14:00 — 16:00
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Alternatives – Network Meeting 2021-II

Theme – Private Equity & Leverage

Investors generally use mean-variance analysis to determine the optimal composition of assets in a portfolio, but because private equity is not traded on public exchanges, the use of standard variance / volatility estimation techniques is not possible. The observed volatility in private equity returns is unrealistically low because returns are based on selective valuations that exhibit autocorrelation. As an alternative to observed volatility, some investors have argued that private equity volatility should be estimated as leveraged equity investments.

However, this approach gives unrealistically high volatilities, and it raises the questions, among other things; Why is this method not a reasonable approximation of volatility in private equity? On the contrary, why can US private equity returns can be replicated systematically via public equities, historically by selecting small, cheap, and levered stocks, essentially using a multifactor approach to stock selection? How does smoothing and lagged valuations of privat equity companies affect volatility?

To shed light on these important questions, we have invited William Kinlaw, Senior Managing Director, Head of State Street Associates, State Street Global Markets, David Turkington, Senior Managing Director and Head of Portfolio and Risk Research at State Street, and Nicolas Rabener, CAIA, Founder & CEO of FactorResearch to present their analysis of private equity, leverage effects, liquid replication of private equity and estimation of risks and whether, when adjusted for the sector, there is still a connection between risk and financial leverage?

After the presentations, the network gathers to debate and discuss the results of the research papers.


Welcome and introductionary remarks
Private Equity and the Leverage Myth
William Kinlaw, Senior Managing Director, Head of State Street Associates, State Street Global Markets & David Turkington, Senior Managing Director and Head of Portfolio and Risk Research at State Street
Street Associates
Does Financial Leverage Make Stocks Riskier? Part II
Nicolas Rabener, CAIA, Founder & CEO of FactorResearch
Network debate
Closing remarks

Will Kinlaw, CFA, Senior Managing Director, Head of State Street Associates

State Street Global Markets

Will is senior managing director and head of State Street Associates, a partnership that bridges the worlds of financial theory and practice. Will oversees the development of investment indicators and research which are delivered daily to thousands of investment managers, pension funds and sovereign wealth funds around the world. These products leverage State Street’s proprietary information assets as well as data sourced through strategic partnerships with alternative data partners. State Street Associates also serves as State Street’s hub for academic partnerships, focused on tackling real-world investment challenges spanning ESG, private markets, asset allocation, risk management, investor behavior, and other topics.

His recent areas of research include business cycle forecasting, risk, private equity investing and asset allocation. Will and his co-authors were awarded the 2013 Peter L. Bernstein Award as well as the 2013, 2014, and 2015 Bernstein Fabozzi/Jacobs Levy “Outstanding Article” awards as well as “Honorable Mention” for the 2016 Peter L. Bernstein Award. The second edition of his book, “Asset Allocation: From Theory to Practice and Beyond,” co-authored with Mark Kritzman and David Turkington, is forthcoming in June 2021.

Will serves on the editorial boards of the Journal of Portfolio Management and the Journal of Alternative Inestments as well as the advisory board for the Journal of Investment Management conference. He holds an M.S. in finance from the Carroll School of Management at Boston College and a B.A. in Economics from Tufts University, as well as a CFA designation. He joined State Street in 2002.

David Turkington, Senior Managing Director and Head of Portfolio and Risk Research

State Street Associates

David Turkington is Senior Managing Director and Head of Portfolio and Risk Research at State Street Associates. His team is responsible for research and advisory spanning asset allocation, risk management and quantitative investment strategy. Mr. Turkington is a frequent presenter at industry conferences, has published research articles in a range of journals, and led the development of State Street’s systemic risk and turbulence indicators. He is also co-author of the book A Practitioner’s Guide to Asset Allocation. His research has received the 2013 Peter L. Bernstein Award, four Bernstein-Fabozzi/Jacobs-Levy Outstanding Article Awards, and the 2010 Graham and Dodd Scroll Award. Mr. Turkington graduated summa cum laude from Tufts University with a BA in mathematics and quantitative economics, and he holds the CFA designation.

Nicolas Rabener, CAIA, Founder & CEO


Nicolas Rabener is the founder & CEO of FactorResearch, which provides quantitative solutions for factor investing. Previously he founded Jackdaw Capital, an award-winning quantitative investment manager focused on equity market neutral strategies. Before that Nicolas worked at GIC (Government of Singapore Investment Corporation) in London focused on real estate investments across the capital structure. He started his career working in investment banking at Citigroup in London and New York. Nicolas holds a Master of Finance from HHL Leipzig Graduate School of Management, is a CAIA charter holder, and enjoys endurance sports (100km Ultramarathon, Mont Blanc, Mount Kilimanjaro).

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8. June 2021
14:00 - 16:00
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