EDHEC-Risk Institute Press Releases2010
New EDHEC-Risk Institute survey reveals that European private wealth managers wish to offer their clients customised risk management but generally fail to do so
This European survey conducted by EDHEC-Risk Institute as part of the “Private ALM” research chair in partnership with Ortec Finance draws on responses from 159 private wealth managers (PWMs), whose clients include the mass affluent (financial assets of less than $1 million) as well as so-called ultra-high-net-worth individuals, or UHNWIs (financial assets of more than $30 million). The 159 respondents are mainly senior European investment professionals working in private banks, asset management firms, and family offices; more than half represent organisations managing more than €1 billion of clients’ money.
New EDHEC-Risk Institute Research Questions Current Corporate Pension Fund ALM Practices and Proposes a New Integrated Model for Analysing the Capital Structure of Corporate Sponsors and Pension Fund Allocation Decisions
No comprehensive model is currently available for the joint quantitative analysis of capital structure choices, pension fund allocation decisions and their impact on rational pricing of liability streams. This conceptual problem is reinforced by new accounting reforms, which make it a real challenge to correctly assess the value of a pension plan in deficit with a weak sponsor company. EDHEC-Risk Institute has attempted to fill this gap by analysing the valuation of pension liabilities in the context of an integrated model of capital structure. The model is a stylised representation of the relationships between the stakeholders of a company with a pension plan, including shareholders of the sponsor company, bondholders, and beneficiaries of the pension fund (workers and pensioners). The new publication, “An Integrated Approach to Asset-Liability Management: Capital Structure Choices, Pension Fund Allocation Decisions and the Rational Pricing of Liability Streams,” contains the results of the second-year research work conducted at EDHEC-Risk Institute within the BNP Paribas Investment Partners research chair on asset-liability management and institutional investment management.
Environmental protection is considered an investment theme by 90% of investment management professionals
In a new EDHEC-Risk Institute Publication, entitled “Adoption of Green Investing by Institutional Investors: A European Survey”, EDHEC-Risk review the concept of green investing and report the results of a European survey on investment management professionals. One of the key results of the survey is that green investing is a significant movement in which survey respondents are heavily involved. In fact, nearly 90% of respondents consider environmental protection an investment theme and the same percentage plans to do more green investing in the future. The results of our survey show that the most popular green theme is climate change: 81.5% of the respondents who take green investing into account are concerned with climate change. Other environmental themes such as water management, anti-pollution measures, and improvement of processes are also frequently taken into account by the majority of respondents.
Advances in private wealth management research to be highlighted at the EDHEC-Risk Institutional Days in Monaco on December 8-9
The EDHEC-Risk Institutional Days in Monaco on December 8 and 9, 2010, will this year be oriented towards themes that are of particular relevance for wealth management professionals. In particular, the second day of the conference will be dedicated to the transfer and adaptation of institutional investment techniques to private wealth management. A special private wealth management seminar, “When Private Money is Managed like Institutional Money,” will be presented in consecutive sessions on the afternoon of December 9, beginning with a presentation on "State-of-the Art ALM and Risk Management for PWM" and followed by a session on "Sources of Added Value in Private Wealth Management" which draws from the "Private Asset-Liability Management" research chair at EDHEC-Risk Institute in partnership with Ortec Finance.
New EDHEC-Risk Institute Publication Proposes an Optimal Investment Strategy for Sovereign Wealth Funds
This new publication, “Asset-Liability Management Decisions for Sovereign Wealth Funds,” contains the results of the first-year research work conducted at EDHEC-Risk Institute within the Deutsche Bank research chair on asset-liability management (ALM) techniques for sovereign wealth fund management. Under the responsibility of Professor Lionel Martellini, the scientific director of EDHEC-Risk Institute, this chair examines optimal allocation policies for sovereign wealth funds. The publication proposes a formal analysis of the optimal investment policy and risk management practices of sovereign wealth funds, which can be regarded as the extension to sovereign wealth funds of the liability-driven investing paradigm recently developed in the pension fund industry.
