Academic Insights on Investing

How to Evaluate Multi-Asset Strategies

Evaluating Multi-Asset Strategies

  • K. Stuart Peskin
  • Journal of Portfolio Management, special issue
  • A version of this paper can be found here
  • Want to read our summaries of academic finance papers? Check out our Academic Research Insight category.

What are the research questions?

Institutional Investors are increasingly allocating to multi-asset strategies (p.17 ) as they seek to access greater diversity, liquidity, and reduced volatility (survey results from Greenwich Associates, 2015).
The main research questions of the paper are as follows:
  1. Is there ‘ONE’ correct way to evaluate multi-asset strategies?
  2. Which are the most appropriate metrics to evaluate multi-asset strategies?

What are the Academic Insights?

By using a case-study approach, the author suggests the following:

  1. NO- There is no ‘ONE’ correct way to evaluate the performance of a multi-asset portfolio. A range of measures is preferred. And by the way, correlation can be a misleading metric, if viewed in isolation.
  2. The author proposes different metrics based on both historical and predictive techniques.


  1. Tail behavior to provide critical information of the strategy results during period of market turbulence ( including a comparison to what correlations would have predicted)
  2. Upside versus downside participation to observe the degree of market capture
  3. Attribution by asset class, for example, how much of the return was captured by equities


  1. Risk modeling, for instance by using an APT risk model (intro to these models here)
  2. Ex-ante tail behavior, the evaluation of portfolio under never-seen-before turbulence

Why does it matter?

This case study is a nice example of a complementary analysis to better understand multi-asset strategy and their potential role in a portfolio.

The Most Important Chart from the Paper:

The results are hypothetical results and are NOT an indicator of future results and do NOT represent returns that any investor actually attained. Indexes are unmanaged, do not reflect management or trading fees, and one cannot invest directly in an index.


An increasing number of investors are recognizing the many benefits of a multi-asset approach, including the potential for improved diversity, greater liquidity, and reduced volatility. Also advantageous is their ability to fit readily alongside a variety of investment approaches and asset class categories. That said, multi-asset strategies come with challenges. This article addresses a particularly problematic area—how to evaluate multi-asset strategy outcomes. Relying on only one or two measures for evaluation can lead to misinterpretation of the historical investment results achieved. Instead, the author advises using a variety of evaluation techniques. One of these—correlation—is discussed in depth, because the author believes it is misunderstood in many dimensions of multi-asset investing. The author also examines some of the more useful performance and risk analytics, both historical and predictive, that can help to understand what drives multi-asset investment outcomes.

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