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Risk Fees at Risk 2 November, 2010 - Singapore

The textbook view on risk in asset management companies is summarized by John Hull (Risk Management and Financial Institutions, 2007): “For an asset manager the greatest risk is operational risk”. In 2008, however, asset management companies came under severe pressure not from operational risk, but from market risk. What had been seen as an annuity stream that was thought to expose firms to little or no earnings risk turned out to be directional stock market exposure combined with high operational leverage. This finding, which we document empirically, challenges not only the risk management literature on the predominance of operative risks, but also the current industry practice of not hedging market risks that are systematically built into the revenue-generation process. To return to an annuity model, asset management companies should actively hedge the risks of large swings in their P&L caused by changes in asset-based fees.

While alpha risks are regarded as core risks, beta risks arising from client benchmark exposure are incidental. Shareholders do not want to be exposed to market beta by investing in asset management companies; they want to participate in these companies’ alpha generation and take advantage of their fund-gathering expertise as financial intermediaries. Professor Bernd Scherer, will provide valuable suggestions on hedging both the production risk (fees at risk) and the capital market related business risk (redemptions by clients either to shed risk or to raise cash).

  • 12.00pm
    Registration and lunch

  • 12.30pm
    Fees at Risk
    Professor Bernd Scherer, Professor of Finance at EDHEC Business School, Member of EDHEC-Risk Institute and Programme Director for its Executive MSc in Risk and Investment Management (Europe)
Speaker’s Biography

Bernd Scherer is Professor of Finance at EDHEC Business School (London campus), Member of EDHEC-Risk Institute and Programme Director for its Executive MSc in Risk and Investment Management (Europe). He has sixteen years of years of investment experience in various roles at leading global investment firms.

Prior to joining EDHEC-Risk Institute in 2010, he was Global Head of Quantitative Structured Products at Morgan Stanley in London and Honorary Visiting Professor at the University of London Birkbeck College. Previously, he was with Deutsche Asset Management where he successively headed the Investment Solutions and Overlay Management Group in Frankfurt, and Global Quantitative Research and Portfolio Engineering from New York.

His research on investment management, strategic asset allocation, portfolio construction, and asset pricing has been widely published in refereed academic and practitioner journals. He serves as Associate Editor for the Journal of Asset Management. He is also on the management committee of the London Quant Group.

Professor Scherer has authored and co-authored reference books on portfolio construction and optimisation, risk management, investment management, and liability hedging. He is regularly invited to present research work at industry conferences, and has significant experience as an instructor of postgraduate and executive education courses.

Bernd holds MSc in Economics from the University of Augsburg and the Queen Mary College at the University of London, and a PhD in Finance from the University of Giessen. He lives with his wife and two sons in Richmond (London).

CE Qualified Activity

As a participant in the CFA Institute Approved-Provider Program, CFA Singapore has determined that this event qualifies for 1 credit hour. If you are a CFA Institute member, CE credit for your attendance at this event will be automatically recorded in your CE diary.
Event Details
  When   Between 02/11/2010 12:00 PM and 02/11/2010 02:00 PM
Where   To be confirmed
Contact Details
  Name   CFA Singapore
E-mail   programs@cfasingapore.org
Phone   +65 6227 8594
  Further information and registration