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Academic Research - March 16, 2011

Short-termism in behaviour and regulation is a major threat - an interview with Jean-François Boulier

In this interview, we talk to Jean-François Boulier, Chairman of the Editorial Committee of Bankers Markets & Investors, and Chief Executive of Aviva Investors Europe about the editorial partnership between BM&I and EDHEC-Risk Institute; the influence of academic research on professionals; and the major challenges facing European institutional investors today.

Jean-François Boulier

You are chairman of the editorial committee of Bankers, Markets & Investors. Could you tell us why you decided to enter into a partnership with EDHEC-Risk Institute to produce a special supplement on the occasion of the EDHEC-Risk Institutional Days in Monaco?

Jean-François Boulier: In now 20 years of existence, BM&I has had several good experiences of publishing a selection of papers presented at specific conferences on topics relevant to the journal. Teaming with EDHEC- Risk Institute was the next natural step and an excellent opportunity to work with academics who had already published in the journal previously.

BMI has a similar approach to EDHEC-Risk Institute, in that the review aims to distribute academic research in finance while focusing on applications for professionals. Is it difficult to find the right balance between the quality of the academic work and the relevance for professionals?

Jean-François Boulier: If that balance was easy we would have a thriving competition …. Indeed this genuinely specific goal makes all the difference. Valuable inputs to the industry, a challenging experiment for academics and a European focus for the journal indeed create a unique proposition, when considering a scientific publication. I feel it’s great that this is also exactly what EDHEC-Risk management wants to bring to the marketplace!

Do you think that academic research is increasingly influential for professionals today, or is there still a wide gap between the two spheres?

Jean-François Boulier: Like oil and water the two worlds do not mix easily. There have been a few ups and downs and some big flops in the past, like the portfolio insurance breakdown in 1987 and CDO modelling more recently. Nevertheless there is a rising trend in intensity and in the quality of communication. Although the community that is able to feel at ease in the two worlds remains a small village, there is a general recognition that financial markets and regulation need more scientific research than less.

In addition to being chief executive of Aviva Investors Europe, you are also honorary chairman of the French finance association (AFFI) and the French ALM association (AFGAP). From your vantage point, what do you think are the major challenges facing European institutional investors today?

Jean-François Boulier: Three challenges come to my mind. First, short-termism, especially in behaviour and regulation, is a major threat to sound practice, value added and stability overall. Second, lack of focus, like an investment bank aiming at being an asset manager, or an asset manager expecting to be a trader. Third, the interest rate rise, which is synonymous with good news for the economy, but a difficult time for fixed-income portfolios.

EDHEC-Risk Institute has conducted a significant amount of research on the Solvency II directive in recent years, and has commented extensively on the relevant quantitative impact studies and consultations. What do you consider to be the key issues in this area for insurance companies and pension funds?

Jean-François Boulier: Poor understanding of liquidity issues and having too short an horizon is, as mentioned before, a danger to long-term institutional investors. Some aspects of Solvency II should be reconsidered from that angle: in my personal view, the one year horizon on the full balance sheet is problematic. Fortunately, pension funds are not subject to this difficulty. Overall a better public understanding of what can be expected from a life insurance product or a pension fund remains a challenge. Any attempt to conduct sound ALM or refined portfolio management without a better understanding would be flawed.

About Jean-François Boulier

Jean-François Boulier joined Aviva Gestion d’Actifs (which became Aviva investors France) as Executive Managing Director in March 2008. In September 2009 he became Chief Executive Officer and in July 2010 Chief Executive, Aviva Investors Europe.

Jean-François began his financial services career with Crédit Commercial de France where he became head of Research and Innovation in 1989, and then Director of Market Risk in 1996. In 1999 he moved to SINOPIA as Executive Managing Director and C.I.O.

In 2002 to took up the position of Deputy C.I.O. at Credit Lyonnais Asset Management before being nominated Director of Euro Fixed Income and Credit at Crédit Agricole Asset Management after the merger in 2003.

He holds a degree from Ecole Polytechnique de Paris and a degree in engineering from ENGREF in Paris. He holds a PhD in fluid mechanics from Université de Grenoble. He became an Actuary in 1995.

Jean-François Boulier is Honorary Chairman of the France Finance Association (AFFI) and Honorary Chairman of the French ALM Association (AFGAP). Author of a book and of numerous technical and academic papers, he was awarded the INQUIRE Prize in 1993 and Bankers Markets and Investors Prize in 2005. He contributes regularly to the French financial press.

Special Bankers, Markets & Investors/EDHEC-Risk Institute Supplement

The November-December 2010 issue of Bankers, Markets & Investors was devoted to the fourth edition of the EDHEC-Risk Institutional Days. Articles were written by EDHEC professors and researchers.

The Bankers, Markets & Investors journal is a bimonthly of the Revue Banque group published in partnership with the French Finance Association, a publication whose aim is to foster ties between applied financial research and finance practitioners.

You can view extracts of this special edition here and it can be ordered directly from the journal website.