GM Asset Management and Martingale's Low Volatility Strategy

Should General Motors' pension plan investment team adapt a low volatility strategy that, although attractive in many respects, contradicted generally accepted finance theory?
Andrew Ang  | Spring 2012
Print this page

In August 2011, members of General Motors' pension plan investment team were considering the adoption of a low volatility strategy proposed by Martingale Asset Management. The strategy had an attractive Sharpe ratio, but it was generated by the underperformance of high risk stocks - a notion contrary to generally accepted finance theory. The team had done their own internal analysis of the strategy and, by back-testing the results, had a good sense of how the low volatility strategy performed historically. In this case, students study the asset mix of GM's pension plan and the Strategy Portfolio proposed by Martingale in order to determine whether the GM team should adapt Martingale's proposal.

Case ID: 110315
Supplemental Materials: Teaching Note

Buy select cases through Ivey Publishing and Harvard Business Publishing.

 

Contact us by e-mail at Columbia CaseWorks or 212-854-1796.