Journal of Wealth Management

Scenario-Based Forecasts: Using Narratives and Human Judgment to Derive Expected Return, Volatility, Asymmetry, and Fat Tails

2025-03-03T16:40:27+00:00

Goal-based investing defines risk as the probability of an investor not attaining a goal. This definition captures both contextual information about the investor and distributional properties of investments that fall outside of the scope of Modern Portfolio Theory. Specifically, it can accommodate asymmetrical and “fat-tailed” distributions. In addition, it is a more intuitive definition of risk than volatility. This article introduces a forecasting method to leverage these two advantages. The proposed approach requires that humans create scenario-based forecasts. From these, computers derive a full probability distribution and consequently, such parameters as expected return and volatility. These yield inputs for portfolio optimization. Lastly, forecasting skill can be measured directly using proper scoring metrics. Scenario-based forecasts are intuitive, scalable across investors, and transparently determine portfolio positions. Essentially, they attempt to leverage both the large amount of information embedded in human forecasts and the computationally efficient methods of academic finance and quantitative investing. On a more philosophical level, the human element removes the dependency on historical data and inductive logic that plagues quantitative modeling, and, thus, avoids the “Black Swan” problem.

Interpreting Omega Ratio for Goals Based Wealth Management

2025-03-28T13:57:22+00:00

Goals-Based Wealth Management (GBWM) presents a distinct challenge for performance measurement, as conventional investment strategies are typically evaluated based on risk-adjusted returns without explicitly considering the achievement of specific financial goals. Traditional portfolio performance metrics focus on maximizing returns relative to volatility, based purely on the investor risk profile. They often neglect whether these strategies effectively meet the investor's predefined objectives. Consequently, strategies specifically designed to satisfy financial goals (for example, goal probability optimization using dynamic programming) may appear to under-perform in some cases when assessed through the traditional lens, despite their alignment with the investor's long-term priorities.

In response to this gap, we propose a risk-sensitive adaptation of the omega ratio that simultaneously accounts for both the probability of goal attainment and the returns generated by a diverse range of investment strategies. We demonstrate that the Risk-Sensitive Omega (RSO) provides a continuous spectrum of preferences between goal achievement and realized returns. The weighting can be determined either by an investor’s risk preferences or by selecting the optimal balance that maximizes the RSO for each individual strategy. By evaluating each strategy at its ideal trade-off between goal probability and returns, we establish a more holistic framework for comparing the performance of competing strategies within the GBWM context, bridging the gap between traditional risk-return assessments and goal-focused investing.

The Evolving Family Office Landscape: Predictions and Challenges

2025-04-11T14:16:12+00:00

Approximately a decade ago, we set forth a “landscape” article with five family office predictions that highlighted several key trends to watch in the coming years. First, we present the four previous predictions, which are all essential parts of preserving family wealth, especially generational wealth which continues to be a dominant factor in the family office landscape and then add some new predictions. In this article we also examine the latest developments, including heightened investment sophistication, family-driven decision-making, and the push for strong governance systems that not only preserve but also unify families across generations.

Rethinking Office REITs: Risk and Return After COVID

2025-08-29T17:49:49+00:00

This study evaluates the performance of Office Real Estate Investment Trusts (REITs) based on monthly returns from January 2010 to December 2024, with a particular emphasis on the post-COVID-19 period. Once considered reliable components of diversified portfolios, Office REITs have faced growing structural headwinds due to remote work trends, declining occupancy rates, and weakening lease fundamentals. Using Sharpe, Sortino, and Omega ratios, the study finds that Office REITs have consistently underperformed both equity and broader REIT benchmarks, especially since 2020. Across all models, Office REITs produced persistent and statistically significant negative alpha, indicating underperformance not explained by standard risk factors. In addition, downside risk metrics such as Value at Risk (VaR) and Conditional VaR highlight the sector’s heightened exposure to extreme losses. The study underscores the need for reassessment of office-specific real estate exposure amid shifting economic and workplace dynamics.

THE DOLLAR’S REIGN: HOW AMERICAN’S CURRENCY CONQUERED AND RULES THE WORLD

2025-10-24T09:38:18+00:00

This paper traces the historical evolution of the U.S. dollar’s rise as the global reserve currency and examines its continued dominance in shaping trade, capital markets, and wealth management. By situating current debates, U.S. deficits, geopolitical realignment, and digital currency innovation, within a longer historical arc, it distinguishes cyclical volatility from structural pressures. For family offices and wealth managers, this perspective clarifies the practical implications of dollar dynamics for portfolio allocation, risk management, and cross-border wealth preservation. While outright displacement remains improbable, a gradual move toward monetary multipolarity is plausible, underscoring the need for disciplined currency management and resilient portfolio design.

Tax-Efficient Investing in Private Markets

2026-01-28T08:41:32+00:00

Tax-efficient investing can be a crucial yet often overlooked investment strategy for maximizing long-term wealth accumulation. Traditional investment analysis and strategy focus on pre-tax returns and typically ignore the negative impact taxes may have on overall returns and long-term wealth accumulation. Failing to consider after-tax performance can significantly erode investment gains over time. In an industry dominated by large investment managers catering to non-taxable institutions (pensions, endowments, foundations), many family offices and ultra-high-net-worth investors (“UHNWI”) lack access to tax-sensitive solutions, particularly in private markets.

This paper introduces a comprehensive framework for tax-efficient investing in private markets, emphasizing the importance of risk-adjusted after-tax returns, standardized tax-impact metrics, and the concept of Tax Alpha (see Arany, Wickremasinghe, Oberoi, & Hollo 2024). While public markets may provide substantial opportunities for tax efficiency (e.g. tax-loss harvesting, direct indexing), private market investments may offer more structured, controlled and targeted opportunities to pursue tax efficiency for other portions of a portfolio. Building on this foundation, this paper takes a deeper analytical approach to defining various return metrics in tax-efficient investing and provides concrete examples of how investment returns may be calculated through a tax-efficient lens using Tax Benefit Harvesting^TM.

The objective is to provide a “common yardstick” for measuring returns for investments with varying degrees of tax efficiency and comparing them to non-tax-efficient investments. The methods outlined herein may be used across the investment spectrum, from public stocks/bonds to private markets (private equity, private credit, real estate, infrastructure, etc.). By integrating a tax-efficient portfolio strategy, tax-efficient investment structuring, and deliberate investment selection, investors may improve after-tax returns without taking on incremental risk[1], ultimately building a more effective approach to wealth preservation and accumulation.

[1] All mentions of “no additional risk” or “no incremental risk” throughout this paper assume comparing two separate investments that have equivalent risk profiles.