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EDHEC-Risk Executive Education

Yale School of Management – EDHEC-Risk Institute Certificate in Risk and Investment Management: Curriculum

Yale SOM-EDHEC-Risk Executive Seminar Series

The program has been designed along three seminars that are intended to reflect the major steps in a modern investment process. The starting point from an institutional or individual asset owner’s perspective should always a broad asset allocation decision, with an emphasis on long-term strategic asset allocation decisions that are designed to achieve an optimal risk-return trade-off with respect to the investor’s liabilities or goals. An in-depth discussion of advanced methods for performing asset allocation decisions is precisely the focus of the first seminar, with a particular emphasis on the design of investment solutions that should help investors achieve their long-term goals such as retirement financing goals for example. Once the broad asset allocation decision has been taken and a relevant policy portfolio has been designed, the next step consists in an effective implementation of asset allocation decisions through an efficient harvesting of risk premia across the various segments of financial markets. In this context, the second seminar in the series has a focus on efficient risk premia harvesting in traditional asset classes, namely in equity and bond markets, while the third seminar in the series has a focus on risk premia harvesting in alternative asset classes and investment strategies such as hedge funds, commodities, private equity, infrastructure, real estate or fine arts.

Yale SOM-EDHEC-Risk Multi Asset Investment Products & Solutions Seminar
Three days
7-9 March, 2017 in London
21-23 March, 2017 in New Haven

The aim of this three-day seminar is to equip participants with practical tools to improve asset allocation and risk management decision processes, and to implement novel investment management approaches.

The first two days of the course, led by Professor Lionel Martellini, has a focus on the efficient use of the three forms of risk management (hedging, diversification and insurance) for the production and distribution of improved investment solutions for asset owners without having to rely on noisy expected return estimates. The seminar will introduce the novel forms of factor and risk allocation techniques that can be used to build well-diversified performance-seeking portfolios in the presence of historically low interest rates. It will also present disciplined approaches to liability-driven investing strategies and goal-based investing strategies, and explain how asset managers may help investors maximise the probability of reaching their objectives subject to dollar and risk budget constraints, with applications in institutional or individual money management.

The third and last day of the seminar, led by Professor James Choi, will explain how to further improve return-agnostic investment solutions by exploiting evidence of predictability in asset and factor returns. It will begin with a discussion about the predictability of broad asset class returns, particularly equity and fixed income market returns. It will also include a discussion about predictability of returns of factors, sectors and styles within the equity market. Finally, it discusses the construction of robust asset and factor tilting strategies that can be used to add incremental value above and beyond strategic asset allocation decisions.

Seminar key learning objectives:

  • Learn how to perform factor investing and risk allocation
  • Develop an understanding of strategic asset allocation in the presence of liability constraints
  • Assess how to overcome effect of estimation error by imposing better constraints
  • Understand how to implement liability-driven investment solutions with cash and derivatives instruments
  • Learn about goal-based investing strategies in institutional and private wealth management
  • Identify affordability conditions for essential and aspirational goals
  • Discuss implementation and mass customisation challenges for individual investment solutions
  • Explore novel welfare-improving forms of investment solutions
  • Discuss an application to the design of efficient retirement solutions
  • Learn the evidence on return predictability
  • Discuss the models, techniques and applications of active multi-asset allocation strategies
  • Discuss the benefits of factor timing strategies

Yale SOM-EDHEC-Risk Harvesting Risk Premia in Equity and Bonds Markets Seminar
Three days
21-23 June, 2017 in London
11-13 July, 2017 in New Haven

Investment portfolios are based on the idea that risk must be taken in order to increase expected returns. However there are intelligent ways to take risk. Participants will learn about how to use current models and empirical evidence about global capital markets to construct asset portfolios based on the principles of factor investing, with a particular focus on equity and bond markets. The seminar introduces the historical evidence for the existence of “smart beta” portfolios based on equity and fixed-income factors in global markets. The economic rationale behind factor portfolios is explored: why have they provided higher returns historically? What are the risks the factor portfolios are exposed to and when do they manifest themselves? Will factor risk premia continue in the future? How do factors behave during financial crises? How costly are they to implement? How are factor exposures combined into a portfolio? The behavioural foundations of factor risk premia and portfolio choice are also essential for modern risk managers and portfolio managers to understand, and they will be discussed.

In a first section of the seminar, the focus will be on equity markets. In the face of recent crises, the question of the value added by both active and passive equity managers has been raised with heightened intensity. Academic and industry research has offered convincing empirical evidence that market-cap weighted indices exhibit poor risk-adjusted performance, while other studies have questioned the persistence of positive abnormal performance generated by active managers. The combination of these empirical and theoretical developments has significantly weakened the case for the current equity investment paradigm based on a combination of a passively managed core portfolio and one of several actively managed satellite portfolios. While a new paradigm known as smart beta equity investing has been proposed, the emergence of which blurs the traditional clear-cut split between active and passive equity portfolio management, a host of questions remain regarding the implications with respect to how the equity investment process should be executed by institutional investors and/or asset managers. In this context, this three-day seminar equips participants with both the technical and conceptual tools that will allow them to better understand the limits and benefits of traditional and alternative equity investing strategies.

