Summary: Investing Amid Low Expected Returns: Making the Most When Markets Offer the Least by Antti Ilmanen

Key Takeaways

• Are you looking for a way to improve your investment returns in a low-return world? If so, you might want to read the new book by AQR Principal Antti Ilmanen, Investing Amid Low Expected Returns: Making the Most When Markets Offer the Least.
• To learn more about the book and how it can help you elevate your game in the face of challenging market conditions, read the full article below. You can also download a free excerpt of the book and see what other experts have to say about it. Don’t miss this opportunity to gain valuable insights and guidance from one of the leading experts in the field of expected returns.

Investing Amid Low Expected Returns (2022) introduces strategies for successful investing in an era marked by the prospect of record-low future expected returns. It emphasizes the importance of discipline, humility, and patience and offers insights into improving long-run returns through effective portfolio construction, risk management, and diversification. The guide is a valuable resource for both institutional and active individual investors navigating challenging financial conditions.

Recommendation

Since the 2008 global financial crisis, investors have had many reasons to feel good. Low interest rates pushed stocks to record levels, leaving investors to reap what financial expert Antti Ilmanen considers “excess gains.” But the good times are coming to an end, Ilmanen warns in this useful study. In a world of higher interest rates, it’s unlikely that investors will continue to enjoy stellar returns. That means they need to start paying close attention to details like diversification and risk management. Ilmanen isn’t predicting a market collapse, but he does want investors to prepare for a challenging future.

Take-Aways

• Investors need to adapt to a new reality.
• Low returns pose serious challenges for those saving for retirement.
• Past performance of equities provides no guarantee of future results.
• Residential real estate offers false hope to investors seeking a magic bullet.
• Value investing has fallen on hard times.
• Investors have moved from active stock picking to passive investing.
• Investors are rewarded by patience, and yet maintaining patience can be difficult.
• Portfolio diversification amounts to the proverbial free lunch.
• Risk gets a bad rap, but proper risk management mitigates the downside of investing.

Introduction: Enhanced strategies for resilient wealth-building in challenging financial landscapes.

Investing can often feel like navigating through an intricate labyrinth, filled with unpredictable turns and obscured pathways, especially in an environment rife with low returns and high valuations. In these environments, success isn’t solely about high returns but more about mastering the delicate balance between risk and reward. The terrain is demanding, requiring more than just financial acumen – it demands a structured and disciplined approach, one that aids in deciphering the varied nuances of numerous asset classes and strategies, to ultimately build a resilient and prosperous financial future. The importance of such a refined approach becomes exceedingly critical, particularly when the market is replete with overvalued assets and the pursuit of alpha becomes more elusive.

In this summary, you’ll learn the essential guidelines and principles needed to navigate this multifaceted financial ecosystem. You’ll discover the significance of a process-oriented approach, gain insights into the nuances of various asset classes, and understand how to avoid the pitfalls of detrimental investment habits. You’ll be encouraged to embrace core principles of investing such as patience, humility, and realistic expectations, and learn the strategic importance of diversification in your investment portfolio.

So, prepare yourself to delve deep into these insights and strategies, and arm yourself with the knowledge you need to successfully navigate the ever-evolving investment landscape.

Adapting strategies in a low-return landscape: Emphasizing process over outcome

In today’s financial world, assets are yielding less and prices are soaring, creating an atmosphere where future returns seem likely to be lower. Most assets seem to be valued quite high, pointing towards a departure from the generous profits of yesteryears. Investors are entering a time, possibly spanning the whole of the 2020s, where a payback period for past gains is looming, this heralding an era marked by reduced returns on a broad range of assets. This shift in the financial climate can unfold gradually, through years of low yields, or abruptly, due to significant losses from value adjustments.

The problem is that many investors, fortified by past successes, continue to anticipate high returns, often resorting to riskier ventures in an effort to maintain prior return levels. This approach might offer transient relief but is fundamentally unsustainable, leading to precarious expectations and a dangerous reliance on past victories. It results in a shift towards more hazardous strategies, with investors diversifying into riskier and illiquid assets to chase higher returns, a pattern observed historically whenever rates plummet. This pursuit, while understandable, is inherently risky and presents tough choices in a low-return environment.

