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P&I EDHEC-Risk Institute Research for Institutional Money Management

EDHEC-Risk Institute and Pensions & Investments have established a partnership to produce a special quarterly editorial supplement to provide Pensions & Investments readers with industry-relevant research of the highest academic standards.

The list of past issues may be consulted below.


Past Issues

• April 2017

The April 2017 edition of the Research for Institutional Money Management supplement to P&I begins by exploring a novel approach to address the challenge raised by the standard investment practice of treating attributes as factors. Other articles provide a broad overview of initiatives to launch new forms of alternative indexes based on the market value of debt, put the search for factors and beta strategies in the context of asset pricing, present the results of our research on smart beta replication costs, and examine the argument that portfolio rebalancing can be a source of additional performance. Further articles introduce a new approach that aims to maximize exposure to the long-term rewarded equity factors in a “top-down” framework in a robust and well-diversified manner and examine the respective merits of the "top-down" and "bottom-up" approaches to multi-factor portfolio construction. Final articles present the results of the first in-depth survey of institutional investors’ perceptions and expectations of infrastructure investment and ask whether focusing on listed infrastructure stocks creates diversification benefits previously unavailable to large investors that are already active in public markets.


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Contents:
  • Risk and Performance Analysis: Distinguishing Factors from Attributes
  • An Analysis of Alternative Bond Benchmarks
  • Are Smart Beta Strategies Appropriate for the Fixed Income Asset Class?
  • The Impact of Costs on Smart Beta Strategies
  • Can Portfolio Rebalancing be a Source of Additional Performance?
  • Maximizing Exposure to Long-Term Rewarded Factors in a "Top-Down" Framework
  • Assessing the Merits of the "Top-Down" and "Bottom-Up" Approaches to Multi-Factor Portfolio Construction
  • Results of Institutional Investor Survey on Infrastructure Investment
  • Is Listed Infrastructure an Asset Class in its own Right?


• December 2016

The December 2016 edition of the Research for Institutional Money Management supplement to P&I is a smart factor indexing special issue. It begins by clarifying the conceptual underpinnings and the need for diversification in factor investing. A second article shows that it is possible to reconcile environmental and financial objectives using low carbon indexes. A series of three articles then examine defensive solutions and indexes, looking at the concepts underlying low-risk equity strategies and the distinction between exposure to a defensive strategy and benefiting from the reward to the Low Risk factor, introducing alternative approaches to limiting concentration in minimum- and low-volatility strategies, and presenting solutions which rely on a risk-based allocation model to dynamically allocate to smart factor indexes carrying long-term risk premia, with a view to delivering a dissymmetric defensive profile. A final article looks at the live performance of Scientific Beta Multi-Beta Multi-Strategy indexes.


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Contents:
  • How Factor Indexes have Evolved: Smart Factor Indexes, Multi-Beta Indexes, and Solutions
  • Achieving Environmental and Financial Objectives with Low Carbon Smart Beta Indexes
  • Difference between Defensive Strategies and the Low Risk Factor
  • Alternative Approaches to Limiting Concentration in Minimum and Low Volatility Strategies
  • Dynamic Strategies that are Defensive When Needed
  • The Live Performance of Multi Smart Factor Indexes


• August 2016

The August 2016 edition of the Research for Institutional Money Management supplement to P&I is an infrastructure special produced by the EDHECinfra research centre in Singapore. It begins by presenting the results of the first in-depth survey of institutional investors’ perceptions and expectations of infrastructure investment before looking at whether an asset class of listed infrastructure exists. Further articles find that infrastructure firms exhibit a unique business model in terms of revenue and profit dynamics compared to a large control group of public and private firms, and show that a powerful statistical model of credit risk relying on Debt Service Cover Ratio (DSCR) dynamics can be developed. Finally, it proposes a data collection framework and template that have been designed to correspond to the requirements of the relevant asset pricing and risk models.


