Research for Business

Since 2001, EDHEC has been pursuing an ambitious policy in terms of international research. This policy, known as "Research for Business", aims to make EDHEC an academic institution of reference for the industry in a small number of areas in which the school has reached critical mass in terms of expertise and research results.

Among these areas, asset and risk management have occupied privileged positions, leading to the creation in 2001 of a major European research facility: EDHEC-Risk Institute.

This research centre now boasts a team of 47 permanent professors, engineers and support staff, and counts 22 research associates from the financial industry and affiliate professors.

Having learnt in recent years about the risks of excessive reliance on asset selection models, investors and managers are showing unprecedented interest in asset allocation approaches as sources of performance.

Concurrently, the emergence of alternative asset classes with risk profiles that are very different from those of traditional investments is creating new opportunities for asset allocation in both conceptual and operational terms.

To ensure that its activities meet the highest academic standards and truly benefit the industry, EDHEC-Risk subjects its activities to strict validation processes. The scientific quality and operational relevance of the centre’s research programmes are guaranteed by the centre’s dual management structure and the oversight exercised by the leading experts serving on its international advisory board.

EDHEC-Risk plays a noted role in furthering applied financial research and systematically highlighting its practical uses.

As part of its "research for business" philosophy, the centre maintains a dialogue with professionals which benefits the industry as a whole.

At the same time, its proprietary R&D provides sponsors with an edge over competition and joint ventures allow selected partners to develop new business opportunities.

The following sections provide a brief introduction to the activities carried out by EDHEC-Risk Institute.

Our team is available to analyse with you the ways in which you could tap into the centre’s expertise for the benefit of your organisation.

From Research Advances to Industry Best Practices

EDHEC-Risk Institute was set up to conduct world-class academic research and highlight its applications to the industry.

In keeping with this mission, the centre systematically seeks to validate the academic quality of its research through publications in leading scholarly journals, implements a multifaceted communications policy to inform investors and asset managers on state-of-the-art concepts and techniques, and develops business partnerships to launch innovative products.

High quality academic output with professional relevance

The results of the research work performed by the centre have been published by such foremost specialised scientific publications as the Journal of Economic Literature, Journal of Financial Economics, Management Science, the Review of Financial Studies, the Journal of Portfolio Management, and the Financial Analysts Journal.

Recognition of the academic quality and professional relevance of the centre’s output is also evidenced by the integration of a number of articles into the required readings of professional designations, invitations to participate in curriculum design or authoring of programme material, and the decision by CFA Institute to designate EDHEC as an Approved Provider under the CFA Institute Professional Development (PD) Programme.

Constant dialogue with the industry

To maximise exchanges between the academic and business worlds, EDHEC-Risk maintains a website devoted to asset and risk management research for the industry: www.edhec-risk.com, circulates a monthly newsletter to over 400,000 practitioners, conducts regular industry surveys and consultations, and organises annual conferences for the benefit of institutional investors and asset managers.

Singular joint-venture policy

While EDHEC-Risk Institute makes important public contributions to the advancement of applied financial research and the improvement of industry practices, it also employs its expertise to conduct proprietary research for clients and develop new products with business partners. An example of a business partnership is the FTSE EDHEC-Risk Efficient Index Series.

FTSE EDHEC-Risk Efficient Index Series

FTSE Group, the award winning global index provider, and EDHEC-Risk Institute launched the first set of FTSE EDHEC-Risk Efficient Indices at the beginning of 2010. Initially offered for the UK, the Eurobloc, the USA, Developed Asia-Pacific ex-Japan, and Japan, the index series aims to capture equity market returns with an improved risk/reward efficiency compared to cap-weighted indices. The weighting of the portfolio of constituents achieves the highest possible return-to-risk efficiency by maximising the Sharpe ratio (the reward of an investment per unit of risk).

In order to maximise the Sharpe ratio, the methodology seeks to reliably estimate two essential inputs needed for portfolio optimisation: the expected returns of each stock which are calculated indirectly by the riskiness of each stock; and the covariance matrix of returns for all stocks which is calculated using statistical factor models that describe the co-movement of stock prices through their exposure to common risk factors.

These indices are a response to the shortcomings of cap-weighted indices, which have been the subject of numerous critiques, both theoretical and practical, over the last few years. The index series is based on all constituent securities in the FTSE All World Index Series. Constituents receive weights which result from EDHEC-Risk’s portfolio optimisation reflecting their ability to maximise the reward-to-risk ratio for a broad market index. The index series is rebalanced quarterly in accordance with the review of the underlying FTSE All World Index Series.

EDHEC-Risk Alternative Indexes

The different hedge fund indexes available on the market are computed from different data, according to diverse fund selection criteria and index construction methods; they unsurprisingly tell very different stories. Challenged by this heterogeneity, investors cannot rely on competing hedge fund indexes to obtain a "true and fair" view of performance and are at a loss when selecting benchmarks. To address this issue, EDHEC-Risk was the first to launch composite hedge fund strategy indexes as early as 2003.