Therefore, the emphasis should be on solid investment principles such as discipline, humility, and patience. The focus needs to be on improving processes and emphasizing factors within your control, rather than being obsessed with outcomes, which, in the short term, are largely dictated by luck. Adopting a systematic and evidence-based approach, favoring strategic asset allocation and diversification over concentration and tactical timing, becomes crucial. This shift is not just a mere change in strategy but a reformation in mindset, a move towards a stoic philosophy, concentrating on realism and process over results.

Different types of investors, whether they are defined benefit pensions, individual savers, or endowments, are all striving to navigate this evolving environment. Everyone is saving to fund future liabilities or spending, with the approach varying in explicitness of their liabilities. The prevalent low returns are forcing many to alter their asset allocation, moving towards riskier assets. The collective reach-for-yield actions, a reaction to sustain return targets, symbolize the current struggle to combat the challenges of the low return environment.

The main takeaway here is that adapting to this transformed financial environment necessitates a recalibration of expectations and strategies. A focus on evidence-based investment principles, realistic expectations, and a dedication to process over outcome are the guiding lights in this journey, ensuring balanced and successful investment endeavors even in the prevailing conditions of lower expected returns. The essence is to cultivate resilience and strategic thinking to navigate the nuanced intricacies of the modern financial landscape efficiently. To do this, you need a deeper understanding of the various asset classes. Let’s look at that in the next section.

Strategic navigation through varied investment terrains: Understanding asset and style premia in a low-return landscape

Navigating today’s investment landscape necessitates a deep understanding of various asset classes and strategies, especially in a climate of notably low returns. Let’s delve deeper into the intricate tapestry of investing, exploring the roles of liquid asset class premia, illiquidity premia, and style premia.

In today’s economy, the interest rates that people earn on cash savings are near zero in the United States, and some countries even have negative rates, meaning savers pay to store their money. This reflects expectations of low inflation and overall economic sluggishness, and it’s a major reason why earning returns on investments is challenging now. The equity premium, which is the extra return that investors expect for investing in the stock market over safer assets, has been a key source of both return and risk. For example, U.S. stocks have typically earned six to seven percent real return annually from 1900 to 2020. However, projections for the future suggest we might earn less than this historical average due to the currently low rates, pointing to potentially lower profits on most major investments that can be easily bought or sold.

Illiquidity premia refer to the additional profits investors hope to earn by investing in assets that are not easily sold or converted to cash, like real estate and private equity. These play a crucial role, especially in those areas. However, there isn’t much consistent evidence to show that these extra returns are substantial. In simpler terms, investments like real estate and private businesses have provided profits similar to more easily sold assets like public stocks over time, though the reported profits may underestimate the true risk due to being artificially smoothed or averaged out. While investing in private businesses has been more profitable than public ones for more than three decades, this trend has been weakening for investments made after 2006.

The analysis extends to style premia, encapsulating value, momentum, carry, and defensive strategies. Value strategies aim to buy assets that seem to be cheaper than their actual worth and have endured various economic challenges but can be affected by major industry shifts, like the technology-driven changes in the 2010s. Momentum strategies are based on following existing trends and have shown to be effective across different asset types. Carry strategies involve earning from the differences in prices or yields of assets and have historically provided excellent returns when spread across different assets, balancing risk well. Defensive strategies focus on safer, high-quality stocks and have continually performed well, which goes against some traditional market beliefs but aligns with preferences to avoid debt and high-risk, high-reward scenarios. In simpler terms, understanding and applying these varied strategies can help in managing investments more wisely in different market conditions.

In essence, understanding the intricate interplay between liquid and illiquid assets, coupled with a strategic application of value, momentum, carry, and defensive strategies, is pivotal in navigating the precarious low-return environment that characterizes today’s investment landscape. This comprehension is paramount for investors aiming to sustain and grow their portfolios in this challenging climate, where the subtleties of asset selection and strategy implementation can be the distinguishing factors between investment success and failure.

Deciphering alpha: Navigating the complexities for optimal value realization

Let’s delve deeper into the concept of alpha – it’s like the extra credit of the investment world, representing the additional return one makes beyond the typical market gains. In simple terms, if the market grows by five percent, and your investments grow by seven percent, that extra two percent is your alpha, your win against the market.

However, determining alpha isn’t straightforward. It’s ever-changing and tends to diminish as market competition increases, emphasizing that higher returns are fleeting and challenging to maintain.

Drawing a clear line between Alternative Risk Premia or ARPs and alpha is tricky. ARPs, much like market gains, are publicly known but share the elusive, hard-to-pin-down nature of alpha. Investors chase unique signals that seem to align with alpha, but these are risky and require a balanced mix of traditional and novel approaches to optimize returns.

