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Performance and Risk Reporting

CACEIS "New Frontiers in Risk Assessment and Performance Reporting" Research Chair

The purpose of the CACEIS "New Frontiers in Risk Assessment and Performance Reporting" research chair is to 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.

The chair will therefore focus on two major ideas:

  • The consequences for the reporting of both institutional investors and asset managers of the change in conceptual paradigm from asset allocation to risk allocation, increasingly present within institutional investment and asset management, which is leading to a focus no longer on categories of assets but on categories of risk.

  • An improvement in extreme risk measures and reporting for funds and institutional investment management.
The chair is under the scientific responsbility of Professor Lionel Martellini, Director of EDHEC-Risk Institute.

[Press release announcing the creation of the research chair (28/05/13): English version; French version]

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”, of which the details may be found here.


Research Output:

Multi-Dimensional Risk and Performance Analysis for Equity Portfolios
October 2016
Kevin Giron, Lionel Martellini, Vincent Milhau
This paper explores a novel approach to address the challenge raised by the standard investment practice of treating attributes as factors, with respect to how to perform a consistent risk and performance analysis for equity portfolios across multiple dimensions that incorporate micro attributes. The study suggests a new dynamic meaningful approach, which consists in treating attributes of stocks as instrumental variables to estimate betas with respect to risk factors for explaining notably the cross-section of expected returns. [Press release announcing the publication of the research: 22/11/16]

Accounting for Geographic Exposure in Performance and Risk Reporting for Equity Portfolios
March 2015
Noël Amenc, Kumar Gautam, Felix Goltz, Nicolas Gonzalez, Jan-Philip Schade
This paper underlines the usefulness of analysing the performance and risks of portfolios, by taking into account their geographic equity exposure based on real economic activity and not only on their place of listing or, more generally, the nationality assigned to them in market indices. The study finds that, for a number of stocks, their official nationality does not match their real economic exposure as represented by the company’s distribution of sales. A dominant practice in the search for international diversification of equity portfolios is to classify stocks according to their place of listing, incorporation or headquarters. However, such a practice is questionable within the context of a globalised marketplace where a company's operations are typically not restricted to any single country. [Press release announcing the publication of the research: 07/04/15]

Improved Risk Reporting with Factor-Based Diversification Measures
February 2014
Tiffanie Carli, Romain Deguest, Lionel Martellini
This paper analyses various measures of portfolio diversification, and explores the implication in terms of advanced risk reporting techniques. We use the minimal linear torsion approach (Meucci et al. (2013)) to turn correlated constituents into uncorrelated factors, and focus on the effective number of (uncorrelated) bets (ENB), the entropy of the distribution of risk factor contribution to portfolio risk, as a meaningful measure of the degree of diversification in a portfolio. In an attempt to assess whether a relationship exists between the degree of diversification of a portfolio and its performance in various market conditions, we empirically analyse the diversification of various equity indices and pension fund policy portfolios. We find strong evidence of a significantly positive time-series and cross-sectional relationship between the ENB risk diversification measure and performance in bear markets.


About CACEIS

CACEIS is the asset servicing banking group of Crédit Agricole dedicated to institutional and corporate clients.

Through offices across Europe, North America and Asia, CACEIS offers a broad range of services covering execution, clearing, depositary and custody, fund administration, middle office outsourcing, forex, securities lending, fund distribution support and issuer services.

With assets under custody of €2.3 trillion and assets under administration of €1.5 trillion, CACEIS is a European leader in asset servicing and one of the major players worldwide (figures as of 31 December 2015).

Contact:

For more information visit www.caceis.com.