Expanding Frontiers

This episode discusses a research article that introduces a regime-based dynamic asset allocation strategy that utilizes artificial neural networks (ANN) to solve the complex Merton optimal portfolio problem. By using the VIX index as a barometer to distinguish between "risk-on" and "risk-off" market environments, the authors allow the model to adapt its strategy based on shifting macroeconomic conditions. Unlike traditional methods that require solving difficult partial differential equations, this approach trains an ANN to directly learn optimal feedback functions while respecting real-world diversification constraints. A 35-year backtest conducted from 1990 to 2024 demonstrates that this regime-specific strategy consistently outperforms standard, regime-agnostic models in both average returns and expected utility. The study concludes that incorporating market regimes through deep learning provides a more accessible and effective framework for modern portfolio management.
Source
"Regimes Matter: Regime-Based Dynamic Asset Allocation Using Neural Networks" Carl, Uri ; Kopeliovich, Yaacov ; Pokojovy, Michael ; Shea, CFA, Kevin, Financial Analysts Journal, 2026-08, p.1-23
Also available on SSRN: Carl, Uri and Kopeliovich, Yaacov and Pokojovy, Michael and Shea, Kevin, Regimes Matter: Regime-Based Dynamic Asset Allocation Using Neural Networks (February 15, 2025). Available at SSRN: https://ssrn.com/abstract=7240302 or http://dx.doi.org/10.2139/ssrn.7240302
 
About the show:Expanding Frontiers is a podcast on alternative investments and machine learning, hosted by Kathryn Wilkens, PhD, CAIA. Subscribe for conversations that bring rigor to the frontier of finance.
 
Episode Note
This episode draws on the sources listed above and incorporates AI-assisted research synthesis. All content has been reviewed and curated by the host. It is intended for educational purposes only and does not constitute investment or financial advice.

This episode charts the profound evolution of private credit from the traditional, unrated, and strictly illiquid middle-market corporate direct lending model into a more liquid, institutionalized, and multi-faceted asset class. A central pillar of this transition is the massive expansion into Asset-Based Finance (ABF) and Private Investment-Grade Credit, which now benefits from formal ratings oversight and multi-agency participation, as well as daily liquid, exchange-traded vehicles like the State Street Public & Private Credit ETF (PRIV) that feature daily pricing and valuations. While direct lending still yields a compelling premium (offering over 200 basis points of excess spread relative to new-issue single-B broadly syndicated loans) this yield is increasingly contested. Rapidly intensifying bank competition has catalyzed a broader "credit convergence," driving a decline in underwriting discipline and a significant migration toward "covenant-lite" structures that depart from the traditional relationship-based, covenant-heavy lending baseline.
Underneath this expansion lies a sharp tension between manager optimism and regulatory concern regarding credit deterioration, vehicle liquidity, and systemic stability. On one hand, the sanguine manager perspective emphasizes stable trailing 12-month default rates of 3.5%, non-accruals remaining below their 10-year average, and robust corporate performance where larger borrowers (EBITDA >$100M) exhibit a mere 1.4% covenant default rate. On the other hand, the IMF highlights deep-seated vulnerabilities, pointing out that floating-rate debt has pushed over one-third of comparable borrowers into unsustainable interest coverage ratios (ICR < 1) and has driven BDCs' payment-in-kind (PIK) interest share to double since 2019. This friction is compounded by the "retailization" of the asset class into evergreen structures (including retail BDCs, European ELTIFs, and PGIM’s pioneering private credit CIT targeting defined contribution plans) which face acute redemption mismatches, illustrated by Australian superannuation rules allowing clients to switch allocations in just three business days. Finally, the IMF warns of severe systemic risks, such as stale "marked-to-model" valuations that take at least four quarters to reflect economic shocks, layers of hidden leverage across the value chain, and a highly concentrated PE-insurer-pension nexus where private equity firms direct premium cash flows from their captive life insurers into their own private credit funds, leveraging offshore Bermuda reinsurers to exploit regulatory discount rate arbitrage.
References
Apollo Global Management. (2026, July). Rethinking core-plus with private investment-grade credit. https://www.apollo.com/insights-news/insights/2026/07/rethinking-core-plus-with-private-investment-grade-credit
BlackRock. (2026). 2026 private markets outlook. https://www.blackrock.com/institutions/en-global/institutional-insights/thought-leadership/private-markets-outlook
BlackRock. (2026). Putting private credit concerns in perspective. https://www.blackrock.com/us/financial-professionals/insights/private-credit-concerns-in-perspective
International Monetary Fund. (2024, April). The rise and risks of private credit. In Global financial stability report: The last mile—Financial vulnerabilities and risks. https://www.imf.org/-/media/files/publications/gfsr/2024/april/english/ch2.pdf
PGIM. (2026). 2026 mid-year global market outlook. https://www.pgim.com/content/dam/pgim/us/en/pgim-center/active/documents/outlooks/2026/PGIM-2026-Mid-Year-Global-Market-Outlook.pdf
 
