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EDHEC-Risk Institute Press Releases


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  • 19/11/13:
    EDHEC-Risk Institute welcomes five distinguished new members to its international advisory board
    EDHEC-Risk Institute is pleased to announce that five new members have joined its international advisory board, which brings together distinguished scholars, representatives of regulatory bodies as well as senior executives from business partners and other leading institutions. The five new members are as follows: Mr Carl S. Bang, Chief Investment Officer, Qatar Foundation Endowment (QFE); Mr James Barber, Chief Investment Officer of Equities, Russell Investments; Mr Laurent Degabriel, Head of Investment and Reporting Division, European Securities and Markets Authority (ESMA); Ms Jacqueline Loh, Deputy Managing Director, Monetary Authority of Singapore (MAS); Mr Adriaan Ryder, Chief Investment Officer, QIC.

  • 12/11/13:
    A new EDHEC study shows that LTGA calibration continues to favour short-duration bonds and could undermine the financial stability and financing of both sovereigns and corporates
    Discussions on the Omnibus II Directive have been in deadlock since July 2012. The main points of contention relate to the integration of ALM mechanisms into the standard formula. Their omission from the QIS5 impact study led to increased artificial volatility of prudential balance sheets and consequently to regulatory capital requirements that are sometimes overestimated. The aim of the Long-Term Guarantees Assessment (LTGA), conducted in the first semester of 2013, was to test a variety of measures which aim to integrate ALM mechanisms into long-term insurance activities, (life insurance, pensions, liability insurance, etc.). These measures relate to the valuation of insurance liabilities (extrapolation of long-term rates, implementation of a counter-cyclical premium and a matching adjustment) as well as to new risk calibrations, particularly that of spread risk.

  • 05/11/13:
    EDHEC-Risk Institute disagrees with EFAMA on ESMA Guidelines and reiterates its call for greater index transparency
    The European Fund and Asset Management Association (EFAMA) recently ventured that the European Securities and Markets Authority (ESMA) had exceeded its powers and mandate by issuing “quasi-regulation (...) on topics which were not previously regulated at EU level.” The representative body for the European investment management industry specifically targeted the ESMA Guidelines on ETFs and other UCITS issues and its provisions in terms of securities lending, collateral management, or the use of financial indices. EDHEC-Risk Institute, which, like EFAMA, has contributed to the consultation process that led to these guidelines, takes exception to this language and interpretation and wishes to underline the considerable investor protection and competition advances introduced by ESMA, notably with respect to the mitigation of counterparty risk and the quality and transparency of financial indices.

  • 07/10/13:
    EDHEC-Risk Institute and Lyxor launch a research chair and explore the next generation of risk parity adapted to time-varying market conditions
    EDHEC-Risk Institute and Lyxor are launching a three-year research chair entitled “Risk Allocation Solutions” to develop academic insights that can be used towards the design of high-performance multi-asset investment solutions, based on specific investor needs. Year 1 will focus on the next generation of risk parity, which may suffer from one major shortcoming, namely the fact that it is not explicitly sensitive to changes in economic conditions. To find optimal ways to allocate risk budgets in investors’ portfolio construction, EDHEC-Risk Institute will in particular develop a dynamic risk allocation approach through three major topics: Extending standard risk budgeting techniques to time-varying equity and bond volatility levels; Extending standard risk budgeting techniques to downside risk measures with an asymmetric response to decreases in bond yield levels; Extending standard risk budgeting techniques to mean-reverting risk premia for equity and bond markets.

  • 24/09/13:
    EDHEC-Risk Institute study shows that corporate bonds can be a highly attractive addition to ALM solutions
    In a paper produced as part of the research chair on “The Case for Inflation-Linked Corporate Bonds: Issuers’ and Investors’ Perspectives” at EDHEC-Risk Institute, supported by Rothschild & Cie, EDHEC-Risk researchers have provided a comprehensive analysis of the sources of added-value of corporate bonds for institutional investors. The paper, “Analysing and Decomposing the Sources of Added-Value of Corporate Bonds within Institutional Investors’ Portfolios,” finds corporate bonds to be attractive additions to investors’ portfolios. In this context, investors may wish to assess whether a particular proportion of corporate bonds in each portfolio would lead to the highest level of welfare gains.

