academic roots & practitioner reach - edhec-risk …...portfolio; and (3) the use of an...
TRANSCRIPT
Academic Roots & Practitioner Reach
EDHEC-Risk InstituteLondon — Nice
55,000
5202,300
100,000
Citations in WorldwideTrade Publications
ParticipantsTrained
Papers Published
NewsletterReaders
3
For more than 15 years EDHEC Business School
has been pursuing an ambitious policy in
terms of practically relevant academic research.
This policy, known as “Make an Impact”, aims
to make EDHEC an academic institution of
reference for the industry in a small number
of areas in which the school has reached
critical mass in terms of expertise and research
results.
Among these areas, investment management
has occupied a privileged position, leading to the
creation in 2001 of EDHEC-Risk Institute, which has
developed an ambitious portfolio of research and
educational initiatives in the domain of investment
solutions for institutional and individual investors.
EDHEC-Risk plays a noted role in furthering applied
financial research and systematically highlighting
its practical uses. As part of its “Make an Impact”
signature, the research institute maintains a
dialogue with professionals that benefits the
industry as a whole. At the same time, its proprietary
R&D provides sponsors with an edge over the
competition and joint ventures allow selected
partners to develop new business opportunities.
Building on the cutting-edge research of the
faculty, EDHEC-Risk Institute creates programmes
to help executives level up their financial expertise
on topics of considerable interest in the asset
management industry: factor investing, goal-based
investing, sustainable investing, data science and
machine learning.
In 2012, EDHEC-Risk Institute signed two strategic
partnership agreements with the Operations
Research and Financial Engineering department
of Princeton University for research and outreach
initiatives in the area of risk and investment
management, and with Yale School of Management
to set up joint certified executive training courses
in North America and Europe in the area of risk and
investment management.
EDHEC-Risk Institute boasts a team of permanent
professors, engineers and support staff, and counts
a large number of affiliate professors and research
associates from the financial industry among its
ranks.
To ensure that its activities meet the highest
academic standards and truly benefit the industry,
EDHEC-Risk Institute subjects its activities to strict
validation processes. The scientific quality and
operational relevance of the Institute’s research
programmes are guaranteed by the centre’s
management structure and the oversight exercised
by the leading experts serving on its international
advisory board.
The following pages will provide you with a brief
introduction to the activities carried out by
EDHEC-Risk Institute. The Institute’s team is
available to help you analyse the ways in which you
could tap into its expertise for the benefit of your
organisation.
Emmanuel Métais, Dean,EDHEC Business School
Make an Impact
@EDHECRisk#MakeFinanceUsefulAgain
The Need for Investment Solutionsand Risk Management
Investment management is justified as an industry only to the extent that it can demonstrate a capacity to add value through the design of dedicated and meaningful investor-centric investment solutions, as opposed to one-size-fits-all manager-centric investment products. After several decades of relative inertia, the much needed move towards investment solutions has been greatly facilitated by a true industrial revolution triggered by profound paradigm changes in terms of (1) mass production of cost- and risk-efficient smart factor indices; (2) mass customisation of liability-driven investing and goal-based investing strategies; and (3) mass distribution, with robo-advisor technologies.
In parallel, the investment industry is strongly
impacted by two other major external revolutions,
namely the digital revolution and the environmental
revolution.
In this fast-moving environment, EDHEC-Risk
Institute positions itself as the leading academic
think-tank in the area of investment solutions,
which gives true significance to the investment
management practice. Through our multi-faceted
programme of research, outreach, education and
industry partnership initiatives, our ambition is
to support industry players, both asset owners
and asset managers, in their efforts to transition
towards a novel, welfare-improving, investment
management paradigm.
Investment management in the new era can
be defined as the art and science of efficiently
spending institutional or individual investors’
dollar and risk budgets to help them achieve their
meaningful goal-driven objectives (for individuals)
or liability-driven objectives (for institutions),
subject to a number of regulatory constraints
or otherwise. Whatever the context, meaningful
investment solutions are in fact invariably based
on three fundamental sources of added value, each
reflecting one particular form of risk management
technique: (1) the use of an efficient risky
performance-seeking portfolio (PSP); (2) the use of
an efficient safe liability-hedging or goal-hedging
portfolio; and (3) the use of an efficient allocation
strategy to the efficient risky and safe building
block portfolios.