About the show:Expanding Frontiers is a podcast on alternative investments and machine learning, hosted by Kathryn Wilkens, PhD, CAIA. Subscribe for conversations that bring rigor to the frontier of finance.
 
Episode Note
This episode draws on the sources listed above and incorporates AI-assisted research synthesis. All content has been reviewed and curated by the host. It is intended for educational purposes only and does not constitute investment or financial advice.

Everyone talks about digital assets. Very few can tell you, with rigor, what is actually under the hood. This conversation changes that.
Kathryn Wilkens sits down with Javier Paz, founder and CEO of RigorRank and former Director of Data and Analytics for Forbes Digital Assets, where he built the publication's nine-factor ranking of more than 600 crypto exchanges and reported investigative work that traced real financial crime. Javier traces his path from multi-asset markets research to building RigorRank, an institutional intelligence platform that now classifies the digital-asset ecosystem across 21 categories and 400 classification groups.
They get specific: why proof of reserves leaves too many questions unanswered, what an eight-month investigation into Binance's BNB token revealed about the gap between narrative and on-chain reality, and why a single company like Coinbase can contain thirty or forty distinct legal entities that each do something different under different licenses and jurisdictions.
The heart of the episode is tokenization, and why it is far less simple than the headlines suggest. Using Tesla stock in five different tokenized forms, Javier explains how "tokenized" can mean anything from genuine ownership to a non-transferable IOU with none of the protections investors assume, and why the name on the underlying asset, transferability, and jurisdiction matter enormously. They close on where digital assets fit in an alternatives allocation as Fidelity, BlackRock, and Morgan Stanley move in, and what a graduate student should actually learn to work in this space rigorously.
About the guest:
Javier Paz is the founder and CEO of RigorRank, an institutional intelligence platform for the digital-asset ecosystem. He spent more than two decades in capital-markets research and served as Director of Data and Analytics for Forbes Digital Assets, where he built the annual ranking of the most trustworthy crypto providers and reported investigative work on financial crime in the industry.
Connect with Javier:RigorRank: rigorrank.comLinkedIn: linkedin.com/in/pazjavier
About the show:Expanding Frontiers is a podcast on alternative investments and machine learning, hosted by Kathryn Wilkens, PhD, CAIA. Subscribe for conversations that bring rigor to the frontier of finance.