Focus on regulation and new indices at the EDHEC-Risk Institutional Days in Monaco on December 8-9
At the fourth edition of the EDHEC-Risk Institutional Days (EID) conference at the Grimaldi Forum in Monaco on December 8-9 next, EDHEC-Risk Institute will be presenting research results on two key themes for the investment industry: regulation and indices. The conference will open with a session that will bring together institutional investors and regulators for a debate on the impact of regulations on the financial management of pension funds. This session will include the results of an exclusive survey of the asset-liability management practices of European pension funds. The second day of the conference will feature separate sessions on “Regulation and Non-Financial Risks in the European Fund Industry: Should We Manage Non-Financial Risks or Insure Them?”, and “Managing Risk with Sovereign Wealth Funds,” which will look at managing macroeconomic risks and the impact of short-term constraints.
The first edition of Green Investing 2010, the Nice Côte d’Azur International Sustainable Development Financing Conference
In Europe, action plans have been developed in order to improve the development and incorporation of eco-technologies. Many of these new techniques contribute to improving the environment while also reinforcing competitive business. Nevertheless, many obstacles still remain, notably an insufficient access to capital. EDHEC, in partnership with Ville de Nice, Nice Côte d’Azur, EPA de la Plaine du Var, Team Côte d’Azur and CCI Nice Côte d’Azur have decided to launch an international conference to promote Green Investing. By organising the Nice Côte d’Azur International Sustainable Development Financing Conference, EDHEC and its partners are seeking to present the latest research on investment criteria in sustainable development and on new findings and innovative projects in the field of green business.
EDHEC Risk Institute research finds that enhanced parameter estimates can lead to significant improvements in hedge fund portfolios
A new study by Lionel Martellini, Scientific Director of EDHEC-Risk Institute, with Giovanni Zambruno and Asmerilda Hitaj of the University of Milano – Bicocca, entitled “Optimal Hedge Fund Allocation with Improved Estimates for Coskewness and Cokurtosis Parameters,” supported by Newedge Prime Brokerage as part of the research chair on “Advanced Modelling for Alternative Investments,” aims to enhance understanding of the dynamic and non-linear relationship between hedge fund returns and the returns on underlying fundamental systematic factors, and to analyse the implications for managing portfolios that include hedge funds.
EDHEC-Risk Institute welcomes distinguished new members to its international advisory board
EDHEC-Risk Institute is pleased to announce that six new members have joined its international advisory board, which brings together high-level representatives from regulatory bodies, leading pension funds, professional organisations and business partners: Christopher J. Ailman, Chief Investment Officer, California State Teachers’ Retirement System (CalSTRS); Tai Tee Chia, Managing Director, Government of Singapore Investment Corporation (GIC); James C. Davis, Vice President, Investment Planning & Economics Asset Mix & Risk, Ontario Teachers’ Pension Plan (OTPP); Mark Fawcett, Chief Investment Officer, NEST Corporation; Chong Tee Ong, Deputy Managing Director, Monetary Authority of Singapore (MAS); Bruno de Pampelonne, President, Tikehau Investment Management.
EDHEC-Risk to organise the fourth edition of the EDHEC-Risk Institutional Days in Monaco on December 8-9
EDHEC-Risk Institute will be staging the fourth edition of its EDHEC-Risk Institutional Days (EID) conference at the Grimaldi Forum in Monaco on December 8-9 next. The conference will allow professionals to review major industry challenges, in the areas of both passive and institutional investment. EID 2010 is the only event that enables professionals to explore state of-the-art investment techniques and benchmark practices to research advances. EID 2010 will allow EDHEC-Risk Institute to present and comment upon new and important research results.
New EDHEC Risk Institute research shows that without the use of robust estimators, minimising extreme risks may be worse than not minimising them
In recent research on advanced modelling for alternative investments, supported by Newedge Prime Brokerage, EDHEC Risk Institute analysed whether portfolio selection techniques with a focus on extreme risks are truly superior to traditional return and risk analysis in situations when risk management matters most. The results show that in trying to minimise extreme risk and make their risk evaluation more sophisticated, many asset managers increase the number of risk parameters to be estimated, which in turn leads to less robust and less relevant results than if they had stuck with a simple measure of portfolio volatility.
EDHEC Risk Institute Survey Suggests that a Majority of European Pension Funds Have a “Blinkered View of their Risks”
In a new survey of 129 asset/liability management (ALM) specialists (pension funds, their advisers, regulators, and fund managers) representing assets under management of approximately €3 trillion, EDHEC Risk Institute finds, amongst other key conclusions, that the majority of respondents have a blinkered view of their risks: accounting risk (the volatility from the pension fund in the sponsor’s books) is managed by only 33% of respondents, and more than 50% ignore sponsor risk (the risk of a bankrupt sponsor leaving a pension fund with deficits). In addition, pension funds generally do not assess the adequacy of their ALM, a failing that may lead to sub-optimal decisions being taken again and again.