The risky portfolio should be efficient at harvesting risk premia across and within asset classes, which is achieved through diversification.If one could reliably predict future returns, there
would be no need or desire for diversification; one
would instead invest in the highest-returning asset
at each point in time. Crystal balls, however, hardly
exist in the real world, and investors do not know
in advance how prices will evolve even in the near
future. In order to enjoy a higher expected return,
some risk must be taken. The goal of diversification
is precisely to find the most efficient way to harvest
risk premia across and within risky assets – in other
words, earn the highest expected return for a given
risk budget, and this is achieved by diversifying away
the largest possible amount of unrewarded risk.
Factor investing has become the dominant paradigm
for accomplishing this task. It has already become
operational in equity markets, and is receiving
increasing attention in fixed-income markets.
Lionel Martellini, PhDDirector, EDHEC-Risk Institute
4
The Need for Investment Solutionsand Risk Management
The safe portfolio should be efficient at matching risk factor exposures on the asset and liability sides, which is achieved through hedging.Diversification can and should be used by investors
who want or need to take risk in the most efficient
way. However, by definition almost, one can
only diversify away unrewarded specific risk but
not systematic risk, and even a well-diversified
portfolio will experience severe losses in the worst
market conditions. The proper risk management
technique that should be used to ensure protection
against systematic risks is not diversification – it is
hedging. Just as diversification tells you how to be
efficient when taking risks, hedging tells you how
to be efficient when you avoid taking risks.
The allocation to the efficient risky and safe portfolios should secure investors’ essential goals while generating a high probability of achieving their aspirational goals, which is achieved through insurance.With a static hedging strategy, investors can only
put at risk the excess wealth that remains after
having secured all essential goals, which in general
is relatively little, thus implying a limited access to
the upside. The main benefit of insurance is that
it allows investors to dynamically allocate to the
well-diversified and risky performance-seeking
portfolio more than the surplus available after
having secured all essential goals. This is possible
thanks to a commitment to reducing this risk-
taking when / if the margin for error disappears.
As such, insurance can be formally regarded as
equivalent to dynamic hedging, which generates
non-linear exposures to underlying sources of
rewarded risk.
5
“Amundi has continuously supported EDHEC-Risk Institute over the past years, convinced by the quality of their state-of-the-art academic contribution, including in the Smart Beta field where innovation remains very intense. The excellence of the literature produced within the “ETF and Passive Investment Strategies” research chair is of great help to investors and the industry as a whole, while enabling us to better accompany our clients in their asset allocation, with added value solutions.”
Valérie Baudson, Member of the ExecutiveCommittee, Amundi, CEO, CPR AM and Head of ETF, Indexing & Smart Beta
In the profound soul-searching process that is currently under way in investment management, EDHEC-Risk Institute strives to provide thought leadership and position itself as the world’s leading academic think-tank with the aim of accompanying the industry in this mutation toward a meaningful focus on investment solutions. This is a unique opportunity for our industry to add value to society as a whole. Incidentally, asset and wealth managers who are willing and able to embrace this challenge will afford to grow a profitable business, as they will start to address the needs of their clients more properly. This is also a unique opportunity for EDHEC Business School to make an impact, and add social value in the context of a novel welfare-improving investor-centric asset management paradigm.
In addition to the EDHEC Alternative Indexes,
which are used as performance benchmarks for
risk analysis by investors in hedge funds, and the
EDHEC-IEIF Monthly Commercial Property Index,
which tracks the performance of the French
commercial property market through SCPIs
(Sociétés Civiles de Placement Immobilier – the
equivalent of real estate investment trusts) that
invest in non-listed real estate, we are launching
a series of new initiatives. These initiatives
complement the work independently conducted by
our colleagues, at Scientific Beta on smart equity indices and at EDHECinfra on infrastructure indices, as part of the global efforts from EDHEC
Business School to have a meaningful impact in
the field of investment management.