Part 1 of 3: Digital Asset Classification
PODCAST SHOW NOTES
This kicks off a three-part series on digital asset classification, following up on what I learned at the Spring Consensus meeting in Miami. The series looks at classification from two angles: the regulators' new framework and the push for U.S. clarity (this episode), and how the securities industry and financial authorities fit digital assets into the existing rules (Part 2).
A quick heads-up for regular listeners: Part 2, "Navigating Digital Asset Securities and Regulatory Frameworks," actually aired here last week, so you may have caught it already. Each episode stands on its own and you can listen in any order, but if you want the foundational overview first, this is the place to start. Part 3, my conversation with a guest I met in Miami, is still to come (second week of August 2026).
This week
In March 2026, the SEC and CFTC issued a joint interpretation that finally gave the digital asset market some long-awaited clarity. The framework sorts crypto into a five-category taxonomy: digital commodities, digital collectibles, digital tools, stablecoins, and digital securities. Most importantly, it clarifies that most crypto assets are not securities, and it explains how an asset can "graduate" out of investment-contract status once it no longer relies on a central issuer. The White House backed the shift, advocating a pro-innovation environment to position the United States as a global leader in blockchain technology. Analysts at Fidelity noted that these clear rules of the road may encourage more institutional investment by removing the legal ambiguity that held firms back.
Elsewhere in the series
Part 2, Navigating Digital Asset Securities and Regulatory Frameworks (already in the feed, from last week): how FINRA, the SEC, the NCUA, and the industry group SIFMA are integrating digital assets into existing securities rules, from the SEC's Crypto Hub and Blockchain Lab, to credit-union guidance and the GENIUS Act's implications for stablecoins, to SIFMA's case that tokenized securities must keep traditional safeguards.
Part 3 (coming soon), my conversation with Javier Paz on RigorRank: a classification framework that maps more than 2,300 issuers, infrastructure providers, and custodians across the global tokenized-securities market.
Sources
Congressional Research Service. (n.d.). Digital assets and SEC regulation (CRS Report No. R46208). U.S. Library of Congress. Retrieved July 29, 2026, from https://www.congress.gov/crs-product/R46208
President's Working Group on Digital Asset Markets. (2025). Strengthening American leadership in digital financial technology. The White House. https://www.whitehouse.gov/crypto/
U.S. Securities and Exchange Commission. (2026, March 17). SEC clarifies the application of federal securities laws to crypto assets (Press Release No. 2026-30). https://www.sec.gov/newsroom/press-releases/2026-30-sec-clarifies-application-federal-securities-laws-crypto-assets
Congressional Research Service. (2025). Crypto legislation: An overview of H.R. 3633, the CLARITY Act (CRS Report No. IN12583). U.S. Library of Congress. https://www.congress.gov/crs-product/IN12583
Fidelity. (2026). The SEC and CFTC's latest crypto guidance. Fidelity Learning Center. https://www.fidelity.com/learning-center/trading-investing/sec-cftc-crypto-guidance
Episode Note
This episode draws on the sources listed above and incorporates AI-assisted research synthesis. All content has been reviewed and curated by the host. It is intended for educational purposes only and does not constitute investment or financial advice.

This episode provides some background for the upcoming discussion with our August guest. It outlines the regulatory landscape and oversight strategies for digital assets and financial technology within the United States. The National Credit Union Administration (NCUA) details its efforts to integrate innovations like stablecoins and blockchain while emphasizing that these assets are not covered by federal share insurance. Concurrently, the Financial Industry Regulatory Authority (FINRA) describes its monitoring of member firms engaged in cryptocurrency activities to ensure compliance with existing securities laws. Both organizations highlight the importance of consumer protection, specifically addressing the risks of financial fraud and the need for rigorous institutional supervision. Furthermore, the documents reference the GENIUS Act, which establishes a formal federal framework for the issuance of payment stablecoins. Together, these sources illustrate a coordinated federal approach to managing the intersection of traditional finance and emerging technologies.
Resources
 
American Bar Association. (2025, August 14). Structural themes in global digital asset regulation. Business Law Today. https://www.americanbar.org/groups/business_law/resources/business-law-today/2025-august/structural-themes-global-digital-asset-regulation/
 
Financial Industry Regulatory Authority. (2024, July 23). Crypto assets. https://www.finra.org/rules-guidance/key-topics/crypto-assets
 
National Credit Union Administration. (2026, June 10). Financial technology and digital assets. https://ncua.gov/regulation-supervision/regulatory-compliance-resources/financial-technology-and-digital-assets
 
Securities and Exchange Commission. (2025, December 16). SIFMA digital assets framework and recommendations [Written Submission]. https://www.sec.gov/files/cft-written-sifma-digital-assets-12-16-2025.pdf
 
Securities Industry and Financial Markets Association. (2026, May 11). SIFMA research brief: Digital assets reshape financial system. LinkedIn. https://www.linkedin.com/posts/sifma_sifma-digital-assets-research-brief-activity-7459558814233608193-QRDI
 
Episode Note
This episode draws on the sources listed above and incorporates AI-assisted research synthesis. All content has been reviewed and curated by the host. It is intended for educational purposes only and does not constitute investment or financial advice.