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Contents:
  • Towards Better Infrastructure Investment Products?
  • Looking for a Listed Infrastructure Asset Class
  • Is Private Infrastructure Different?
  • Tracking Credit Metrics in Private Infrastructure Debt
  • Data Collection for Infrastructure Investment Benchmarking


• May 2016

In the May 2016 edition of the P&I EDHEC-Risk Institute Research for Institutional Money Management supplement, several articles on the subject of smart beta look at the issue of combining different smart beta strategies and introduce the Scientific Beta six factor multi-smart factor indices, refute simplistic explanations of smart beta performance, and examine conventional wisdom on the performance drivers of equity smart beta performance. On different topics, further articles examine whether it would make sense for a pension fund to hold a customised equity portfolio engineered to exhibit enhanced liability-hedging properties vs. holding a broad off-the-shelf equity index, analyse whether systematic rules-based strategies based on investible versions of traditional and alternative factors allow for satisfactory in-sample and out-of-sample replication of hedge fund performance, and discuss the need for the investment industry to evolve beyond standard product-based, market-centered approaches and to start providing individuals with meaningful retirement investment solutions.


[Download]
Contents:
  • Comprehensive and Well-Diversified Access to Rewarded Equity Factors: a Six-Factor Smart Beta Strategy
  • Is Smart Beta Just Monkey Business? Beyond Simplistic Explanations of Smart Beta Performance
  • The Drivers of Smart Beta Performance — Does Conventional Wisdom Hold?
  • Enhanced Liability-Hedging Portfolios for Institutional Investors
  • Obtaining Attractive Exposure to Alternative Factors with Risk Allocation Strategies
  • Meaningful Retirement Solutions for Institutional Investors


• February 2016

The February 2016 edition of the P&I EDHEC-Risk Institute Research for Institutional Money Management supplement is a special issue on smart factor indexing. Articles look at the performance of smart factor indexes that are constructed based on combining a stock selection that targets a factor tilt with a diversified weighting scheme known as Diversified Multi-Strategy, and also at the performance of different approaches to Value factor indexes. Further articles examine whether smart beta strategies are vulnerable to "crowding" and address the question of proprietary equity risk factor definitions and their deviation from the academic consensus on factor definitions. The supplement also contains an article summarizing recent research which develops a general operational framework that can be used by financial advisors to allow individual investors to optimally allocate to categories of risks they face across all life stages and wealth segments so as to achieve personally meaningful financial goals.


[Download]
Contents:
  • Performance of Smart Factor Indexes: Long-Term and Live Track Records
  • A Flurry of Value Factor Indexes: Comparing the Performance of Different Approaches
  • Is There Crowding in Smart Beta Strategies?
  • “Enhanced”, “Prime”, or just “Data-mined”? Over-fitting Risks in Factor Index Design
  • A Comprehensive Investment Framework for Goals-Based Wealth Management


• November 2015

The November 2015 issue of the P&I EDHEC-Risk Institute Research for Institutional Money Management supplement is an infrastructure investing special. A first article argues that a number of characteristics associated with the structuring of capital projects constitute a much more powerful framework to understand, benchmark and predict long-term returns in infrastructure debt or equity. A second article looks at how to collect the relevant information, which requires large-scale cooperation between investors, creditors, academic researchers and the regulators that can help make such reporting part of a new standard approach to long-term investment in infrastructure by institutional players. A further article discusses a dedicated valuation framework for privately-held infrastructure equity investments that takes into account the challenges of valuing privately-held and seldom-traded infrastructure equity investments, while aiming to design a methodology that can be readily applied given the current state of empirical knowledge and, going forward, at a minimum cost in terms of data collection. The supplement also contains a number of articles in the area of smart beta equity investing and ends with an empirical investigation of the profitability of skewness trading in commodity futures markets.