EDHEC Bond Risk Premium MonitorThe ambition is to provide investors, academics,
students, policy makers and the financial
community in general with a series of estimates
of meaningful capital market assumptions (CMAs)
for the risk premia embedded in Treasury bonds
(with an initial focus on the US) based either on
statistical analysis or on term-structure modelling.
The estimations about the term premia for
various yield maturities of the US Treasuries will
be regularly provided, together with more formal
research papers on these and related topics. More
work remains to be done to extend the analysis
to different regions. However, we believe that the
present offering can already be of real practical use
and interest for practitioners and for academics.
The development of a similar initiative in the equity
space is subject to ongoing research.
EDHEC-Princeton Retirement Goal-Based Investing IndicesMeaningful investment solutions should start with
an understanding of clients’ goals. In retirement
planning, the main problem faced by individuals
is to finance a sufficient and stable stream of
replacement income in retirement. The Retirement
Goal-Based Investing Indices, developed with the
Operations Research and Financial Engineering
(ORFE) Department at Princeton University in
the context of our joint research programme
on Investment Solutions for Institutions and
Individuals, are an example of these concepts being
implemented. The research done to develop the
analytical framework was made possible through
the support of Bank of America’s Merrill Lynch
Wealth Management group. The index series
launched at the beginning of May 2018, represent
asset allocation benchmarks for innovative mass-
6
EDHEC-Risk New Initiatives
7
EDHEC-Risk New Initiatives
customised target date solutions for individuals
preparing for retirement. The index series answers
two important questions from a retirement
investing standpoint:
• How much replacement income can be acquired
from a given level of retirement savings? Given
that income, and not wealth, is what matters in
retirement, the ability to translate wealth into
replacement income is critically important in
assessing individual portfolios’ adequacy with
respect to retirement needs. The Goal Price Index
Series has been introduced as the appropriate tool
to measure the purchasing power of retirement
savings in terms of replacement income.
• How does one generate the kind of upside
potential that is needed to achieve target levels
of replacement income while securing minimum
consumption levels in retirement? Dynamic
allocation to two suitably designed “safe” and
“risky” building blocks (namely the retirement
goal-hedging portfolio and the performance-
seeking portfolio), is required to achieve this dual
objective. The Goal-Based Investing Index Series
has been introduced to provide a benchmark for
such dynamic retirement solutions, which can be
regarded as improved, risk-managed forms of
target date funds.
In the months and years ahead, EDHEC-Risk Institute
will launch more initiatives of practical relevance,
including (i) the launch of an effort towards the
development of improved forms of stress testing strategies for investment solutions, (ii) the
launch of the ESG Indicators and Sustainable Investment Solutions research programme,
whose focus is on assessing the impact of ESG
factors on risk analysis and investment decisions,
for equity and bond portfolios, and (iii) the launch
of digital education programmes (MOOCs) on
a series of themes related to key developments in
investment management: machine learning and
sustainable investing. On the research side, we are
launching multi-year projects on various aspects
of relevance to the industrial revolution that is
taking place, including factor investing not only in
equities and fixed-income markets, but also in the
real estate, currency or commodity markets space,
as well as important topical issues such as green
investing, big data and machine learning applied to
investment decisions.
International academic journals in which EDHEC-Risk staff have published include:
> Applied Financial Economics> Canadian Journal of Economics> Economic Inquiry> European Financial Management> Finance and Stochastics> Financial Analysts Journal> Journal of Alternative Investments> Journal of Asset Management> Journal of Banking and Finance> Journal of Business> Journal of Business and Economic Statistics> Journal of Business Finance and Accounting> Journal of Econometrics> Journal of Economic Dynamics & Control> Journal of Economic Growth> Journal of Economic Literature> Journal of Empirical Finance> Journal of Finance> Journal of Financial and Quantitative Analysis> Journal of Financial Economics> Journal of Fixed Income> Journal of Futures Markets> Journal of International Money and Finance> Journal of Investment Management> Journal of Mathematical Economics> Journal of Political Economy> Journal of Portfolio Management> Journal of Wealth Management> Management Science> Quarterly Journal of Economics> Review of Finance> Review of Financial Studies
Bringing Research Insights to Investors
EDHEC-Risk Institute was set up to conduct world-class academic research and highlight its applications to the industry. In keeping with this mission, the Institute systematically seeks to validate the academic quality of its research through publications in leading scholarly journals, implements a multifaceted communications policy toinform investors and asset managers onstate-of-the-art concepts and techniques, and develops business partnerships to launch innovative products.
