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EDHEC-Risk Institute - September 23, 2011

EDHEC Risk Institute—Asia at a glance: An interview with Frédéric Ducoulombier

In this month's interview, we talk to Frédéric Ducoulombier, Director of EDHEC Risk Institute–Asia, about the platform's current and future research projects and executive education activities in the region. Frédéric is also Director of Executive Education and a Member of the Management Committee of EDHEC-Risk Institute. Since April 2010, he has been heading the operations and business development of the Institute in Asia.

Frédéric Ducoulombier

By way of introduction, could you tell us what EDHEC Risk Institute—Asia is?

Frédéric Ducoulombier: EDHEC-Risk Institute—Asia is the Singapore home base of EDHEC-Risk Institute for its operations in the Asia-Pacific region. Asia is a key growth area for the global investment industry and the development of the financial sector and, as elsewhere, the region needs to be supported by industry-oriented research and professional education.

Our mission is to serve as a platform for generating academic insight into important global investment issues, with particular relevance to investors and institutions in the Asia-Pacific region. Working with the support of the investment industry, we aim to foster innovation and high, professional standards in the region and worldwide.

How do you plan to do so?

Frédéric Ducoulombier: We already have fifteen research and marketing staff in Singapore.

Our ten researchers conduct Asia-focused work in the context of the Institute’s pre-existing research programmes, new thematic programmes and the Asian Research and Advocacy Centre. Work conducted in the context of the Institute’s six research programmes is being extended and adapted to regional characteristics. The two thematic programmes address issues of global importance and of particular regional relevance, with one looking at the optimal management of sovereign reserves and investment vehicles and the other looking at infrastructure investment in Asia. Last but not least, the Asian Research and Advocacy Centre for Best Investment Practices will keep tabs on investment practices across the region, promoting academic advances and best industry practices. While the bulk of our research will concentrate on the region, the Asian team will also be leading or contributing to theoretical work of general application.

Marketing staff play an important role in the dissemination of our research results towards end-users. This is done via a number of channels that include direct distribution to 370,000 professionals in the region, organisation of research events in Asia and Australasia and by maintaining media relations.

What are your research highlights?

Frédéric Ducoulombier: In April, EDHEC-Risk Institute—Asia’s Head of Research, Professor Stoyan Stoyanov, presented the first results of a new research multi-year initiative looking at novel approaches for hedging tail risk and investigating the potential of volatility and higher moments as asset classes.

Back in June, we released our second research publication¹ under the "Asset-Liability Management (ALM) Techniques for Sovereign Wealth Fund (SWF) Management” research chair, endowed by Deutsche Bank and managed from Singapore. It extends our prior work² on the adaptation of the ALM approach to sovereigns by incorporating the economic balance sheet of the sovereign sponsor into the optimal asset allocation problem of the fund. This is done in a way that is reminiscent of recent advances in corporate pension fund investing where the fund is considered an integral part of the corporate balance sheet and capital structure and pension fund allocation choices are jointly analysed. It offers interesting insights into optimal asset allocation given different drivers of economic risks and sheds light on the impact of sovereign leverage on optimal investment choices. As such, it has important implications for the provision of ALM and risk management advice as well as for sovereign wealth fund solutions.

In the next few weeks, we will be unveiling the results of a research project on “Structured Equity Investment Strategies for Long-Term Asian Investors”, which was supported by Société Générale Corporate and Investment Banking. Asian equity markets are more volatile than their counterparts in Europe and North America and volatility hedging is made more difficult by the underdeveloped state of options markets in the region. This is a big issue for long-term investors who need to access the equity risk premium to meet their liabilities, but who also have to respect strict short-term risk budgets that punish equity investments. Our research shows how a new class of structured products can contribute to solving this riddle.

We will also shed new light on commodities as a strategic and tactical asset allocation class and contribute academic insights to the politically-charged debate on the impact of the financialisation of commodities futures markets. While initiated in Asia, this project has global relevance and a global sponsor in the form of the CME Group.

Work in progress, whose results will see the light of day in the coming year, includes a self-sponsored study on the biases of equity indices in Asia, the EDHEC-Risk Asian Index and ETF survey sponsored by Amundi ETF, and a EUREX-sponsored study on the use of volatility derivatives in portfolio management and further contributions to risk management and higher moments as asset classes.

You mentioned that professional education was key to the development of the investment industry, what is the contribution of EDHEC Risk Institute–Asia?

Frédéric Ducoulombier: Presenting our research results in a format that corresponds to the needs and expectations of professionals and discussing their application with the industry is one way we contribute to innovation and higher professional standards. EDHEC-Risk Institute distributes its research to 370,000 professionals in Asia, Australasia and the Middle-East and to a total of one million practitioners globally. Electronic distribution is not enough and we have engaged well over a thousand practitioners across the region since inception, to mention only the live presentations we have organised. The first edition of EDHEC-Risk Days Asia to be held in Singapore on 9-10 May, 2012 will be an opportunity to discuss our Asian-focused research and the Institute’s latest research advances, with a cross-section of professionals representing traditional and alternative investment managers, private bankers, institutional investors and family offices.

Naturally, the Institute offers the whole range of its executive education programmes in Asia – from short courses that present our research advances to risk and investment officers to the EDHEC-Risk Institute PhD in Finance that allows high-level practitioners in full-time jobs to acquire the background and skills to put academic research to use in their organisations, generate new knowledge and advance practices. We are delighted to have been awarded a six-year licence by the Singapore Council for Private Education for our short course and degree programme activities and are also proud to have been invited to join the country’s Global Schoolhouse initiative as an institution representing the best in the field of finance.

To explore the possibility of a research cooperation with EDHEC Risk Institute–Asia or opportunities for sponsorship of the forthcoming EDHEC-Risk Days Asia conference on May 9-10, 2012, please contact Jeremiah Cai at jeremiah.cai@edhec-risk.com or on +65 6631 8578.

¹ An Integrated Approach to Sovereign Wealth Risk Management, Bernd Scherer, EDHEC-Risk Institute Publication, June 2011.

² Asset-Liability Management Decisions for Sovereign Wealth Funds, Lionel Martellini and Vincent Milhau, EDHEC-Risk Institute Publication, October 2011.