This week's Expanding Frontiers features a live conversation with financial author and advisor Dr. Adam Link, who challenges some of the biggest assumptions investors make about risk, retirement, and what "average" really means.
Together, we explore why average returns can be misleading, the hidden dangers of sequence of returns risk, passive versus active investing, dynamic portfolio management, alternative investments, and how AI is changing, but not replacing, the role of trusted financial advisors.
Whether you're an investor, advisor, or simply interested in making better financial decisions, you'll come away with practical insights and a fresh perspective on managing wealth with purpose.
In this episode:
Why average isn't always good enough
Purpose, protection, and performance
Sequence of returns risk
Passive vs. active investing
Dynamic portfolio design
Alternative investments
AI and the future of financial advice
I'd love to hear what resonated with you after you listen.

In this episode we discuss various approaches to measuring investment risk and outline some of the pitfalls of using the traditional standard deviation of returns metric. We also examine a journal article which introduces a novel methodology for measuring portfolio tail risk by integrating multivariate extreme value theory with orthogonalized returns. The author, Miloš Božović, addresses the computational complexity of traditional risk models by using principal component analysis and GARCH filtering to transform correlated assets into independent series. These individual components are then analyzed using the generalized Pareto distribution to provide precise, closed-form estimates for Value at Risk and Expected Shortfall. Empirical testing on U.S. stock data and currency portfolios demonstrates that this approach identifies extreme market co-movements more accurately than standard parametric methods. Ultimately, the research offers a robust framework for financial institutions to manage risk during periods of significant market stress and volatility.
Sources
Kim, M., & Zhou, A. (2024). "The Measurement of Investment Risk." World Scholars Review. (Mentored by Dr. Gerard Dericks, Hawaii Pacific University.)
Božović, M. (2020). "Portfolio Tail Risk: A Multivariate Extreme Value Theory Approach." Entropy (Basel), 22(12), 1425. doi:10.3390/e22121425.
Episode Note
This episode draws on the sources listed above and incorporates AI-assisted research synthesis. All content has been reviewed and curated by the host. It is intended for educational purposes only and does not constitute investment or financial advice.

This episode synthesizes a legal analysis of a recent SEC roundtable regarding the "retailization" of private and alternative investments, and the ninth edition of a comprehensive Art & Finance Report produced by Deloitte Private. Together, these sources explore how alternative assets are becoming more accessible to a broader range of investors while highlighting the legal, regulatory, and practical challenges that accompany this shift. Topics include potential changes to the accredited investor definition, regulatory safeguards for private markets, the growing role of art within wealth management, legacy planning, art-secured lending, fractional ownership, and technology. Collectively, the sources suggest that expanding access to alternative investments will require a careful balance between innovation, investor protection, and professional oversight.
Sources
Art & Finance Report 2025 | Deloitte. Private (PDF)
SEC Holds Roundtable on the “Retailization” of Private/Alternative Investments: A Hint of the Agency's Direction | Global Financial Regulatory Insights (Webpage)
Episode Note
This episode draws on the sources listed above and incorporates AI-assisted research synthesis. All content has been reviewed and curated by the host. It is intended for educational purposes only and does not constitute investment or financial advice.