High Quality Academic Output with Professional RelevanceThe results of the research work performed by the
Institute have been published by leading specialised
scientific publications such as the Financial Analysts Journal, the Journal of Derivatives, Journal of Financial Economics, Journal of Financial and Quantitative Analysis, Journal of Fixed-income,
Journal of Monetary Economics, Journal of Portfolio Management, Management Science, the Review of Financial Studies, among others.
Recognition of the academic quality and professional
relevance of the Institute’s output is also evidenced
by the integration of a number of articles into the
required readings of professional designations, and
invitations to participate in curriculum design or
authoring of programme material.
Constant Dialogue with the IndustryTo maximise exchanges between the academic
and business worlds, in September 2017 EDHEC-
Risk launched a website (https://risk.edhec.edu)
devoted to asset and risk management research for
the industry, with a focus on investment solutions.
Additionally, EDHEC-Risk circulates a quarterly
newsletter to over 100,000 practitioners, conducts
regular industry surveys and consultations, and
organises annual conferences for the benefit of
asset owners, asset managers and wealth managers.
8
For its scientific arm, the team is made up of permanent professors and full-time researchers from EDHEC Business School, and also of affiliate professors and research associates.
Faculty members of EDHEC-Risk Institute include a core team of full professors of finance at EDHEC Business School, some of whom have important responsibilities within the Institute.
Professor Noël Amenc is Associate
Dean for Business Development
at EDHEC Business School and the
founding Chief Executive Officer of
Scientific Beta. His concern for bridging the gap
between university and industry has led him to
pursue a double career in academe and business.
Prior to joining EDHEC Business School as founding
director of EDHEC-Risk Institute, which he ran
for nearly fifteen years, he was the Director of
Research of Misys Asset Management Systems,
having previously created and developed a portfolio
management software company. He has published
numerous articles in finance journals as well as
four books on quantitative equity management,
portfolio management, performance analysis,
and alternative investments. He is a member of
the editorial board of the Journal of Portfolio Management, associate editor of the Journal of Alternative Investments, and member of the
advisory board of the Journal of Index Investing. He
is also a member of the Finance Research Council
of the Monetary Authority of Singapore. He was
formerly a member of the Consultative Working
Group of the European Securities and Markets
Authority (ESMA) Financial Innovation Standing
Committee and of the Scientific Advisory Council of
the AMF (French financial regulatory authority). He
holds graduate degrees in economics, finance and
management and a PhD in finance.
Professor Laurent E. Calvet is a
specialist in asset pricing, household
finance, and volatility modelling. He
has served as the John Loeb Professor
of the Social Sciences at Harvard University, was
research professor at HEC, and a Professor and Chair
in Finance at Imperial College London. Together with
Adlai Fisher, he pioneered the Markov-switching
multifractal model of financial volatility, which is
used by academics and financial practitioners to
forecast volatility, compute value-at-risk, and price
derivatives. He is a Research Associate of Goethe
University Frankfurt’s Center for Financial Studies, a
Founding Member of the CEPR Household Finance
Network, and an editorial board member of several
academic journals, including Journal of Fractal Geometry. He is an engineering graduate from
Ecole Polytechnique and Ecole Nationale des Ponts
et Chaussée in Paris and holds a Ph.D. in Economics
from Yale University.
Professor Frank Fabozzi, is one of the
most respected figures in the academic
community in finance worldwide,
author and editor of over a hundred
reference textbooks in finance, and the eponymous
manager of an authoritative series of finance
books for practitioners and academics in numerous
fields including fixed income analytics, financial
modelling, mortgage-backed securities, municipal
Bringing Research Insights to Investors Outstanding Faculty and Research Team
9
bonds, credit derivatives, and financial statement
analysis. He was previously Professor in the Practice
of Finance and Becton Fellow at the Yale School of
Management. He has been the editor of the Journal of Portfolio Management since 1986. In 2002,
Frank was inducted into the Fixed Income Analysts
Society’s Hall of Fame. He is the 2007 recipient
of the C. Stewart Sheppard Award and the 2015
recipient of the 2015 James R. Vertin Award both
given by the CFA Institute. He earned a doctorate
in economics from the City University of New York.