EDHEC-Risk Institute Finds No New Evidence that SRI Funds Create Financial Value
In 2008, EDHEC-Risk Institute analysed the performance of a sample of SRI funds distributed in France, covering a six year-period from January 2002 to December 2007. This study concluded that none of the funds in the sample produced both positive and statistically significant alpha. In a new position paper entitled “The Performance of Socially Responsible Investment and Sustainable Development in France: an Update after the Financial Crisis,” EDHEC-Risk Institute again finds that a majority of the funds studied over long or short periods produce negative but non-significant alpha.
EDHEC Risk Institute Supports the Objective of Better Regulation of the Derivatives Markets for Commodities but Criticises the Motivation behind the French Position on the Subject
In an open letter to European Commissioner Michel Barnier, EDHEC-Risk Institute supports the idea of better regulation of the derivatives markets for commodities requested by France in a recent report sent to the commissioner by the French Ministers of the Economy, Energy and Agriculture, and which serves as a basis for the French position ahead of its future presidency of the G20, but criticises the motivations behind the French request, which it considers cannot be a starting point for a credible European initiative.
Inquire Europe First Prize 2009/2010 Awarded to EDHEC-Risk Institute Research
EDHEC-Risk Institute is proud to announce that the Institute for Quantitative Investment Research (Inquire) Europe has awarded its First Prize for 2009/2010 to Professor Lionel Martellini, Scientific Director of EDHEC-Risk Institute, for research presented at the Inquire Autumn Seminar 2009 in Madrid, and developed in conjunction with Vincent Milhau, Research Engineer with EDHEC-Risk Institute. The presentation was cited by Inquire as being "truly outstanding and deserving this recognition".
EDHEC-Risk Study Finds No Theoretical or Empirical Justification for Cap-Weighted Indices
After the financial crisis and the accompanying falls in the stock markets, many commentators have questioned the appropriateness of tracking cap-weighted indices. These indices are particularly inefficient and, through their momentum properties, favour the emergence of speculative bubbles. New research from the EDHEC-Risk Institute shows that financial theory, despite widely-held views to the contrary, does not support investment in these types of indices. It is therefore urgent for investors to seek alternatives to these indices which are justified by neither fact nor theory.
New EDHEC study calls into question the suitability of the calibration of private equity in the Solvency II standard formula
In the study, entitled “On the Suitability of the Calibration of Private Equity Risk in the Solvency II Standard Formula,” EDHEC calls into question the method and the data used by the European regulator to measure the risk of private equity investments, in particular the correlation coefficient of performance of private equity and that of listed equities. The drawing-up of Solvency II prudential rules has become a matter of major concern for the private equity sector since the current measure for private equity risk, used by the European regulator, is likely to dissuade insurers from investing in this asset class.
EDHEC-Risk’s annual European ETF Survey sees room for growth in spite of a maturing market
EDHEC-Risk Institute has announced the results of the EDHEC European ETF Survey 2010, which presents the results of a comprehensive survey of 192 institutional investors, asset managers and private wealth managers conducted between January and March 2010. On the whole, the results of the survey suggest that, as a consequence of strong growth, the industry has entered a phase of increased maturity. As ETFs are now very widely used, investors are embracing more advanced ways of trading and using ETFs, such as OTC trading and securities lending, and the positive impact of ETFs on the market as a whole, including their underlying assets and other related instruments, is being felt by an increasing number of market participants. Despite this maturity, there is still room for growth. In particular, survey respondents see a need for new products on emerging markets and alternative asset classes.
EDHEC-Risk Institute and Rothschild set up a research chair on inflation-linked corporate bonds
EDHEC-Risk Institute and Rothschild have announced the creation of a research chair entitled The Case for Inflation-Linked Corporate Bonds: Issuers’ and Investors’ Perspectives. The purpose of the research chair is to support research undertaken at EDHEC-Risk Institute on the benefits of inflation-linked corporate bonds both from the issuers’ as well as from the investors’ points of view. The chair will also focus on contrasting the analysis, in corporate finance, and perceptions of inflation-linked corporate bonds both by issuers and investors.