  • 19/09/13:
    EDHEC-Risk study on Asian volatility risk factors finds that using VIX to hedge the global volatility risk of a portfolio is ineffective
    A new study from EDHEC-Risk Institute, entitled “The Local Volatility Factor for Asian Stock Markets,” has shown that using US VIX to hedge the volatility risk of Asian portfolios is not particularly effective. Regional factors matter when it comes to volatility indicators—the study suggests that derivatives on Asian volatility should therefore be of genuine interest to investors. The study finds strong evidence for a very significant local volatility factor in the Asian market index returns. In particular, the analysis reveals that the relationship between the Asian equity index returns and the Asian model-free option-implied (MFOI) volatility indices is significantly stronger than the relationship between Asian equity index returns and VIX. The analysis suggests either a weaker or insignificant relationship between the Asian equity market returns and the US VIX in the presence of Asian volatilities, implying that the Asian volatility indices can absorb the information content of the VIX.

  • 04/09/13:
    Investment solutions can be designed to solve Asia's pension woes
    The costly future resulting from population ageing can still be affordable if scientific investment solutions are created to put the region's vast savings to work, said Dr Blanc-Brude, Research Director at EDHEC Risk Institute-Asia, speaking at the 9th conference on Asian pension and retirement planning in Singapore, yesterday, which gathered thought leaders from global insurance firms and asset managers around Singapore's Central Provident Fund and the OECD. There are reasons to be optimistic despite the difficult issues surrounding pension plans in Asia, said Dr Blanc-Brude, who is in charge of research on pension systems at EDHEC Risk Institute-Asia, because the large individual and collective savings (pension reserves) of Asia represent a unique opportunity to face the predictable costs of rapid population ageing.

  • 24/07/13:
    EDHEC-Risk Institute unveils major scholarship programme for Asia-Pacific
    To support the build-up of a strong, home-grown cohort of financial sector and capital market leaders within ASEAN countries and the wider Asia-Pacific region, EDHEC Risk Institute–Asia is creating a scholarship scheme aimed at facilitating the participation of outstanding professionals in the executive track of its doctoral programme in Singapore. Ahead of the launch of the ASEAN Economic Community and in the wider context of Asia-Pacific integration, EDHEC-Risk Institute has unveiled a new initiative to accelerate the build-up of a regional pool of finance experts and leaders. Part of hundred-year old EDHEC Business School, the finance research institute is creating a new scholarship programme to facilitate the participation of Asia-Pacific practitioners in the executive track of its PhD in Finance programme.

  • 22/07/13:
    EDHEC-Risk Institute welcomes eight distinguished new members to its international advisory board
    EDHEC-Risk Institute is pleased to announce that eight new members have joined its international advisory board, which brings together distinguished scholars, representatives of regulatory bodies as well as senior executives from business partners and other leading institutions. The role of the international advisory board is to validate the relevance and goals of the research programme proposals presented by the institute’s management and to evaluate research outcomes with respect to their potential impact on industry practices. The 47 members of the board also advise on the objectives and contents of projects deriving from the expertise of the institute, thereby ensuring that graduate and executive programmes remain at the forefront of developments in the marketplace.

  • 15/07/13:
    EDHEC-Risk Institute study shows that investors should embrace construction risk in properly structured infrastructure debt portfolios
    This paper produced as part of the NATIXIS research chair on “Investment and Governance Characteristics of Infrastructure Debt Instruments,” is the first of a series discussing the opportunity for long-term institutional investors such as pension funds, insurance companies or sovereign wealth funds, to invest in large portfolios of infrastructure debt, both to manage their liabilities and to enhance yield. In “Who is afraid of Construction Risk,” the authors focus on the question of credit risk in infrastructure investment but also address a public policy question that has come to the fore since the financial crisis of 2007-9: should pension funds and insurance companies invest significantly in new infrastructure projects?