Using factor analysis techniques, the EDHEC-Risk Alternative Indexes are built as the best one dimensional summaries of the information conveyed by competing indexes for a given style. The EDHEC-Risk composites are thus able to capture a very large fraction of the information contained in the competing indexes while implicitly minimising their various biases. Consequently, the EDHEC-Risk Alternative Indexes tend to be very stable over time and thus are easily replicable.

The 13 EDHEC-Risk Alternative Indexes are published monthly on www.edhec-risk.com and are freely available to managers and investors.

EDHEC-Risk Position Papers, Publications and Industry Surveys

Position papers – the EDHEC-Risk stance on issues of relevance to the financial industry

EDHEC-Risk has innovated with the concept of the EDHEC-Risk Position Paper. This is a collective commitment not only on the part of the research team but also the whole institution to research results that are brought to the attention of companies and society at large.

As such, EDHEC-Risk has taken a position on, amongst many other issues, the inadequacies of the MiFID financial services directive; the eligibility of hedge fund indices within the framework of UCITS3; the lessons to be drawn from the subprime lending crisis; the ground to be covered for optimal implementation of the Solvency II directive; the nature of asset management regulations following the credit crisis; the “fair value” accounting standards; the undesirable effects of banning short sales; and the absence of excessive speculation on the US oil futures markets.

EDHEC-Risk publications – financial research that corresponds to the needs of the corporate world

EDHEC-Risk’s publication strategy is to break away from a purely academic vision of research, whereby any research carried out has only been evaluated by academics and disseminated primarily to other scholars, to favour an approach where business is at the heart of the researcher’s concerns.

To ensure that our financial research corresponds to the needs of the corporate world, we present our publications in such a way as to render the research conclusions as accessible as possible to finance professionals, by including clearly delineated introductions, conclusions and an executive summary.

Recent EDHEC-Risk publications include studies on an asset-liability management approach to private wealth management, alternative investments for institutional investors, the benefits of dynamic allocation strategies in the presence of liability constraints, and the impact of regulations on the asset-liability management of European pension funds.

Industry surveys – confronting research advances with industry best practices

EDHEC-Risk regularly conducts surveys on the state of the European institutional investment and asset management industry. These surveys look specifically at the application of recent research advances within investment management companies and at best practices in the industry.

The surveys cover both the traditional investment universe and alternative investments.

Survey results receive considerable attention from professionals and are extensively reported by the international financial media.

EDHEC-Risk Conferences

Since 2004, EDHEC-Risk Institute has been organising annual conferences devoted to the buy-side industry across Europe. By setting up the EDHEC Hedge Fund Days in May 2004, EDHEC-Risk Institute created a new type of conference that aimed to provide professionals with the state of the art in financial research in the various fields of risk and asset management. In view of our academic background, this was not about organising sales conferences where the speakers in turn deliver excessively brief messages that they do not have the time to discuss thoroughly, but about genuinely transmitting expertise on and debating current themes proposed by the EDHEC-Risk research team.

As such, the EDHEC-Risk conferences allow research results to be compared with the practices and needs of European institutional investment and asset management professionals. EDHEC-Risk’s independence, the original approach—which leaves time for instruction and discussion during the sessions—and the highly selective speaker panel, make the EDHEC-Risk conferences the must-attend annual events for European institutional investors and asset managers who are concerned about maintaining best level practices in both technical and conceptual terms.

The EDHEC-Risk Alternative Investment Days are recognised as the most relevant and worthwhile industry conference dedicated to alternative investments. The inaugural event, then called EDHEC Hedge Fund Day, was attended by over 400 senior professionals from private and institutional investors to both hedge fund and fund of hedge fund managers from 20 countries. The fourth edition, which was held at the ExCeL Centre in Canary Wharf on December 9-10, 2008, was attended by over 1,200 delegates in the midst of the financial crisis, confirming that this event has become the most prestigious and well-attended academic and professional conference on alternative investments in Europe.

In 2010, the EDHEC-Risk Alternative Investment Days have returned to The Brewery in London. The event includes two conferences and a roundtable that are genuinely significant events for alternative investment professionals: the CNBC EDHEC-Risk International Herald Tribune Hedge Fund Roundtable of Global Thought Leaders, the EDHEC-Risk Hedge Fund Summit and the EDHEC-Risk State-of-the-Art Alternative Investment Conference.

The first EDHEC-Risk Institutional Days ran in Paris in November 2006 and were attended by over 800 senior industry professionals in order to better understand how state-of-the-art asset management techniques could address their current and foreseeable needs.

The 2008 event, in Paris on June 12-13, and the 2009 event, in Paris on May 26-27, attracted more than 2,100 institutional investors, asset managers and private bankers.