[Download]
Contents:
  • Infrastructure: Shifting the Long-Term Investment Paradigm
  • Setting the Standard for Data Collection and Reporting in Private Infrastructure Investments
  • A New Framework for the Valuation of Privately-Held Infrastructure Equity
  • The General Principles of EDHEC Risk Smart Allocation Offerings
  • Absolute Risk Allocation with Smart Factor Indexes
  • Relative Risk Allocation with Smart Factor Indexes
  • The Limitations of Factor Investing: Impact of the Volkswagen Scandal on Concentrated versus Diversified Factor Indexes
  • Skewness: A New Signal for Long-Short Commodity Investing


• August 2015

The August 2015 issue of the P&I EDHEC-Risk Institute Research for Institutional Money Management supplement includes research that looks at the consequences for investors of the development of passive equity investment and "smart beta" indexes, examines the live performance and long-term track records of ERI Scientific Beta indexes, analyses whether the well-known value factor is redundant with the profitability or investment factors, discusses robustness issues, asks what investors can learn from academic research on long-term rewarded equity factors, compares the results of smart factor indexes with several stylized examples of concentrated factor indexes, and finally asks whether factor investing is truly a new welfare-improving investment paradigm or merely another marketing fad.


[Download]
Contents:
  • Nothing to Hide
  • Live Performance and Long-Term Track Records of ERI Scientific Beta Indexes
  • Looking at Value through a New Lens
  • Does Smart Beta Work Well Only in Backtests? A Discussion of Robustness Issues
  • Long-Term Rewarded Equity Factors: What Can Investors Learn from Academic Research?
  • Concentrated versus Diversified Factors
  • Factor Investing—Welfare Improving or Marketing Fad?


• May 2015

The May 2015 issue of the P&I EDHEC-Risk Institute Research for Institutional Money Management supplement contains a number of articles on the topic of smart beta. Other articles analyze the usefulness of a company's reported geographic segmentation data in performance reporting, discuss the creation and implementation of the first robust valuation, risk measurement and data collection framework for private infrastructure project loans, propose the first valuation framework dedicated to privately held infrastructure equity investment, and examine the possibility of measuring the capacity of a fund of hedge fund manager to manage risk efficiently.


[Download]
Contents:
  • The Dimensions of Quality Investing: High Profitability and Low Investment Factors
  • Identifying Equity Factors with a Genuine Economic Rationale
  • Smart Beta Performance is not “Monkey Business”
  • Investment Professionals’ Views on Alternative Equity Beta Strategies
  • Examining Geographic Exposure in Performance Attribution and Reporting
  • Measuring the Performance of Private Infrastructure Debt
  • Constructing a Valuation Framework for Privately Held Infrastructure Equity Investments
  • Funds of Hedge Funds: In Search of The X-Factor


• February 2015

The February 2015 issue of the P&I EDHEC-Risk Institute Research for Institutional Money Management supplement is a “Liability-Driven Investing Special” which first examines, in a series of four articles, the evolution of pension fund investment management from asset management to asset-liability management and risk and asset-liability management, and from liability-driven investing to dynamic liability-driven investing, concluding with a survey of institutional investors who provide insights on current practices in these areas and how those practices compare to those prescribed in the academic literature. It also analyzes the challenge of hedging long-term inflation-linked liabilities under various inflation regimes without inflation-linked instruments, and finally looks at how to construct improved corporate bond benchmarks.


[Download]
Contents:
  • Accounting for Pension Liabilities via the Liability-Driven Investing Paradigm: From Asset Management to Asset-Liability Management
  • From Isolated to Integrated Liability-Driven Investing
  • Accounting for Short-Term Constraints via the Risk-Controlled Investing Paradigm: From Asset-Liability Management to Risk and Asset-Liability Management
  • Key Insights from a Survey on Institutional Investors’ LDI and DLDI Practices
  • Hedging Long-Term Inflation-Linked Liabilities under Various Inflation Regimes without Inflation-Linked Instruments
  • Constructing Improved Corporate Bond Benchmarks


• November 2014

In the November 2014 issue of the P&I EDHEC-Risk Institute Research for Institutional Money Management supplement, several articles are dedicated to the subject of smart beta, examining smart factor indices, the investability and robustness of smart-beta strategies, and comparing equity factor index offerings from major index providers. In the area of infrastructure, we propose steps needed to create benchmarks for long-term infrastructure investments and discuss how they can be implemented.