  • 09/07/13:
    Modern investment techniques and retirement solutions needed to avert East-Asian pension crisis, EDHEC-Risk Institute
    New research conducted by EDHEC-Risk Institute with the support of AXA Investment Managers finds that North-East Asian countries and Greater China are facing a formidable demographic challenge and need to better manage public reserves and help channel private savings into adequate retirement solutions to avert a looming pension crisis. The paper first looks at the region’s demographics and the models predicting financial trouble as the population ages quickly and the workforce is depleted; it establishes that this demographic challenge is compounded by the observation that, as countries develop, the combined lifetime consumption needs of the younger and older segments of the population grow roughly three times as fast as the corresponding surplus of the working population.

  • 04/07/13:
    Institutional investors will not provide long-term financing to the real economy without access to genuinely long-term instruments
    Policy makers increasingly wish to see institutional investors become more involved in the financing of the real economy, but matching the supply of long-term capital provided by such investors with long-term investment demand is not self-evident and requires a policy and regulatory focus on the type of instruments that long-term investors need, rather than which sectors of the economy qualify as "long-term" investment. In its recent responses to the European Insurance and Occupational Pension Authority's (EIOPA) consultation on the design and calibration of the Solvency II Standard Formula for long-term investment (May 2013), and to the European Commission's Green Paper on long-term financing (June 2013), EDHEC-Risk Institute has highlighted three important points.

  • 01/07/13:
    EDHEC welcomes IOSCO’s ETF principles, calls on regulators and industry to adopt high standards of transparency
    EDHEC-Risk Institute welcomes the Principles for the Regulation of Exchange Traded Funds (ETFs) released by the International Organisation of Securities Commissions (IOSCO) on 24 June 2013, which are broadly consistent with EDHEC-Risk Institute’s research on ETFs and recommendations, but deplores the timidity of the organisation’s proposals on index transparency and calls on regulators and index providers to adopt standards on par with those recently defined for European Undertakings for Collective Investment in Transferable Securities (UCITS).

  • 19/06/13:
    Yale School of Management and EDHEC-Risk Institute present joint Certificate in Risk and Investment Management
    Yale School of Management and EDHEC-Risk Institute are pleased to announce the launch of a joint Executive Seminar series in the United States and Europe. Participants in this seminar series will be able to acquire the Yale School of Management — EDHEC-Risk Institute Certificate in Risk and Investment Management. The seminar series will cover the following modules: Strategic Asset Allocation and Investment Solutions, Equity Investment, Fixed-Income Investment, Alternative Investment, Multi-Management Investment, and Structured Product Investment. The first of the joint seminars are planned for the end of the year at Yale SOM's New Haven campus in the United States and EDHEC-Risk Institute's campus in London, England.

  • 28/05/13:
    EDHEC-Risk Institute and CACEIS launch new research chair on risk assessment and performance reporting
    CACEIS and EDHEC-Risk Institute have announced the creation of a new research chair at EDHEC-Risk Institute entitled “New Frontiers in Risk Assessment and Performance Reporting.” This new three-year chair will follow on from the previous CACEIS research chair at EDHEC-Risk Institute on “Risk and Regulation in the European Fund Management Industry.” Led by Professor Noël Amenc, Director of EDHEC-Risk Institute, and Professor Lionel Martellini, Scientific Director of EDHEC-Risk Institute, the research chair team will examine new advances in risk measurement and reporting. The goal is to explore, for the benefit of institutional investors and asset managers, both new concepts and innovative applications of concepts that are popular in the investment world.

  • 23/05/13:
    EDHEC-Risk Institute welcomes distinguished new members to its international advisory board
    EDHEC-Risk Institute is pleased to announce that three new members have joined its international advisory board, which brings together distinguished scholars, representatives of regulatory bodies as well as senior executives from business partners and other leading institutions. The role of the international advisory board is to validate the relevance and goals of the research programme proposals presented by the centre’s management and to evaluate research outcomes with respect to their potential impact on industry practices. The 40 members of the board also advise on the objectives and contents of projects deriving from the expertise of the research centre, thereby ensuring that graduate and executive programmes remain at the forefront of developments in the marketplace.

