Practical Applications of Portfolio Tilts Using Views on Macroeconomic Regimes

In Portfolio Tilts Using Views on Macroeconomic Regimes, from the February 2023 issue of The Journal of Portfolio Management, Redouane Elkamhi, of the University of Toronto, and Jacky S. H. Lee and Marco Salerno, both of the Healthcare of Ontario Pension Plan Trust Fund, develop and illustrate an approach for enhancing investment decisions by incorporating investor views on the likelihood of economic regimes. This contrasts with the literature incorporating investor views on specific asset returns and the covariances among returns on different assets. The authors assert that their approach outperforms others that require investors to have views on specific asset returns. Additionally, it is easier to apply because it is more likely that an investor will have views about the likelihood of different macroeconomic regimes than about the expected performance of many different assets.