[Download]
Contents:
  • Smart Factor Investing – a New Approach to Equity Investing
  • Smart Factor Index Allocation with Factor Risk Parity Constraints
  • How Investible are Smart-beta Indexes?
  • Examining the Relative Robustness and Absolute Robustness of Smart-beta Strategies
  • A Comparative Study Of Equity Factor Index Offerings
  • Benchmarking Long-Term Infrastructure Investments


• August 2014

The August 2014 issue of the EDHEC-Risk Institute supplement in Pensions & Investments looks at a number of subjects including the effects of different measures a regulator can use to reduce volatility in financial markets, the state of the art in fixed-income performance attribution analysis, and the link between idiosyncratic volatility and returns in commodity futures markets.


[Download]
Contents:
  • Financial Regulation: Comparing Different Measures to Control Stock Market Volatility
  • Fixed-Income Performance Attribution Analysis and Other Performance Evaluation Approaches
  • Dynamic-Allocation-Based Portfolio Insurance for Long-Term Investors
  • Global Cash Flows as a Valuable Asset Allocation Tool
  • The Benefits of Dynamic Portfolio Construction: Mirage or Reality?
  • Should Commodities Be Included in Investment Portfolios?
  • The Performance of Idiosyncratic Volatility Strategies in Commodity Markets
  • The Importance of the Structural Shape of Crude-Oil Futures Curves


• May 2014

The May 2014 issue of the EDHEC-Risk Institute supplement in Pensions & Investments looks at the topics of risk allocation, smart beta, factor investing, extreme risk, and the level of diversification of US pension fund portfolios.


[Download]
Contents:
  • Risk Allocation Within and Across Asset Classes
  • Combining Factor Tilts and Diversification Strategies: Towards Smart Factor Indexes
  • The Performance of Smart Factor Indexes in Developed Economies
  • Multi Smart-Beta Allocation: Performance and Implementation Benefits
  • A Guide to Factor Investing in the Equity Space
  • The Impact of Risk Controls and Strategy-Specific Risk Diversification on Extreme Risk
  • Are U.S. Pension Fund Allocations Well Diversified?


• February 2014

This issue of the EDHEC-Risk Institute supplement in Pensions & Investments looks at infrastructure investment and smart beta, amongst other topics.


[Download]
Contents:
  • An Analysis of the Convergence between Mainstream and Alternative Asset Management
  • Hedging Inflation-Linked Pension Liabilities without Inflation-Linked Instruments
  • A Roadmap to Make Long-Term Infrastructure Investment Relevant to Institutional Investors
  • Smart Beta 2.0: A Powerful Concept for Multi Smart Factor Investing
  • How Robust is the Outperformance of Smart Beta Equity Strategies?
  • Long-Term Performance of Scientific Beta Indexes


• Fall 2013

The inaugural issue of the EDHEC-Risk Institute supplement in Pensions & Investments looks at the topics of porfolio management, indexes, and defined benefit plans.


[Download]
Contents:
  • Long-Term Investing with Short-Term Constraints
  • Low-Volatility Investing and the Low-Volatility Anomaly
  • Measuring and Controlling the Risks of Smart Beta Investing: The Smart Beta 2.0 Approach
  • From Single to Multistrategy Indexes
  • A Critical Analysis of Alternative Bond Indexes
  • Dynamic Investment Strategies for Corporate Pension Funds in the Presence of Sponsor Risk
  • Toward a Fair(er) Valuation of Pension Liabilities