Gianfranco Gianfrate is Professor
of Finance at EDHEC Business School
and Sustainable Finance Lead Expert
at EDHEC-Risk Institute . He writes
and researches on topics related to innovation
financing, corporate valuation, and climate change
finance. Prior to joining EDHEC Business School, he
held teaching and research positions at Erasmus
University (Netherlands), Harvard University
(USA), and Bocconi University (Italy). Gianfranco
also has extensive experience in the financial
industry, having worked, among others, for Deloitte
Corporate Finance (Italy), Hermes Investment
Management (UK), and iStarter (UK). Gianfranco
holds a BA and a PhD in Business Administration
from Bocconi University and a Master in Public
Administration from Harvard University.
Professor Lionel Martellini, is
Director of EDHEC-Risk Institute.
He conducts research in a broad
range of topics related to investment
solutions for individual and institutional investors,
equity and fixed-income portfolio construction,
risk management and derivatives valuation. He
was previously on the faculty of the University of
Southern California and has held a visiting position
at Princeton University. He sits on the editorial
boards of various journals, including the Journal of Alternative Investments and the Journal of Portfolio Management. He holds a PhD in Finance
from the Haas School of Business, University of
California at Berkeley. Outside of his activities in
finance, he recently completed a PhD in Relativistic
Astrophysics (University Côte d’Azur) and has
become a member of the LIGO/Virgo international
collaboration for the observation of gravitational
waves.
Professor Riccardo Rebonato is a
specialist in interest rate risk modelling
with applications to bond portfolio
management and fixed-income
derivatives pricing, he was previously Global Head
of Rates and FX Research at PIMCO, he also served
as Head of Front Office Risk Management and Head
of Clients Analytics, Global Head of Market Risk
and Global Head of Quantitative Research at Royal
Bank of Scotland (RBS). He is the author of several
books, in particular having published extensively
on interest rate modelling, risk management, and
most notably books on SABR/LIBOR Market Model
pricing of interest rate derivatives, as well as on the
use of Bayesian nets for stress testing and asset
allocation. He earned a PhD in Science of Materials/
Solid State Physics from Stony Brook University
(USA) and a doctorate in Nuclear Engineering from
Universita’ ‘Leonardo da Vinci’ (Italy)
Professor Nikkos Tessaromatis is
a financial economist with interest
and experience in applying modern
portfolio theory to the management
of institutional assets. His professional experience
includes the creation and management of
quantitatively driven investment products, index
fund management, portfolio risk management and
advice on strategic asset allocation. His research
and teaching focus on pension fund asset-liability
management, factor-based investment strategies,
fund manager selection and portfolio risk
management. Prior to joining EDHEC Business School,
he was CEO and CIO of EDEKT Asset Management.
He holds a PhD from Manchester Business School.
10
Professor Raman Uppal is a specialist
in portfolio selection, asset pricing,
risk management, and exchange
rates. He was formerly Professor of
Finance and Chair of the Finance Subject Area at
the London Business School. He was previously
editor for the Review of Financial Studies and is
currently editorial board member of Mathematics
and Financial Economics, associate editor of the
Review of Asset Pricing Studies and the Critical Finance Review, and a director of the American
Finance Association. He holds a Ph.D in Finance
from The Wharton School of the University of
Pennsylvania.
The team of research engineers closely involved
in the Institute’s research chairs and is headed by
Dr Vincent Milhau, who is in charge of a variety of
research projects related to portfolio optimisation,
asset-and-liability management and goal-based
investing. He is also responsible for validating the
quantitative models and algorithms developed at
EDHEC-Risk Institute.
The 36 research associates of EDHEC-Risk Institute
provide direct links to the industry through their
professional activities. Many of these research
associates contribute to EDHEC-Risk Institute’s
position paper and working paper series and
participate in seminars and conferences while
playing leading roles within the industry.
