, using monthly portfolio holdings data. We find significant persistence among outperforming rather than underperforming funds, which is primarily related to security selection skill, and is associated...