Even as many turn from active to passive investment strategies, the picture isn’t black and white. Passive strategies might rule in some areas, but there are realms where active managers still achieve positive, albeit increasingly rare, alpha. Recognizing this scarcity highlights the need to analyze managers’ performance deeply, ensuring investors are not paying premium prices for standard returns. Often, what is thought to be alpha is related to regular market influences, making true alpha more limited than generally believed – this is true even for renowned investors like Warren Buffett and George Soros.

Grasping the subtle and transient nature of alpha, its varying calculations, and its relationship with ARP is key for navigating the ever-evolving financial landscape. This knowledge enables informed investment choices and effective risk management. To truly understand alpha, a diligent and enlightened approach is needed, discerning the interactions between alpha and regular market returns, ensuring the pursuit of alpha yields real value and avoids the misleading charm of assumed returns.

Balancing act: Harnessing diversification for optimized risk-adjusted returns

When we continue our journey in understanding investments, we see that diversification, or spreading your investments across different types of assets, is vital. Even though it’s a powerful strategy, it’s often undervalued and not used to its full potential. Many investors still tend to put all their eggs in one basket, mostly in stocks.

The power of diversification comes from mixing different kinds of ARPs that don’t all behave the same way. This can significantly increase the ratio of return to risk. But to really benefit from diversification, one might need to use leverage, or borrowed money, which can be risky and unconventional, and might not sit well with some investors.

Despite its proven benefits, diversification is often met with doubt because it doesn’t have a one-size-fits-all guide and it strays from traditional investment models. History tells us that diversification consistently improves the risk-return profile of ARP portfolios, especially when investments are spread globally, which can lower risks and increase long-term returns compared to focusing on one market.

When building a diversified portfolio, a lot of emphasis is put on Mean-Variance Optimization or MVO, a technique that helps align investments with one’s preferred risk and return levels. However, using MVO involves making crucial decisions, like how much to invest in less liquid assets and considering wider economic influences. MVO aims to prefer assets with superior risk-return profiles and low correlations, but in real-world applications, there are limits related to leverage and liquidity that need meticulous consideration to avoid mistakes and achieve realistic allocations.

Constructing a diversified portfolio is complicated and needs an approach that doesn’t only rely on past data and existing models but also reflects individual goals, preferences, and limits. Achieving the right balance between diversification, liquidity, leverage, and risk involves navigating through many considerations, making the quest for optimized risk-adjusted returns an intricate task. By embracing diversification and informed optimization techniques, investors can create a more balanced approach to investment, tapping into the full range of opportunities in the ever-changing financial markets.

Principles over profit: Navigating the investment landscape with discipline and wisdom

In the pursuit of financial acumen and investment success, steering clear of detrimental habits while fostering discipline and patience is paramount. As mentioned earlier, successful investors are not swayed by the allure of immediate results – rather, they maintain a steadfast focus on the process, resisting the temptation to chase returns.

Chasing returns usually comes from impatience and the tendency to make extreme predictions. This approach, of going after investments that have been doing well, can be risky, especially when these investments are due for a downturn. Investors often fall into other harmful habits too, like not saving enough, not spreading their investments widely, trading too much, and going after “lottery stocks” instead of using borrowed money wisely. To combat these habits, it’s important to build good practices, be more disciplined, patient, think probabilistically, and govern investments effectively. Using tools that help you stick to your commitments and reflecting on your choices can also help in reducing biases.

Evidence from studies underscores the consequences of these common bad habits. For instance, pension plans often replace underperforming managers with those showcasing recent success, only to find the terminated managers subsequently outperforming the newly appointed ones. This underscores the detrimental timing often associated with investment decisions, a phenomenon also seen in the propensity to allocate to past multi-year winners and the general prevalence of overtrading due to overconfidence.

In today’s investing world, where the returns are generally low and there’s a lot of speculation, taking risks wisely is more important than ever, especially when there’s a lot to lose. The essence of smart investing remains relevant, especially in tough times when using resources efficiently is vital.

It’s vital, especially in times of elevated asset valuations and potential repricing, to adhere to key principles such as meticulous strategy selection, accurate risk assessment, strategic patience, expansive diversification, cost-efficiency, and stringent governance. Maintaining unwavering confidence in your chosen approach is imperative.

