Real Assets
Alternative Investments for Institutional Investors: Risk Budgeting Techniques in Asset Management and Asset-Liability Management
In the current context of a short- and probably medium-term downturn in the financial markets, our research in this area seems to be of particular relevance for long-term investors. Our results suggest that real estate and commodities have particularly attractive inflation hedging properties over long-horizons, which justify their introduction in pension funds' liability-matching portfolios. We show that novel liability-hedging investment solutions, including commodities and real estate in addition to inflation-linked securities, can be designed so as to decrease the cost of inflation insurance for long-horizon investors.
This research was undertaken with the support of Morgan Stanley Investment Management.
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