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EDHEC-Risk Institute - August 20, 2015

Research programmes and projects are chosen and conducted to meet the needs of the investment and asset management industry - an interview with Tomas Franzén

In this month's interview, we speak with Tomas Franzén, Chief Investment Strategist, AP2 - Andra AP-fonden and Chairman of EDHEC-Risk Institute's International Advisory Board, about EDHEC-Risk Institute's mission and achievements since it was founded, ERI Scientific Beta's initiative and the main challenges facing asset owners.

Tomas Franzen

As chairman of EDHEC-Risk Institute's International Advisory Board, how do you think EDHEC-Risk Institute is currently succeeding in its mission to ensure that its research is relevant and useful for the financial industry?

Tomas Franzén: I think the Institute is succeeding well in its mission. Research programmes and projects are chosen and conducted to meet the needs of the investment and asset management industry. The Institute plays a unique role given it has a firm anchoring in academic and scientific research combined with its focus on finding practical solutions for investors grappling with risk and investment issues on a daily basis.

The Institute has a vital role to play as a mediator between pure academic research efforts on the one side and product driven commercial studies on the other.

As Professor Noël Amenc hands over the baton of Director of EDHEC-Risk Institute to Professor Lionel Martellini, it provides the opportune moment to take stock of EDHEC-Risk Institute's achievements since it was founded. What have been the highlights for you?

Tomas Franzén: The Institute has made extensive achievements since inception more than a decade ago. Under the directorship of Professor Noël Amenc, and with Professor Lionel Martellini as its Scientific Director, the Institute now boasts an academic platform with a broad range of astute research initiatives of relevance to investors and regulators. Just as significant is the circulation of research findings and opinions. Research and position papers reach out to a very large group of investors and asset managers. Conferences that the institute hosts have an impressive attendance rate, which in itself is a token of industry relevance. The recently launched Executive Education programme on Risk and Investment Management, in cooperation with Yale School of Management, is just another example of the Institute’s achievement.

Under Professor Amenc's leadership, EDHEC-Risk Institute set up ERI Scientific Beta, an index provider specialised in smart beta. What is your view of this initiative?

Tomas Franzén: This is one very good example of research initiatives at the Institute that are tailored to investor needs for investment solutions. It is really quite amazing what traction non-market cap weighting has got over the past five to ten years and the proliferation of asset management products in its wake has also been quite astonishing. I think that the Institute has been at the forefront in the process of “peeling the onion” to better understand the drivers and logic behind various forms of alternative indices. This has also highlighted the direct link to academic findings over the past few decades, where asset pricing and portfolio construction are concerned. The Institute’s solution-oriented mindset has also furnished investors with a practical tool for designing robust portfolios aligned with specific investment needs and preferences.

Viewed from your position as chief investment strategist to one of the largest funds in the world, what do you think the main challenges facing asset owners are and how do you think academic research can help address these challenges?

Tomas Franzén: Different kinds of investors and asset managers have different challenges depending on their missions and objectives. What we all have in common though is that we are all participants in financial markets. We should really be more concerned with how these markets inherently work, rather than with where they are headed in the near-term. The understanding of how markets work is better fostered by an academic and scientific approach. The same goes for the risk aspects of financial markets and risk management of financial portfolios. The link to specific investment objectives and liabilities is crucial. A firm grounding in an academic and scientific approach to investment and risk management will continue to be pivotal for long-term investment success and an important counterweight to a flood of more opportunistic investment ideas and potential fads.

About Tomas Franzén

Tomas Franzén currently holds a position as Chief Investment Strategist at the Second Swedish National Pension Fund – AP2, in Gothenburg. AP2 is one of four buffer-funds within the recently reformed Swedish national pay-as-you-go pension system. As Chief Investment Strategist, Tomas is responsible for issues related to Investment Policy and Strategic Asset Allocation. AP2 has some USD 35 bn in assets under management invested in a broad-based global portfolio of public and private assets. Tomas is a member of the Executive Committee.

Before joining AP2 at the start-up in 2001, Tomas, between 1998-2001, held a position as Chief Strategist at Swedbank Markets, advising the banks’ Swedish and global clients on equity investments. Prior to that, he was Chief Strategist at Den Norske Bank between 1996-1998. During 1986-1996, he served as a senior economist at Svenska Handelsbanken in Stockholm. In the early 80’s, Tomas held a position as an Economist at The Swedish Employers’ Confederation.

Tomas holds a B.A. in Economics from the University of Stockholm, Sweden. He is also a holder of CEFA (Certified EFFAS Financial Analyst). Tomas is furthermore an Editorial Advisory Board member of the Journal of Pension Management at ICPM in Toronto and a member of the International Advisory Board of EDHEC-Risk Institute. He also serves as a Board member of KF Invest, Stockholm and is a member of the Investment Committee at The Foundation of Chalmers University of Technology, Gothenburg.