To ensure that the conference is the European institutional event of 2010, EDHEC-Risk has entered into a partnership with Investment & Pensions Europe (IPE), the leading monthly magazine for European institutional investors. In 2010, EDHEC-Risk’s partnership with IPE will enable the EDHEC-Risk Institutional Days to be held on the two days following the IPE Pension Fund Awards in Monaco, thus providing an exceptional opportunity for the awards ceremony attendees to take advantage of their visit to Monaco in order to bring themselves up-to-date with the latest developments in institutional investment research.

EDHEC-Risk Institute in the press and media

EDHEC-Risk Institute has been cited in more than 2,000 articles in the industry press.

Highlights of the research centre’s involvement with the press include:

• Regular articles covering the research centre’s work in Financial Times fund management;

• Partnership with CNBC and the International Herald Tribune on the Hedge Fund Roundtable of Global Thought Leaders;

• Partnership with the Wall Street Journal Europe on the Institutional Investor Forum;

• Partnership with Investment & Pensions Europe (IPE) on the IPE Pension Fund Awards, and the EDHEC-Risk Institutional Days.

Investment Management Review is a magazine with which EDHEC-Risk Institute has formed a major partnership. This partnership involves both editorial contributions and a distribution agreement.

Investment Management Review provides an overview of new developments and thinking in the asset management industry, globally and across a comprehensive range of sectors, including pension funds, mutual funds, hedge funds, private equity, structured products and ETFs.

By reading just this one magazine, readers can keep up-to-date with all the important asset management developments. IMR’s sources range from the best of the financial media and websites to important conferences and authoritative academic publications.

All aspects of the industry are covered, including business strategy, the relative growth of different distribution channels, and investment processes and techniques.

Executive Education Seminars

The executive education seminars offered by EDHEC-Risk Institute help professionals to upgrade their skills with advanced asset allocation and risk management training across traditional and alternative classes.

Building on the latest research advances engineered by EDHEC-Risk Institute, we offer a range of executive courses in investment management and joint seminars with CFA Institute.

State-of-the-art investment management series

The EDHEC-Risk Institute investment management series seminars bring research advances and state-of-the-art practices into the practitioner’s portfolio of skills.

Designed and delivered by some of the most respected practitioners and academics in the area, these executive courses provide participants with a workable knowledge of the techniques that any investment professional should adopt.

Presented in a highly accessible manner and drawing upon the latest research results, these executive courses appeal to senior officers, investment specialists and administrators working for buy- and sell-side institutions, and to consultants and key account representatives advising high net worth individuals and institutional investors.

Spanning traditional and alternative investments, our offering includes such courses as:

• Commodities Investing Seminar
• Fixed Income Investing Seminar
• Hedge Fund Investing Seminar

Courses are offered in London and New York and carry CFA Institute Continuing Education credits.

CFA Institute – EDHEC-Risk Institute joint seminars

CFA Institute and EDHEC-Risk Institute organise events which present the latest research advances in asset allocation and alternative investment and clarify the distinction between true innovation and mere marketing claims in emerging industry trends. These exclusive seminars offer senior investment professionals a unique opportunity to gain an in-depth appreciation of the concepts and techniques that are shaping the future of investment management. In addition, they provide practical tools and novel investment approaches to improve investment and risk management processes and design new products.

The partnership between EDHEC-Risk Institute and CFA Institute provides the CFA Institute community with privileged access to EDHEC-Risk Institute’s expertise and allows EDHEC Business School to be part of the select club of global institutions-such as Harvard Business School and Wharton-which offer joint executive programmes with the world’s leading association of investment professionals.

The EDHEC-Risk Institute PhD in Finance

The EDHEC-Risk Institute PhD in Finance programme is designed for professionals who aspire to higher intellectual levels and aim to redefine the investment banking and asset management industries.

The programme has two tracks: a ‘residential track‘ for high-potential graduate students who hold part-time positions at EDHEC-Risk, and an ‘executive track‘ for high-level practitioners who keep their full-time jobs.

Drawing its faculty from the world’s best universities and enjoying the support of a leader in applied financial research, the EDHEC-Risk Institute PhD in Finance creates an extraordinary platform for professional development and industry innovation.

The EDHEC-Risk Institute Executive MSc in Risk and Investment Management

The Executive MSc in Risk and Investment Management offered by EDHEC-Risk Institute helps professionals to embrace and lead the major changes that will reshape investment management. It trains participants to appreciate recent and forthcoming paradigm shifts and equips them with the conceptual and practical tools required to improve the organisation of the investment process; optimise portfolio construction, risk management, and performance measurement; and design novel investment management approaches and solutions for institutional, private and retail investment management.

Contact details:

E-mail address: research@edhec-risk.com

Postal address:

EDHEC-Risk Institute
393-400 Promenade des Anglais
BP 3116
06202 Nice Cedex 3
France

Tel:  +33 (0)4 93 18 78 24
Fax: +33 (0)4 93 18 78 44