A second section of the seminar will give participants the skills necessary to understand how to efficiently harvest risk premia in fixed-income markets, and most notably the interest rate and credit risk factors. More precisely, the seminar will review advanced techniques for interest rates and risk management in bond markets. It will develop insights into different bond portfolio strategies and illustrate how various types of cash and derivative securities can be used to shift the risks associated with investing passively or actively in fixed-income securities. Bond portfolio optimisation techniques will receive specific attention, as well as their applications in asset-only and asset-liability management contexts.

Seminar key learning objectives:

  • Appreciate the post-crisis passive-active equity management controversy
  • Understand the drawbacks of the popular equity strategy that combines a passively managed core portfolio with one of several actively managed satellite portfolios
  • Find out about the dangers of naively optimised equity portfolios and the benefits of robust optimisation
  • Discover how to address the challenges in implementing optimised portfolios, in particular, how to manage portfolio liquidity and turnover
  • Study the limits of traditional equity indices; find out about the minimum-variance benchmark, equally-weighted benchmark, and other forms of benchmarks; evaluate the objectives and assumptions underlying alternative indices and learn about model selection and hidden risks entailed in the choice of a particular benchmark
  • Develop an understanding of the concepts and tools for evaluating and implementing the new paradigm of equity strategies such as smart beta
  • Measuring and managing systematic and specific risk of smart beta benchmarks
  • Discover the many dimensions of putting factor investing into practice through the case-study approach (The Norway Model)
  • Explore the rational and behavioural foundations of factor risk premia and portfolio choice
  • Evaluate methods for efficiently harvesting risk premia in equity markets / fixed income markets
  • Identify and control the various risks associated with a bond portfolio using factor models
  • Learn how to control portfolio risk using interest rate and credit derivatives
  • Understand the shortcomings of existing bond benchmarks and learn how a smart bond benchmark can be used as an alternative

Yale SOM-EDHEC-Risk Harvesting Risk Premia in Alternative Asset Classes and Investment Strategies Seminar
Three days
6-8 December, 2017 in London
12-14 December, 2017 in New Haven

Investors are increasingly turning to alternative investments to find new ways of increasing the performance and decreasing the risk of their portfolio, in a context where the benefits of diversification within traditional equity and bond portfolios have decreased. Broadly speaking, this seminar shows how to deal with non-Gaussian returns, illiquid assets, and flawed data. It also presents qualitative and quantitative techniques to control asset-class exposures, and manages liquidity, valuation and counterparty risks for portfolio-wide decisions involving alternatives.

The first day of the seminar presents a broad introduction to current academic research into alternative asset classes by one of the world’s leading researchers in the field, and analyses the risks, return drivers and the conditional performance of the various alternative asset classes and strategies. It also includes a discussion of the celebrated Yale model, which suggests that large investors (such as endowments and public pension funds) can achieve superior returns by shifting a significant portion of investments away from traditional stocks and bonds and into carefully selected alternatives. In one of the two remaining days, the seminar gives participants a deeper understanding of long-term investment in infrastructure assets, which have become a prominent part of the allocation for a number of large, well-diversified institutional investors. It proposes a bottom-up approach to understand the asset class starting from the financial economics of infrastructure projects and the different instruments used to finance them, to asset pricing and risk models adapted to illiquid, thinly traded assets, and portfolio construction and benchmarking of asset allocations to infrastructure. In another one of the remaining two days, the seminar will examine, in addition to the theoretical foundations, the empirical evidence on risk and return in commodity markets.

This will include the perspective of a variety of market participants including investors, hedgers, and asset managers such as CTAs.

Throughout the class, the speaker will illustrate how the insights from research have been implemented in the design of commodity benchmarks and the products offered on the market.

Seminar key learning objectives:

  • Explore the efficacy of an alternatives-based portfolio
  • Analyse various alternative investment vehicles including real estate, private equity, hedge funds, infrastructure and commodities
  • Discuss the celebrated Yale model
  • Understand underlying infrastructure assets and learn about the existing track record of listed and unlisted infrastructure investments solutions
  • Learn about applicable pricing and risk models for infrastructure project debt and equity investments
  • Explore the major global trends in commodities trading, production, and demand around the world
  • Understand the fundamental interconnection between spot and futures markets
  • Investigate investable commodity indices, the effects of the financialisation of commodity markets, and the influence of speculative capital in the markets

Yale School of Management – EDHEC-Risk Institute Certificate in Risk and Investment Management: