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IPE EDHEC-Risk Institute Research Insights

At the beginning of 2011, EDHEC-Risk Institute and Investment & Pensions Europe (IPE) established a partnership to produce a special editorial supplement to provide IPE readers with academic insights that genuinely contribute to improving institutional investment practices.

The list of past issues may be consulted below.

Past Issues

• Spring 2017

Key research results presented in the latest issue of the EDHEC Research Insights supplement to IPE include an analysis of the framework used by large financial institutions to determine initial margin and variation margin payments when trading non-cleared over-the-counter derivatives, a presentation of our study on smart beta replication costs, the introduction of a new ERI Scientific Beta approach with the objective of maximising exposure to the long-term rewarded equity factors in a "top-down" framework in a robust and well-diversified manner, and the results of the first in-depth survey of institutional investors’ perceptions and expectations of infrastructure investment.

  • Multi-dimensional risk and performance analysis for equity portfolios
  • New frontiers in smart beta investing: benefits and limits of traditional and alternative bond benchmarks
  • Smart beta strategies in fixed income
  • Initial margin for non-centrally cleared OTC derivatives: overview, modelling and calibration
  • Smart beta replication costs
  • Measuring volatility pumping benefits in equity markets
  • Introducing a multi-beta diversified max factor exposure strategy
  • Improving multi-factor exposure without sacrificing diversification and risk control
  • Towards better infrastructure investment products?
  • Looking for a listed infrastructure asset class

• Autumn 2016

This latest Scientific Beta special issue of the Research Insights supplement in partnership with Investment & Pensions Europe (IPE) examines a number of topics in the area of smart beta investing. Articles discuss the benefits of combining various factor strategies, the reconciliation of environmental and financial objectives using low carbon indices, the benefits of multi-smart factor indices for emerging markets, defensive solutions and indices, the live performance of Scientific Beta's multi-beta multi-strategy indices, and the current offerings in the world of multi-factor indices.

  • The evolution of multi-factor indices: smart factor indices, multi-beta indices and solutions
  • Smart beta and low carbon investing
  • Applying multi (smart) factor indexing methods to emerging market stocks
  • Defensive strategies (I): concepts underlying low risk equity strategies
  • Defensive strategies (II): revisiting traditional defensive strategies with smart factor indices
  • Defensive strategies (III): towards dynamic defensive strategies
  • Analysing the live performance of Scientific Beta multi-strategy indices
  • Methodological differences across multi-factor index offerings

• Spring 2016

This supplement is an EDHEC-Risk Days Special that ties in with the flagship conference presented by EDHEC-Risk Institute in March 2016. Among the key research results presented in this issue, we compare different approaches to the design of factor indices in the equity space, notably concentrated indices and more diversified indices, we sum up the results of the most recent EDHEC European ETF Survey, we discuss the need for the investment industry to evolve beyond standard product-based market-centred approaches and to start providing both institutions and individuals with meaningful retirement investment solutions, and we also analyse the characteristics of cash flows in private infrastructure firms and find that infrastructure firms exhibit a truly unique business model compared to public and private firms.

  • Diversified or concentrated factor tilts?
  • Common misconceptions about smart beta performance drivers
  • Fresh evidence from the EDHEC European ETF Survey 2015
  • Smart betas in ALM
  • Alternative risk premia harvesting: From hedge fund replication to hedge fund substitution
  • New frontiers in retirement solutions
  • Are infrastructure firms different from other firms? Evidence from 15 years of UK data
  • The cash flow dynamics of private infrastructure project debt: new results using a new infrastructure cash flow database
  • Hedge funds: From leading edge to bleeding edge, and back

• Autumn 2015

This Scientific Beta special issue of the Research Insights supplement in partnership with Investment & Pensions Europe (IPE) examines a number of topics on the theme of smart beta. Among the key research results presented in this issue are the merits of diversified as opposed to concentrated factor indices, smart beta solutions through allocation between existing smart factor indices, and the robustness of the first generations of smart beta indices on the basis of live track records.

  • Quality investing
  • The relationship between quality and value factors
  • The robustness of smart beta and live performance
  • Back to basics: why diversification matters when constructing factor indices
  • What does academic research teach us about factor investing?
  • EDHEC Risk smart allocation offerings: general principles
  • Absolute risk allocation with smart factor indices
  • Relative risk allocation with smart factor indices

• Spring 2015

The EDHEC-Risk Days special issue of the Research Insights supplement in partnership with Investment & Pensions Europe (IPE), that ties in with the flagship conference presented by EDHEC-Risk Institute in March 2015, features, among others, articles on the economic rationale behind the various "factors" in the equity space, the fallacy that all smart beta strategies are the same, the latest EDHEC European ETF Survey, the results of a survey on alternative equity beta investing, and the usefulness of a company’s reported geographic segmentation data in performance reporting.

  • Detecting true factors in the factor zoo: assessing the economic rationale behind equity factors
  • ‘Too much monkey business’: a rebuttal of simplistic explanations of smart beta performance
  • The EDHEC European ETF Survey results
  • Use of alternative equity beta strategies and perceptions of investment
  • Analysing geographic exposure for performance reporting of equity
  • A rigorous yet implementable framework to measure the performance of private infrastructure debt
  • Building a long-term investment benchmark for privately-held infrastructure equity
  • In search of the X-factor: the case of funds of hedge funds
  • A proposal for an interest rate dampener for Solvency II to manage pro-cyclical effects and improve asset liability management

• Autumn 2014

The latest "Scientific Beta" special issue of the Research Insights supplement to IPE again presents research that has been developed by ERI Scientific Beta to help investors understand and invest in advanced beta equity strategies. In this issue, we examine the topics of risk allocation with smart factor indices, and the investability, robustness and performance of smart beta strategies.

  • Risk allocation, factor investing and smart beta
  • Risk allocation with smart factor indices: a case study with factor exposure constraints
  • Risk allocation with smart factor indices: a relative risk perspective
  • Investability of smart beta indices
  • Robustness of smart beta strategies
  • The performance of smart beta indices: assessing factor indices

• Summer 2014

The latest issue of the Research Insights supplement to IPE reports on the results of a survey of European institutional investors on their perceptions and expectations with respect to the governance and transparency of indices. An additional survey presents the results of a comprehensive survey of European ETF investors, analysing the current practices and perceptions among ETF users in Europe and shedding light on trends within the European ETF market. Further articles present a major review of the academic literature on high frequency trading, and focus on equity factor investing, the link between idiosyncratic volatility and returns in commodity futures markets, and the improvement of traditional risk parity strategies.

  • Index transparency: a survey of European investors’ perceptions, needs and expectations
  • The EDHEC European ETF Survey 2013
  • Algorithmic trading: conclusions from academic studies
  • Global equity factor investing using country indices
  • Performance of idiosyncratic volatility strategies in commodity markets: delusion or reality?
  • Improving traditional risk parity strategies by considering more appropriate risk measures than historical volatility

• Spring 2014

The latest Scientific Beta special issue of the Research Insights supplement to IPE first seeks to provide an effective response to the traditional criticism of cap-weighted indices through smart factor risk allocation. It also discusses smart factor indices, presenting an analysis using US long-term track records and looking at their performance in other developed economies and in the global developed stock universe. The supplement then analyses the potential benefit of combining factor tilts, and examines the extreme risk of cap-weighted and smart beta indices. Finally, it looks at factor investing in the equity space.

  • Risk allocation and smart beta
  • From factor indices to smart factor indices: enhancing factor-tilted indices through diversification-based weighting schemes
  • Smart factor indexing around the world
  • Assessing the performance and implementation benefits of multi-factor allocations
  • Extreme risk and smart beta strategies
  • Principles of equity factor investing

• Winter 2014

This supplement again addresses what we consider to be the key topics of importance for institutional investors today. This time, we look at the treatment of bond investment within the framework of the Solvency II Directive, the benefits of including corporate bonds in investors’ portfolios, the appropriate discount rate that should be used to value pension liabilities, a review of the regulatory developments related to indexing with particular emphasis on the issue of transparency, the local volatility factor in the Asian market index returns, and finally non-bank lending and the question of long-term funding for the real economy.

  • LTGA impact assessment and bond management: Has Solvency II reached a deadlock?
  • Analysing the benefits of corporate bonds for institutional investors
  • Proper valuation rules for pension liabilities
  • Index transparency – recent regulatory developments
  • The local volatility factor for Asian stock markets
  • The risks of closed-ended long-term debt funds

• Autumn 2013

This ‘Scientific Beta’ special issue presents research that has been developed by ERI Scientific Beta, an EDHEC-Risk Institute entity that aims to help investors understand and invest in advanced beta equity strategies, notably looking at smart beta diversification indices, the risks of smart beta indices, smart beta allocation, and the conditional performance and robustness of smart beta strategies.

  • Overview of diversification strategies
  • Risks of smart beta indices and customisation of these risks
  • Beyond smart beta indexation
  • Analysis of the conditional performance of smart beta strategies
  • Analysis of the specific risks of diversification strategies
  • Systematic risk factors and the robustness of smart beta strategies

• Summer 2013

This issue introduces a wide range of results from the ongoing research programmes at EDHEC-Risk Institute that we consider to be of particular interest to institutional investors, with articles on topics ranging from equity and fixed-income allocation to infrastructure and hedge funds.

  • The impact of Solvency II on bond management
  • An analysis of the convergence between mainstream and alternative asset management
  • Defining infrastructure investment under Solvency II
  • The future of pensions in East Asia: Is demography destiny or can asset management make a difference?
  • Implications of regional volatility factors for asset management
  • The principal conclusions of the EDHEC European ETF Survey 2012
  • Understanding and outperforming equal-weighted portfolios

• Spring 2013

The latest issue of Research Insights was published concurrently with the EDHEC-Risk Days Europe conference in London, which was held on 26–27 March, 2013, and some of the articles address topics presented at EDHEC-Risk’s flagship European conference, such as the question of non-financial risks within the European fund management industry, creating efficient benchmarks for infrastructure equity investing, the benchmarking of "smart beta", or alternative equity index, strategies, and choosing the risk exposures of alternative equity indices.

  • Proposals for better management of non-financial risks within the European fund management industry
  • Long-horizon investing with short-term constraints
  • Implicit public pension liabilities and evaluating the solvency of European states
  • Benchmarking of popular smart beta strategies
  • Choosing risk exposures of alternative equity indices
  • Understanding the low volatility anomaly

• Winter 2013

This Research Insights issue devotes a large proportion of its content to Asian-based and Asia-relevant research in order to mark the second staging of the EDHEC-Risk Days Asia 2013 conference, that will be held on 15-16 May 2013 in Singapore. In 2012, the Institute exported its conference concept to Asia in order to provide Asia-based finance professionals with easier access to state-of-the-art research in investment and risk management and to establish a dialogue around research results with particular relevance to investors and institutions in Asia. The inaugural conference attracted over 800 participants including end-investors, traditional and alternative investment managers, wealth managers, investment bankers, and policy-makers.

  • Structured equity investment strategies for long-term Asian investors
  • Asian volatility indices and volatility products
  • Key results of the EDHEC-Risk Asian Index Survey
  • Who is afraid of construction risk?
  • Avoiding sovereign credit risk exposure in equity portfolios
  • EDHEC-Risk Institute’s response to the European Commission White Paper, An Agenda for Adequate, Safe and Sustainable Pensions
  • Improving risk management in DC and hybrid pension plans

• Autumn 2012

The present supplement features several articles drawn from the research that was presented at the inaugural EDHEC-Princeton Institutional Money Management Conference that was held on 27 April 2012, at the Princeton Club in New York with the aim of providing participants with the latest academic insights related to new frontiers in institutional money management. This issue also features the results of several recent research projects at EDHEC-Risk Institute.

  • A generalised approach to portfolio optimisation: improving performance by constraining portfolio norms
  • Advantages of long-short commodity funds for long-term investors
  • Portfolio allocation decisions in the presence of regimes in asset returns
  • The benefits of volatility derivatives in equity portfolio management
  • What asset-liability management strategy for sovereign wealth funds?
  • Reactions to the EDHEC study ‘Optimal design of corporate market debt programmes in the presence of interest rate and inflation risks’
  • European regulation of the commodity derivatives market – be wary of placebos
  • Reactions to the EDHEC-Risk European Index Survey 2011
  • Insights from the EDHEC-Risk North America Index Survey 2011
  • How to assess hedge fund performance in a robust manner
  • Risk-managed investing in non-cap-weighted equity indices

• Summer 2012

This issue introduces some of the research results presented at the EDHEC-Risk Days Europe conference held at The Brewery in London from 27–29 March. It focuses on five subjects of particular current importance for European institutional investors in individual research produced with the support of a number of EDHEC-Risk Institute's research chair partners in order to propose optimal solutions to the primary issues facing the European financial industry today.