At the end of the day, as you navigate the intricate landscape of investment, remember the importance of resilience, the pursuit of wisdom, and adherence to thoughtful, disciplined strategies. In a world rife with speculation and transient allure, let your journey be guided by enduring principles and a steadfast commitment to sound investment practices, thus ensuring a balanced and prosperous financial future.

Summary

Investors need to adapt to a new reality.

Individual investors have adjusted their expectations of returns to reflect a climate characterized by rich asset valuations and rock-bottom bond yields. Central banks kept rates low for years, and investors reaped the rewards. The era following the 2008 financial crisis has been one of robust realized returns. But the past is not a perfect roadmap to the future, and investors would be wise to change their expectations and investment strategies. Investors are likely to see lower returns than the ones they experienced in the 2010s.

“Collectively, we are due for a disappointment, as we cannot all buck the fate of lower expected returns.”

The new reality of low returns will pose challenges for investors and savers of all stripes, from sophisticated pension funds to individuals. If returns do indeed revert to the mean, then compounding will become a less powerful force than it has been over the past few decades. The 2010s saw strong investment returns, thanks to low inflation and the growth of the FAMAG (Facebook, Apple, Microsoft, Amazon and Google) platform companies and their monopolies. But a clear pattern has emerged over history, one that sees a decade of strong returns followed by a decade of weak ones.

Low returns pose serious challenges for those saving for retirement.

For American workers, retirement plans fall into one of two basic categories: Defined-benefit (DB) pension plans allow someone else to worry about investment decision-making. A worker contributes a small percentage of compensation, the employer promises a future benefit, and an investment manager figures out how to make the portfolio meet the promise. But today, most workers have defined-contribution (DC) plans, which feature a much harsher calculus. It’s up to the individual not only to save for retirement but also to decide how to allocate investments. If returns languish, DB and DC savers find themselves in different scenarios. Underfunded pension plans often have to chase returns while underfunded individuals simply must work longer and save more.

“If you are an individual DC saver, you must shoulder the investment risk and the longevity risk in pension saving.”

The low-return world became especially stark in 2020 when fixed-income instruments traded at negative yields. The uncomfortable reality was clear: Taking no risk meant watching asset values decline. Investors could generate positive returns with riskier assets but with the obvious downside that adverse outcomes were a very real possibility. Some individual investors began taking risks on the equivalent of lottery tickets – they traded options or speculated on “meme stocks.” But in a world in which investments have delivered returns of 8% to 10% a year for three decades, it’s easy for investors to become complacent about risk and unrealistic about returns.

Past performance of equities provides no guarantee of future results.

US stocks have performed exceptionally well for a long time. From 1900 to 2020, US stocks generated real returns of 6.6%, well above the 4.5% returns of other nations’ stock markets. That strong performance includes the 84% decline in stocks during the Great Depression. Stock valuations represent the discounted value of future cash flows, and this discount rate keeps falling. That reality has contributed strongly to the large gains enjoyed by equity investors. However, there’s no guarantee that these windfall gains will continue.

“Few investment opportunities are as old as gold.”

Commodities faced headwinds in the 2010s, an era of low inflation. Perhaps the oldest commodity is gold. The precious metal continues to hold appeal as a store of value, even if it generates no cash flows or dividends. Even so, the value of all gold stores as of 2021 was $17 trillion while the much newer alternative to fiat money, cryptocurrency, was worth a combined $2 trillion in 2021. Gold tends to perform well in inflationary periods and bear markets for stocks, and it remains a favorite of investors preparing for doomsday scenarios.

Residential real estate offers false hope to investors seeking a magic bullet.

What about housing as a solution to savers’ investment challenges? One widely noted study in 2019 argued that residential real estate has produced long-term results similar to stocks but with less downside risk. Slicing and dicing returns from 16 nations, the authors concluded that homes returned 7.26% annually, compared to 6.67% for stocks. But the findings proved contentious. Housing experiences less volatility in part because of its illiquidity – any given property is marked to market only occasionally. What’s more, the study overlooked the inevitable decline in the quality of a house over time.

“Unfortunately, the current generation of real estate investors may extrapolate past decades’ generous returns.”

A more sober look at housing suggests that it’s no magic solution to the conundrum of low returns. While the value of the land under a house remains steady, the house itself is an ever-depreciating asset. Houses require constant repair and upkeep, and eventually they have to be torn down and rebuilt. Rental income isn’t all gravy, either – a significant portion of rental income covers the landlord’s costs, plus the intangibles of headaches from managing a property and the risk of occasional declines in real estate values.