11
12
EDHEC-Risk Institute’s eight research programmes explore interrelated aspects of investment solutions to advance the frontiers of knowledge and foster industry innovation. These programmes correspond to a long-term investment on the part of the Institute. They are designed with the support ofEDHEC-Risk Institute’s International Advisory Board. They host research chairs and strategic research projects that are supported by the industry.
Investment Solutions in Institutional and Individual Money managementThe research conducted in this programme
relates to the design of novel welfare-improving
forms of investment solutions for institutions
and individuals.
On the institutional side, this research
programme has benefitted from the support of
BNP Investment Partners for a research chair on
dynamic liability-driven investment solutions. It
has also benefitted from the support of Ontario
Teachers’ Pension Plan for a research chair on
improved methods for inflation-linked liability
hedging, and Deutsche Bank for a research chair
on asset-liability management techniques for
sovereign wealth fund management.
The research conducted at EDHEC-Risk Institute
on liability-driven investment solutions has also
led to a consulting assignment with the California
Public Employees’ Retirement System (CalPERS)
on the construction of a comprehensive factor-
based asset-liability management framework
conducted jointly with Professor John Mulvey
from the Princeton University ORFE department.
On the individual side, this research programme
has benefitted from the support of Merrill Lynch
Wealth Management (MLWM) for a research
chair on risk allocation goals-based investing.
It has built upon previous work supported by
ORTEC and Pictet on ALM for individuals, as well
as a research chair supported by La Française
AM on improved forms of target date funds. The
research conducted at EDHEC-Risk Institute on
goals-based investment solutions has also led
to a consulting assignment with MLWM on the
construction of dynamic retirement solutions,
as well as the launch of the EDHEC-Princeton
retirement goal-based indices, again with
the support of MLWM. EDHEC-Risk Institute
strives to develop strategic partnerships with
investment managers worldwide for the launch
and promotion of meaningful mass-customised
investment solutions for individuals.
Equity Risk Premia in Investment Solutions An efficient harvesting of risk premia in equity
markets is a key component in the design of
meaningful investment solutions for institutions
and individuals.
As early as 2006, EDHEC-Risk Institute had
produced research on the inefficiency of cap-
weighted equity indices supported by Af2i (the
French association of institutional investors),
BNP Paribas Asset Management and UBS.
Eight Research Programmes
13
Following up on this early work, EDHEC-Risk
Institute has developed an active research
programme in the area of constructing
and allocating to smart equity indices. This
programme includes the “ETF, Indexing and Smart
Beta Investment Strategies” research chair, in
partnership with Amundi, the “Active Allocation to
Smart Factor Indices” research chair, in partnership
with Rothschild & Cie, as well as the “Maximising
Volatility Pumping Benefits in Equity Markets”
research chair, in partnership with Bdf Gestion.
As part of its policy of transferring know-
how to the industry, EDHEC-Risk Institute has
set up ERI Scientific Beta. ERI Scientific Beta
is an original initiative which aims to favour
the adoption of the latest advances in smart
beta design and implementation by the whole
investment industry. Its academic origin
provides the foundation for its strategy: offer,
in the best economic conditions possible, the
smart beta solutions that are most proven
scientifically with full transparency of both the
methods and the associated risks.
Fixed-Income Risk Premia in Investment SolutionsFixed-income investing is a strategic area of
development for EDHEC-Risk Institute, with
a number of increasing relevant questions for
investors, including smart harvesting of interest
rate and credit risk premia, the impact of a zero-
interest rate environment on bond portfolio
management, or efficient interest rate risk
management in retirement investing solutions.
This research programme is led by some of the
world’s very best experts in the area of fixed-
income securities, starting with Riccardo Rebonato, a world leading expert in interest
rate risk modelling and management, Frank J. Fabozzi, author and editor of over one
hundred reference textbooks in finance, and the
eponymous manager of an authoritative series of
finance books for practitioners and academics in
numerous fields including fixed income analytics,
financial modelling, mortgage-backed securities,
municipal bonds, credit derivatives, and financial
statement analysis, Dominic O’Kane, a specialist
in credit modelling, derivative pricing and risk-
management who was Head of Fixed Income
Quantitative Research for 9 years at Lehman
Brothers, and Lionel Martellini, who has co-
authored reference textbooks in fixed-income
investment strategies.