  • 29/04/13:
    Official opening of scientificbeta.com, the first multi-strategy platform for smart beta investing
    As of April 22, 2013, EDHEC-Risk Institute has inaugurated its new smart beta index design and production activity, ERI Scientific Beta. This activity aims to revolutionise the index world through, firstly, a new approach to smart beta investing called Smart Beta 2.0, which enables investors to choose and control the risks of these new benchmarks, and secondly, total transparency on the methodologies and compositions of the indices available on the platform. Through its ‘More for Less’ initiative, ERI Scientific Beta intends to promote a more transparent and efficient index market for the benefit of investors. As such, ERI Scientific Beta is taking initiatives that are at odds with those of traditional index providers, by supplying information on its flagship smart beta indices free of charge, allowing investors to choose and control the risks of their smart beta investment, and, finally, by not asking institutional investors for fees on assets under management (AUM) to replicate its indices.

  • 11/04/13:
    EDHEC-Risk Institute study illustrates that short-term risk control is not incompatible with long-term investment performance
    A new study produced as part of the BNP Paribas Investment Partners research chair on “Asset-Liability Management and Institutional Investment Management,” provides comprehensive insights into all of EDHEC-Risk Institute’s research on dynamic allocation in asset-liability management. The publication, “Hedging versus Insurance: Long-Horizon Investing with Short-Term Constraints,” demonstrates that failing to separate long-term risk-aversion and short-term loss-aversion may lead to poor investment decisions. As an illustration, the research points to a 32% opportunity cost when managing maximum drawdown constraints inefficiently through an excessive level of hedging.

  • 04/04/13:
    EDHEC-Risk Institute: UCITS hedge funds underperform their non-UCITS rivals, shows new study
    This new research is drawn from the Newedge research chair on “Advanced Modelling for Alternative Investments” at EDHEC-Risk Institute. UCITS hedge funds are typically more volatile and underperform their non-UCITS hedge fund rivals, a new comprehensive comparative study by the EDHEC-Risk Institute has found. The finding, also show that the domicile of a fund is an important indicator of a fund’s likely performance with European domiciled funds delivering lower risk-adjusted returns compared to funds domiciled in other regions. The EDHEC-Risk Institute study, which examined an aggregate hedge fund dataset that consisted of more than 24,000 unique hedge funds, is one of the most comprehensive analyses of the performance and risks of UCITS hedge funds and non-UCITS hedge funds undertaken in recent times.

  • 28/03/13:
    EDHEC-Risk’s annual European ETF Survey confirms satisfaction levels and investor approval of ESMA guidelines
    EDHEC-Risk Institute has announced the results of the EDHEC European ETF Survey 2012, which represents a comprehensive survey of 212 European ETF investors. The survey was conducted as part of the Amundi ETF research chair at EDHEC-Risk Institute on “Core-Satellite and ETF Investment.” Among the key findings of the 2012 survey: ETFs remain the favourite choice of investors for passive investment, in spite of the controversies surrounding the use of ETFs in 2011/12. Satisfaction levels remain high (equity ETF satisfaction rates have been consistently in the region of 90%), and there has been an increase in the use of ETFs for corporate bonds, infrastructure and real estate. Demand for innovation is high in different asset categories, with 49% of respondents seeking development of emerging market equity ETFs, and there is also demand for new forms of indices, such as ‘smart beta’ ETFs, which seek to generate superior risk-adjusted returns compared to standard market-capitalisation-based equity indices.