Value investing has fallen on hard times.

Value investing is a contrarian strategy, one that seeks out underpriced stocks that have been overlooked by the market. Value investors focus on metrics such as book/price ratios to find bargain stocks. In other cases, investors simply buy assets that have underperformed over a given period of time, with the idea that those assets are due for a rebound. The reasons that markets undervalue certain companies are up for debate, but value investors generally believe that excess profits enjoyed by growth-stock companies ultimately will self-correct.

“Stock selection value strategies performed very poorly between 2018 and 2020, raising investor doubts about these strategies’ long-run viability.”

Value investing was a profitable pursuit for many decades, but the style fell out of favor during the 2010s. The rout was total and complete; value investing failed in all corners of the globe and across most sectors. And value-investing flops were limited not just to picks based on book/price ratios but on all types of value strategies. Growth stocks simply overpowered value stocks, seemingly ending the old debate about growth versus value as viable strategies. However, it might be too soon to rule out value investing. Markets tend to embrace the idea that “this time is different,” and yet fundamental strategies such as bargain hunting endure.

Investors have moved from active stock picking to passive investing.

In recent decades, low-cost index funds, and especially exchange-traded funds, have become wildly popular. Instead of attempting to pick individual stocks or hiring managers to select stocks, investors increasingly have turned to letting an index do the work for them. In 2007, passively managed mutual funds accounted for 19% of market share, according to Morningstar. By 2021, that share had risen to 50%. The tide toward index-based investing is based in part on the reality that active managers struggle to pick winners at a pace that justifies their fees.

“The conventional wisdom is that while markets are not perfectly efficient in the sense that market prices are always right, beating the market is really hard.”

Even superstar active managers owe some of their wins to the broader trends on which passive investors rely. Warren Buffett is a hugely successful value investor, and clearly his expertise is responsible for some part of his market-beating performance. But on balance, Buffett owes more of his long-term returns to mere market exposure than to his contrarian plays. George Soros has produced even less of a return beyond the usual benchmarks: His Quantum fund benefited to an even larger extent from market exposure during a time of rising asset values.

“Overall, investor choices on trading activity and on active versus passive management appear more faith-based than evidence-based.”

Still, investors seem to have embraced the low-fee ethos of passive investing a bit too exuberantly. Investors should keep their focus on maximizing returns rather than minimizing fees. The broad shift to index funds has been somewhat offset by inflows to managers of hedge funds and private equity funds, both high-fee endeavors involving active management. The most revered hedge fund managers continue to command fees of 2% of assets and 20% of performance. But there’s no question that management fees have trended sharply down. Passively run funds typically charge less than 30 basis points, while actively managed stock funds impose fees of 30 to 80 basis points.

Investors are rewarded by patience, and yet maintaining patience can be difficult.

Investors know that they should be patient, and yet many find it all but impossible to stay the course when markets don’t perform as they hope. Nobel laureate Daniel Kahneman delved into the behavioral issues that plague many investors. He noted that they make long-term investments but expect short-term results. When those results fail to materialize, investors lose patience. By churning in and out of investments, they all but guarantee poor returns. Many investors struggle to stay the course for even three to five years, much less for longer periods of time.

“Patience is a virtue also in investing – and one that is hard to sustain.”

Investors are wise to simply tune out performance. To return to Buffett, his Berkshire Hathaway beat the S&P 500 by an average of 9.5% per year for four decades. Yet even Buffett had three-year periods of poor performance. Indeed, Buffett’s three-year record was unimpressive fully 30% of the time. But investors who were patient and held on through such periods enjoyed stellar returns over the long term. A paradox of risk aversion is that by selling too quickly and avoiding losses, investors actually reduce their ability to meet their long-term goals. In fairness, there is such a thing as too much patience – investors can and do stick too long with poor managers or losing strategies. For the most part, though, investors would be wise to hold on through tough times and review their portfolios only sporadically.

Portfolio diversification amounts to the proverbial free lunch.