This episode discusses sources that analyze the profound migration of capital from active fund management to passive investment strategies, such as ETFs and index funds. The New Constructs report warns that this trend has created overcrowded trades, where massive inflows into a few dominant tech stocks result in market inefficiencies and inflated valuations. Meanwhile, the Federal Reserve discussion paper examines how this shift impacts financial stability, noting that while passive investing may reduce certain redemption risks, it increases industry concentration and can amplify market volatility. Both documents suggest that the decline of fundamental research creates a "Danger Zone" for passive investors while simultaneously opening new alpha opportunities for disciplined active managers. Ultimately, the authors argue that the unthinking allocation of capital based on index weightings rather than company health poses systemic risks to market liquidity and long-term returns. Here is a bibliography of the 10 sources the episode considers, ordered alphabetically by the author's last name or publisher:
Anadu, K., Kruttli, M., McCabe, P., & Osambela, E. (2020, May 15). The Shift from Active to Passive Investing: Potential Risks to Financial Stability? Finance and Economics Discussion Series 2018-060r1, Board of Governors of the Federal Reserve System.
Azar, J., Schmalz, M. C., & Tecu, I. (2017, March). Anti-Competitive Effects of Common Ownership. IESE Business School – University of Navarra, Working Paper WP-1169-E.
Fang, L., Jiang, H., Sun, Z., Yin, X., & Zheng, L. (2023, November 15). Limits to Diversification: Passive Investing and Market Risk.
Gerlach, D. (2025, August 11). The Detrimental Impact of Index Funds and ETFs on Small-Cap Stocks. myICLUB Blog.
Leithner, C. (2023, October 23). Index funds' key flaws – and how we overcome them.
Lund, D. S. (2018). The Case Against Passive Shareholder Voting. Journal of Corporation Law, 43(3), 494-535.
New Constructs / Trainer, D. (2020, May 11). The Hidden Dangers of Passive Investing. New Constructs.
Pan, K., & Zeng, Y. (2017, June). ETF Arbitrage under Liquidity Mismatch.
QuantPedia. How Does the Passive Investing Impact Market Risk? (Note: The provided source text currently only displays a "429 Too Many Requests" error, making further publication details unavailable).
Reddit (User: joe4942). The passive investing bubble? Burry might be right. Posted in the r/Burryology subreddit.
Episode NoteThis episode draws on the sources listed above and incorporates AI-assisted research synthesis. All content has been reviewed and curated by the host. It is intended for educational purposes only and does not constitute investment or financial advice.

What does "skin in the game" actually look like inside an index? Most benchmarks weight companies by free-float-adjusted market capitalization which is a methodology that, by design, strips out insider-held shares. Haren Bhakta's Inside Ownership Index does close to the opposite, weighting on the very stakes the standard approach removes.
 
In this conversation, Haren walks through how the IO 100 Index, calculated and published by S&P Dow Jones Indices as a custom index service, was built, what makes insider ownership a legitimate factor rather than a marketing narrative, and how the alignment effect holds up against the standard controls for size, value, and quality. We also explore how investors are currently accessing the methodology (separately managed accounts now, with an ETF pathway on the horizon) and what the broader move toward incentive-aligned investing means for governance, allocator decisions, and the next generation of index construction.
 
This is the first live guest episode of Expanding Frontiers, and a fitting one, with a conversation that sits squarely at the intersection of factor research, governance, and institutional credibility that the show is built to explore.
 
About the Guest
 
Haren Bhakta, CFA, is the Founder and CEO of Inside Ownership Index, a company that constructs equity indices weighted by insider-held share value rather than free-float market cap. The IO 100 Index (Inside Ownership's flagship benchmark) is calculated and published by S&P Dow Jones Indices, with sector-specific variants spanning Financials, Healthcare, Technology, Industrials, Consumer, and Energy. Haren's work centers on the thesis that companies whose leaders hold meaningful personal stakes outperform over time, and that ownership-based benchmarks can complement traditional cap-weighted approaches in institutional portfolios.
 
Website: https://insideownership.com
 
ABOUT THE SHOW
Expanding Frontiers is hosted by Kathryn Wilkens, PhD, CAIA, an alternative investments educator at Rutgers University and founder of Pearl Quest LLC. New episodes Wednesdays.
 
Episode NoteTis content is intended for educational purposes only and does not constitute investment or financial advice.