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Executive Education - January 08, 2014

CFA Institute–EDHEC-Risk Institute flagship seminar turns seven

In 2008, CFA Institute and EDHEC-Risk Institute partnered to offer advanced executive education programmes to senior investment industry professionals and introduced what remains their flagship programme, the three-day “Advances in Asset Allocation” seminar.

Designed and delivered by EDHEC-Risk Institute Scientific Director and EDHEC Business School Professor Lionel Martellini and regularly updated to incorporate the latest research by EDHEC-Risk Institute, the seminar has trained close to six hundred senior executives and investment officers in the concepts and techniques needed to optimise asset allocation and risk management via diversification, hedging, and insurance.

The first part of the seminar focuses on bridging the gap between portfolio theory and portfolio construction and outlines a coherent framework in which optimal decisions for the design of well diversified asset class and asset allocation benchmarks can be framed. It discusses the limits of modern portfolio theory and presents solutions to address estimation issues. It includes a presentation of portfolio optimisation models that takes non-normality risks and realistic preferences into account. It concludes by applying these improved techniques to the design of truly well-diversified improved equity or strategic allocation benchmarks.

In the second part of the seminar, the focus shifts from static risk diversification to dynamic risk hedging and the design of optimal allocation strategies for investors endowed with long-term liability or consumption objectives. The seminar presents the state of the art in asset-liability management with a specific emphasis on the liability-driven investment (LDI) paradigm in institutional money management and its counterpart in private wealth management and retail investment management, the life-cycle investment (LCI) paradigm. It discusses the challenges related to the implementation of novel forms of interest rate- and inflation hedging portfolios. It then explores the interaction between the performance-seeking and liability-hedging components in investors’ portfolios. It concludes on the design of improved forms of target-date funds.

The final part of the seminar shows how to account for regulatory, accounting, and other short-term constraints, which require implementing risk insurance, in addition to risk diversification and risk hedging. It introduces the risk-controlled investing paradigm, which complements the LDI/LCI paradigm in the presence of short-term risk budgets. It shows how long-term objectives and short-term constraints can be simultaneously taken into account in a comprehensive disciplined asset allocation framework.

Over the next semester, the seminar will be offered in London on 20-22 May 2014 and in New-York on 22-24 July, 2014.