Elm Research

Golf Guru Scott Fawcett Will Make You a Better Golfer, and a Better Investor Too

October 20, 2021 — What does professional golf have to do with becoming a better investor? As it turns out, a surprising...

What Didn’t Happen on Black Monday 1987

October 17, 2017 — I was 25 years old and had been on John Meriwether’s Arb Desk for just over a year, following two years working in...

Market Multiple Mean-Reversion: Red Light or Red Herring?

October 2, 2017 — When it seems like equities aren’t what they used to be, it’s natural to consider reducing...

When (if Ever) Has it Paid to Wait for a Stock Market Correction?

August 7, 2017 — An investor once told us she wanted to add to her account, but felt the market was so high that she should wait for a...

What’s the Best Way to Get Invested in the Market?

March 8, 2017 — A few friends asked me how to go about putting more of their savings into the stock market. Is it better to jump in all at...

Reading Lists

Investment Basics

Tax Matters

Inquiries into Investing

Our Investment Approach

Publications

Elm Original Research

Research Tax Efficiency and Dynamic Asset Allocation: Can We Have Our Cake and Eat It Too?

Haghani, White — 2018

Recommended Reading

Return Chasing and Trend Following: Superficial Similarities Mask Fundamental Differences

Elm Original Research

Practical Utility Risk Aversion and Investing

Recommended Reading

A Case Study for Using Value and Momentum at the Asset Class Level - Journal of Portfolio Management

Elm Original Research

Tax Efficiency and Dynamic Asset Allocation: Can We Have Our Cake and Eat It Too?

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Baseline Weights: The Baseline defines the strategy's 'average' asset allocation over a long period of time, and serves as the reference point for Long-Term and Trend deviations. The Baseline represents the asset-allocation that a prospective investor would choose were they seeking a static strategy. See here for more information about the Baseline construction methodology.

Target Weights:The target weights used in the periodic portfolio rebalancing. Portfolios may not be rebalanced exactly to target, as Elm's execution engine tries to find a parsimonious set of trades which get as close as possible to target weights while also minimizing transaction costs, tax costs, etc.

Target Weight Breakdown:

Expected Return: The target weight resulting only from the Expected return-based metric. We want target weights to be proportional to the Expected excess returns, while staying within 2/3 above or below the bucket's Baseline Weight.
Risk: The deviation caused by the Risk Metric. We want a positive Deviation in lower-risk environments, and vice versa. The size of Risk-based deviation can be at most 1/3 of the bucket's Baseline Weight.
The Target Weight is equal to the Return + Risk components in the Breakdown.

Expected Return Metric:

Equities: 1 / CAPE - 10y TIPS Real Yield (Excess Expected Return in excess of the long-term risk-free rate)
Fixed Income: 10y TIPS Real Yield
For a small number of asset buckets we use slightly different signals than described above, and a few buckets use secondary metrics as well. Please contact us for details if you're interested.

Risk Metric:

We use a momentum signal as a proxy for the risk-environment: positive momentum indicates a low-risk environment, negative momentum indictse a higher-risk environment.
Balanced: Spot Asset Class Total Return Index / 1y-Avg Total Return Index
(All indexes adjusted for inflation and risk-premia)
All-Equity: [Spot Asset Class Total Return Index / 1y-Avg Asset Class Total Return Index] - [Spot Baseline Total Return Index / 1y-Avg Baseline Total Return Index]
(All indexes adjusted for inflation and risk-premia)

Disclaimer

Elm Partners’ Funds are available only to accredited investors. The content of this website and related materials are not intended to solicit investment, but rather to elicit discussion and exploration of better ways to invest. The contents of this website do not comprise an offering document. Neither historical simulations nor past return performance are necessarily indicative of future returns. Elm Partners Management LLC is an investment advisor registered with the SEC. Here are the most recent copies of our Form ADV Part 1, ADV Part 2A2B and Form CRS.

Fidelity Investments (“Fidelity”) is an independent company, unaffiliated with Elm Partners (“Elm”). Fidelity is a service provider to Elm. There is no form of legal partnership, agency affiliation, or similar relationship between your financial advisor and Fidelity, nor is such a relationship created or implied by the information herein. Fidelity has not been involved with the preparation of the content supplied by Elm and does not guarantee, or assume any responsibility for, its content. Fidelity Investments is a registered trademark of FMR LLC. Fidelity InstitutionalSM provides clearing, custody, and other brokerage services through National Financial Services LLC or Fidelity Brokerage Services LLC, Members NYSE, SIPC. 830247.3.0

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