EDHEC-Risk Institute Considers that Germany’s Restrictive Measures on the Sovereign Debt Markets are Counterproductive, Inconsistent and Liable to Hinder European Growth
On the basis of numerous academic studies, along with its own research, including the position paper published in March 2010 by Professor Abraham Lioui entitled “Spillover Effects of Counter-cyclical Market Regulation: Evidence from the 2008 Ban on Short Sales,” EDHEC-Risk Institute considers that the unilateral measures taken by Chancellor Merkel on the sovereign debt markets, both on the short selling of sovereign bonds and credit default swaps (CDS), are counterproductive, inconsistent and liable to hinder European growth.
EDHEC-Risk Survey Reveals Fears that Structuring Hedge Fund Strategies as UCITS will Distort Strategies and Diminish Returns
As part of the CACEIS research chair on non-financial risks in investment funds, EDHEC-Risk Institute has surveyed UCITS and alternative asset managers, their service providers, external observers, and investors for their views of structuring hedge fund strategies as UCITS. The 437 respondents report assets under management (AUM) of more than €13 trillion. (...) Most respondents fear that structuring hedge fund strategies as UCITS will distort strategies and diminish returns.
EDHEC-Risk Institute Position Paper Shows that the 2008 Short Sale Ban did not Ease Downward Pressure in the Financial Markets
In a new position paper entitled “Spillover Effects of Counter-cyclical Market Regulation: Evidence from the 2008 Ban on Short Sales,” Professor Abraham Lioui, Professor of Finance at EDHEC Business School looks at the impact of the ban on broad market indices in the US and in Europe (the United Kingdom, France, and Germany). Since these indices and their performance are of great concern to the asset management and hedge fund industries, it is important for practitioners and policymakers to understand the impact of changing the rules of the game (banning short sales) on the return distribution of these indices and to assess the potential spillover effects of a counter-cyclical regulation affecting only one segment of the financial market.
EDHEC-Risk Institute Warns the European Commission of the Dangers of Unilateral Regulation of the Credit Default Swap Markets
In an open letter addressed to European Internal Market Commissioner Michel Barnier on March 15, 2010, EDHEC-Risk Institute has warned of the dangers of prohibiting “naked” sales of sovereign credit default swaps. Besides the fact that the lack of convergence on these issues with the US authorities leaves little hope of the measures being effective, EDHEC-Risk Institute thinks that this ban would pose numerous problems and run up against legal and practical obstacles that would make it inapplicable or even counterproductive.
CFA Institute and EDHEC‐Risk Institute Expand Seminar on Alternative Asset Allocation
CFA Institute and EDHEC‐Risk Institute continue to extend their partnership in executive education to offer their Alternative Asset Allocation seminar in both London and New York. The seminar, aimed at senior investment professionals, provides an indepth understanding of the means of maximising the benefits of alternative investments for asset management and asset‐liability management while controlling for their specific risks. It will be given in London on 16–18 March 2010 and in New York on 30 March–1 April 2010.
EDHEC-Risk to organise the fifth edition of the EDHEC Risk Alternative Investment Days in London on February 8 9, 2010
The EDHEC-Risk Institute will be staging the fifth edition of the EDHEC-Risk Alternative Investment Days at The Brewery in London on February 8 and 9 next. The conference aims to present the applied research conducted by the EDHEC-Risk Institute and to discuss its results with the institutional investor and fund manager communities. More than 900 professionals have already registered for this unique event.
FTSE Group and EDHEC-Risk Institute collaborate to create innovative benchmarking with new risk efficient indices
FTSE Group (“FTSE”), the award winning global index provider and EDHEC-Risk Institute, the leading centre for applied asset and risk management research, have today launched the FTSE EDHEC-Risk Efficient Indices, an index series which uses a risk-adjusted strategy to that of traditional market capitalisation-weighted indices, to deliver investors with an optimal risk:return ratio. The FTSE EDHEC-Risk Efficient Index Series, a global offering, can be used by asset owners and investment consultants to capture equity market returns with improved risk/reward efficiency. This efficiency is achieved by maximising what is known as the Sharpe ratio, by weighting the constituents of the indices accordingly.
EDHEC-Risk Institute Announces Rebranding of its Risk and Asset Management Research Centre
EDHEC-Risk Institute, the leading centre for asset and risk management research, announced today that the official name for the holding entity governing its entire range of activities would henceforth be ‘EDHEC-Risk Institute’. Formerly called the ‘EDHEC Risk and Asset Management Research Centre’, EDHEC-Risk Institute was set up in 2001 to conduct world-class academic research and highlight its applications to the industry.