  • 18/03/13:
    Smart Beta 2.0 – Taking the risks of new equity benchmarks into account
    In research published today entitled, “Smart Beta 2.0,” EDHEC-Risk Institute is seeking to draw the attention of investors to the risks of traditional smart beta equity indices and propose a new approach to smart beta investing to take account of these risks. This new approach, referred to as “Smart Beta 2.0,” enables investors to measure and control the risks of their benchmark and revolutionises the offerings of advanced equity benchmarks. In their study, Noël Amenc, Felix Goltz and Lionel Martellini show that Smart Beta 1.0 indices present systematic and specific risks that are neither documented nor explicitly controlled by their promoters. This inadequate level of information and of risk management calls into question the robustness of the performance presented and implies considerable risk-taking that is not controlled by investors when they choose new equity benchmarks. In order to deal with this situation, EDHEC-Risk Institute recommends that the choice of systematic risk factors for smart beta benchmarks be clearly explicit. This choice should be made by the investor and not by the index promoter.

  • 11/03/13:
    Benchmarks: EDHEC-Risk Institute warns against the false promises of governance
    Transparency key to informed decision-making and mitigating conflicts of interest. In the context of the ongoing regulatory debate on financial benchmarks and the recent consultations by the International Organisation of Securities Commissions (IOSCO) and the European Securities and Markets Authority (ESMA)/European Banking Authority (EBA), EDHEC-Risk Institute wishes to underline that transparency is both crucial to allowing users to assess the risks, relevance and suitability of indices and the most powerful tool to mitigate conflicts of interests existing across the indexing industry. EDHEC-Risk Institute is concerned that discussions pertaining to define an “adequate level of transparency” and balance the needs of index users with the purported necessities of confidentiality or intellectual property protection may result in a framework that falls short of providing users with the information they need to discharge their due diligence responsibilities (at a reasonable cost or at all). Against this backdrop, EDHEC-Risk Institute cautions regulators against the temptation to trade lower levels of transparency against stronger governance mechanisms or stricter codes and standards. Because the latter have too often proven ineffective at ensuring good behaviour or protecting the interests they are expected to defend, they can at best support transparency and at worst exacerbate moral hazard and adverse selection phenomena.

  • 05/03/13:
    EDHEC-Risk Institute Study Highlights the Inefficiency of Asian Stock Market Indices
    In a study entitled “Assessing the Quality of Asian Stock Market Indices,” researchers at EDHEC-Risk Institute have reported results for 10 major Asian stock market indices over the past decade. Among the key findings of the study: All indices analysed display a pronounced lack of efficiency, in the sense of providing an efficient risk-reward trade-off: for all of them, an equal-weighted index constructed from the same components outperforms the corresponding cap-weighted market index. The levels of inefficiency of Asian market indices were found to be quite comparable to those of European and US indices. The standard Asian indices are heavily concentrated in a few large-cap stocks. Most indices allocate as much as 60% of the index weight to only one-fifth of the stocks in the universe. For investors who are interested in holding well-diversified equity portfolios, one can see these results as a motivation to explore whether more appropriate alternatives can be developed.

  • 26/02/13:
    EDHEC-Risk Institute Survey confirms investor dissatisfaction with corporate bond indices
    In a survey entitled ‘Reactions to “A Review of Corporate Bond Indices: Construction Principles, Return Heterogeneity, and Fluctuations in Risk Exposures”’ researchers at EDHEC-Risk Institute have analysed industry reactions to a previous EDHEC-Risk study on corporate bond indices and confirmed that investors are dissatisfied with the indices currently on offer. Among the main findings of the survey: Only 41% of respondents are satisfied or very satisfied with corporate bond indices, a level which confirms that current corporate bond indices do not meet investor needs. The instability of corporate bond indices’ risk factor exposures was affirmed by the majority of respondents. Between 64% and 80% of respondents agree or strongly agree that the instability of interest rate risk exposure is problematic.

  • 01/02/13:
    EDHEC-Risk Institute Reiterates its Warnings to the European Commission on the Inadvisability of Imposing a Tobin Tax
    In an open letter to European Commission President, José Manuel Barroso on January 30, 2013, Professor Noël Amenc, Director of EDHEC-Risk Institute and Professor of Finance at EDHEC Business School, has reiterated EDHEC-Risk Institute’s opposition to a ‘Tobin’ or financial transactions tax (FTT). Research findings from EDHEC-Risk Institute and other academic institutions show that the theoretical arguments in support of the FTT as a measure to reduce volatility are, at best, mixed; the empirical evidence, on the other hand, indicates that a FTT has either no effect on volatility or it actually increases volatility; and, introducing an FTT faces serious implementation challenges.