  • Is the crisis financial?
  • How to allow insurance companies to benefit from investment in equities within the framework of Solvency II
  • Shedding more light on non-financial risks — a European survey
  • The use of ETFs by European institutional investors and asset managers
  • Dynamic investment strategies for corporate pension funds in the presence of sponsor risk
  • Shifting towards hybrid pension systems: a European perspective
  • How investors can respond to the shifting pension landscape

• Spring 2012

In the past few years the advisability of including commodities in institutional investors' portfolios and the supposed role of speculative activity in the volatility of commodity prices have been widely discussed within the industry, not least as a response to EDHEC-Risk Institute's research on these topics. In view of the importance of commodities investment, a considerable portion of the Spring 2012 issue is devoted to commodities investing, from both the research and practitioner perspectives.

  • Lessons from history on commodity futures trading controversies
  • Long-short commodity investing: implications for porfolio risk and market regulation
  • Commodity prices over the last decade were greatly influenced by the rise of emerging markets: Interview with Blu Putnam, Managing Director & Chief Economist, CME Group
  • Assessing the risks of European ETFs
  • Accounting and sponsor risks in European pension plans

• Autumn 2011:

This edition is a special issue to celebrate the 10th anniversary of EDHEC-Risk Institute. Since it was founded in 2001, the institute has endeavoured to remain faithful to its “research for business” approach, by providing research that is both academically excellent and relevant and useful for the industry. This supplement looks at the industry-sponsored research that has been developed at EDHEC-Risk Institute over the past ten years.

  • EDHEC-Risk Institute 2001-11, key dates
  • The choice of asset allocation and risk management
  • Ten years of research supported by the financial industry
  • Ten years of applied research
  • Ten years of speaking up on important issues for the financial industry

• Summer 2011

This issue addresses one of the key questions in modern finance from both an academic and practitioner perspective: are investors rewarded for investing in high-risk stocks by enjoying higher expected returns? It also discusses what is probably the single most important subject to come out of the financial crisis: risk management. The supplement also looks at the difference between a reference index and a custom benchmark, explaining how this distinction leads to different approaches to passive investment, and introduces the EDHEC-Risk Indices & Benchmarks’ efficient relative return benchmark approach. Other articles examine the advantages and shortcomings of minimum variance portfolios and how the shortcomings can be addressed, and look at the question of optimal hedge fund allocation. Finally, an analysis of dynamic core-satellite strategies with exposure to value and momentum strategies is provided.

  • Is there a risk/return trade-off across stocks?
  • A post-crisis perspective on diversification for risk management
  • Efficient indices and efficient relative return benchmarks
  • Advantages and shortcomings of minimum variance portfolios
  • Optimal hedge fund allocation with improved estimates for coskewness and cokurtosis parameters
  • Value and momentum effects across exchange-traded funds

• Spring 2011

In this issue, EDHEC-Risk’s researchers look at two of the key challenges facing institutional investors today: selecting the right benchmark for passive investment and holding a portfolio that provides an optimal risk-return tradeoff. Additional articles address the optimal design of debt programmes for corporates and the optimal dynamic asset allocation for sovereign assets given different drivers of economic risks as well as varying levels of debt. Finally, the supplement reports the results of separate European surveys of institutional investors on exchange-traded funds and indices, both equity and fixed-income.

  • Alternative weighting schemes: conditions for optimality
  • Efficient indexation: an alternative to cap-weighted indices
  • Indices in institutional investment management: results of a European survey
  • Institutional investors’ views on exchange-traded funds
  • Inflation-linked corporate bonds and the optimal design of debt programmes
  • Integrated approach to sovereign wealth risk management

• Winter 2010/11

This first issue of the IPE EDHEC-Risk Institute Research Insights was produced on the occasion of the EDHEC-Risk Institutional Days 2010 which were held in Monaco on 8-9 December, 2010 as a complement to the Global Institutional Investment Conference with the aim of providing research-based solutions to some of the key challenges facing institutional investors today. One of the most prominent of these challenges is to find an appropriate benchmark for institutional investments. Another key question is whether currently available bond indices are optimal for investors. Further research focuses on the biases that prevent many pension funds from managing their assets optimally following a survey of European pension funds, advisers, regulators, and fund managers, and the impact of pension fund allocation decisions on the wealth of shareholders, bondholders and pensioners. The supplement also examines whether private wealth managers will adopt institutional investors’ risk management techniques in the light of the results of a survey on the subject, and looks at the optimal asset allocation for sovereign wealth funds.

  • Alternatives to cap-weighted indices
  • Are currently available corporate bond indices optimal for investors?
  • Rules-based strategies for pension funds
  • Integrated ALM
  • Will wealth managers adopt institutional risk management?
  • Optimal asset allocation for sovereign wealth funds