Properly spreading a portfolio’s holdings is a way to both boost returns and mitigate volatility. A common example is the 60-40 split of stocks versus bonds. Geographic diversity also is often overlooked; while US-heavy portfolios did well in the 2010s, it seems wise to assume that globally diversified portfolios will perform in the future. Investors should aim to diversify risk strategically rather than try to time their purchases. Sophisticated diversification strategies build in long/short plays as well. What’s more, it’s important for investors to rebalance across asset classes to prevent the best performers from dominating the portfolio.

“Many investors talk diversification but walk concentration.”

While diversification is a powerful tool, it certainly has its detractors. Some decry it as “deworsification,” or moving money out of winning asset classes into poorer performing ones. While that criticism is misguided, there are downsides to diversification. One is that sophisticated diversification strategies involve leverage, an inherently risky approach. An overlooked risk is that aggressively diversifying means you’re no longer following the crowd. If things go wrong in the portfolio, the investor can feel as if he or she is “losing alone.” What’s more, humans love stories, and diversification strategies tend to be based on statistical evidence rather than easily grasped narratives.

Risk gets a bad rap, but proper risk management mitigates the downside of investing.

Investors need to manage risk, an oft-misunderstood concept. For most investors, the most basic edict is survival – to make it through a major downturn, such as the 1970s stagflation or the 2008 financial crisis. Investors also need to be cautious about strategies that involve limitless downsides. These include shorting stocks and selling naked calls. Basic risk management strategies help investors rule out the most catastrophic scenarios. One hallmark of diversification and rebalancing, for instance, is limiting the size of any single position. Hedging strategies and insurance can allow investors to offset specific risks.

“Although the word risk has negative connotations, successful risk management can go beyond risk reduction and also enhance long-run returns.”

Risk isn’t all bad. For instance, leverage has a tarnished reputation because of infamous episodes such as the Long Term Capital Management crash in 1998 and Lehman Brothers’ collapse in 2008. When leverage involves risky assets, concentrated positions and illiquidity, disaster can ensue. But the truth is that leverage can help boost portfolio returns. The key is to make sure that leverage is meticulously managed so that the investor isn’t stuck with highly leveraged, illiquid assets when the market turns. Options and other flavors of risk protection allow investors to use leverage responsibly.

Conclusion

In a landscape marked by low expected returns and high valuations, investors must shift focus from outcomes to a disciplined, process-oriented approach and strategically understand various asset classes and strategies. Successfully navigating this environment means embracing solid investment principles like patience, humility, and realistic expectations, while understanding the complexities of assets, the elusive nature of alpha, and the strategic application of diversification. It’s crucial to avoid detrimental habits such as overtrading and the pursuit of “lottery stocks,” and to foster a steadfast commitment to sound, evidence-based investment practices. This discipline, coupled with a comprehensive grasp of asset nuances and enduring principles, empowers you to traverse the intricate financial terrains effectively, ensuring a balanced and prosperous financial future amidst prevailing challenges.

About the Author

Antti Ilmanen is principal and global co-head of the Portfolio Solutions Group at AQR Capital Management. He is the author of Expected Returns and holds a PhD in finance from the University of Chicago.

Genres

Non-fiction, Business, Finance, Economics, Investing, Personal Finance, Wealth Management, Portfolio Management, Asset Allocation, Financial Planning

Review

The book addresses the challenges facing investors amid the prospect of record-low future expected returns. It provides a timely update to Ilmanen’s renowned 2011 book, Expected Returns: An Investor’s Guide to Harvesting Market Rewards. The book covers the following topics:

• The common investor responses so far to the low expected return challenge, such as increasing risk-taking, seeking higher-yielding alternatives, or lowering return expectations.
• The extensive empirical evidence on the critical ingredients of an effective portfolio: major asset class premia, illiquidity premia, style premia, and alpha.
• The pros and cons of illiquid investments, factor investing, ESG investing, risk mitigation strategies, and market timing.
• The role that timeless investment practices – discipline, humility, and patience – play in enabling investment success.
• The best practices for portfolio construction, risk management, and cost control in today’s environment and beyond.

The book is a comprehensive and insightful guide for investors who want to navigate the challenging market conditions with evidence-based strategies and principles. Ilmanen draws on his extensive experience and research to provide a clear and balanced perspective on the sources and drivers of expected returns, as well as the pitfalls and opportunities that investors face. The book is rich in data and analysis, but also accessible and engaging for readers of different backgrounds and levels of expertise. The book offers practical and actionable advice on how to improve long-run returns and manage risks in a low-return world. The book is a must-read for anyone who is interested in understanding and enhancing their investment performance.