  • 28/01/13:
    EDHEC-Risk Institute Puts Forward a Series of Proposals to Limit Non-Financial Risks in the European Fund Management Industry
    In a summary document that concludes three years of research on better management of non-financial risks within the European fund management industry – conducted with the support of CACEIS – EDHEC-Risk Institute is putting forward a series of proposals to limit these risks which emerged during the 2007-2008 crisis and undermined the quality of the UCITS label. For EDHEC-Risk Institute, the sophistication of UCITS is one of the principal causes of a rise in non-financial risks. These risks are not the direct result of positions taken by funds on financial markets and for which they receive a reward proportional to their exposure, but rather produced by the operation of the value chain of the collective investment management industry itself.

  • 24/01/13:
    EDHEC-Risk Institute Calls on Investors to Take Better Account of Pension Liabilities when Analysing the Solvability of European Countries
    While public and private pension systems in the EU are under tremendous pressure, a new study by EDHEC-Risk Institute analyses the explicit and implicit pension liabilities that are weighing on the public finances, and the principal related risks. As structural deficits become a target in the Eurozone and beyond, it is fundamental to evaluate the extent to which the increasing funding needs, and decreasing funding basis of public pensions, could add to public deficits. Due to the variety of national systems, obtaining a clear view of pension liabilities is not straightforward. The recent 2012 Ageing Report (European Commission, 2012) goes a long way in providing comparable figures and projections of public pension expenditures. On the basis of these projections to the year 2060, EDHEC-Risk Institute has estimated the net present value of the corresponding liabilities for various discount rates.

  • 22/01/13:
    Infrastructure Construction Risk does not Need Public Sector Guarantees but Scientific Portfolio Construction
    In a report published on January 16, 2013, the UK National Audit Office (NAO) expressed concerns that if the British government, in its desperation to attract pension funds to the infrastructure sector, gave large construction risk guarantees for new projects, substantial liabilities could arise for the British taxpayer. This is an ongoing debate in the UK, but it highlights an issue of global relevance: numerous governments are now pushing for the growth of institutional financing of national infrastructure spending plans, while investors are increasingly looking at long-term assets like infrastructure. Recent research by EDHEC-Risk Institute in the context of the NATIXIS Research Chair on infrastructure debt investment argues that construction risk guarantees are simply not necessary if scientific portfolio construction methodologies are applied to infrastructure investing. In effect, they are likely to be damaging not only from a public welfare perspective but also from an asset management one.

  • 15/01/13:
    Meridiam Infrastructure, Campbell Lutyens and EDHEC-Risk Institute launch a Research Chair on equity investment in infrastructure
    With this new Chair, EDHEC-Risk Institute will conduct research supported by Meridiam Infrastructure and Campbell Lutyens on “Infrastructure Equity Investment Management and Benchmarking.” The Chair will involve a research team made up of three senior researchers (professors and engineers) from EDHEC-Risk's campus in Singapore for the next three years. This research aims to provide a better understanding of the nature and investment profile of equity investment in infrastructure assets. It will focus on fostering data collection and aggregation from investors and on improving the benchmarking of return distributions for direct and indirect investment in infrastructure equity by developing an academically-validated and industry-recognised index. EDHEC-Risk Institute, Meridiam Infrastructure and Campbell Lutyens are committed to bringing further knowledge to institutional investors, financial regulators and governments while the infrastructure world and financial regulations have dramatically evolved in the past decade. As part of the Chair launch, EDHEC-Risk Institute, Meridiam Infrastructure and Campbell Lutyens are delighted to announce the publication of a first foundation paper: “Towards Efficient Benchmarks of Infrastructure Equity Investments.”