The research programme has benefitted from
the support of Banque de France Gestion in the
context of a research chair on the benefits of
scientific and naive diversification for sovereign
bond and corporate bond portfolios. It also
benefits from the support of PIMCO in the
context of a research chair on cross-sectional
and time-series of bond risk premia.
Alternative Risk Premia in Investment SolutionsThe research carried out focuses on the
benefits, risks, and integration methods of
the alternative classes in asset allocation and
makes significant contributions to the field of
multi-style/multi-class portfolio construction.
In particular, EDHEC-Risk research has advanced
non-parametric risk estimation methods and
extended the Bayesian approach to portfolio
construction in the presence of preferences
about higher moments of return distributions.
The programme has included in the past the
“Advanced Modelling for Alternative Investments”
research chair, in partnership with Société Générale
Prime Services (Newedge), the “Investment and
Governance Characteristics of Infrastructure Debt
Investments” research chair, in partnership with
Natixis, and the “Infrastructure Equity Investment
Management and Benchmarking” research chair,
in partnership with Meridiam Infrastructure and
Campbell Lutyens.
Eight Research Programmes
14
This programme has also benefitted as part of strategic research projects from the support of CME Group on “Exploring the Commodity Futures Risk Premium: Implications for Asset Allocation and Regulation”, of Aberdeen Property Investors on the EDHEC European Real Estate Investment and Risk Management Survey, and of Morgan Stanley Investment Management on “Financial Engineering and Global Alternative Portfolios for Institutional Investors”.
As part of this research programme, EDHEC-Risk Institute maintains a series of hedge fund indices as well as a real estate index for the French commercial property market produced in cooperation with IEIF.
Multi-Asset Multi-Factor Investment SolutionsFor more than 50 years, the investment industry has mostly focused on security selection as the main source of added value. This focus on security selection has somewhat distracted the industry from another key source of added value, namely asset allocation decisions. In the face of recent crises, and given the intrinsic difficulty of delivering added value through security selection decisions alone, the relevance of the old paradigm has been questioned with heightened intensity, and a new paradigm
is starting to emerge where asset allocation decisions appear as the main source of added value by the investment industry.
The ambition of this research programme is to develop new academic insights that can be used towards the design of improved forms of asset allocation solutions. The core challenge in the design of such asset allocation solutions is essentially to find optimal ways to spend dollar budgets as well as risk budgets that investors are reluctantly willing to set, with a focus on allowing the greatest possible access to performance potential while respecting such risk budgets. This programme has benefitted from the support of LYXOR Asset Management for research on dynamic forms of risk parity strategies, as well as the efficient harvesting of alternative risk premia across asset classes.
Reporting and Regulation for Investment SolutionsThis programme aims to adapt the portfolio performance and risk analysis models and methods to the new paradigm of investment solutions. Our research has historically looked at performance evaluation in traditional classes–investigating socially responsible investing or analysing rating methods for long-only funds–and at performance evaluation in the hedge
fund universe (implementing dynamic factor models).
This programme has benefitted from research starting in 2013 in the area of risk reporting as part of a research chair on ”New Frontiers in Risk Assessment and Performance Reporting”, supported by CACEIS, as well as previous research in the area of the impact of regulation on institutional money management as part of a research chair on “Regulation and Institutional Investment” supported by AXA Investment Managers.
The programme has also led to a business partnership with SIX Telekurs and to the offering of the EuroPerformance-EDHEC style ratings, a service measuring the quality of active management in the European fund management industry, as well as the design of Solvency II Benchmarks dedicated to optimise capital charges expenditure by insurance companies in partnership with Russell Investments.
Finally this programme benefits from the support of Fédération Bancaire Française (FBF) on innovations and regulations in investment banking, with research projects on OTC derivatives markets, initial margin calibration, as well as impact of financial regulation on financial markets and the economy.
15
Technology, Big Data and Artificial Intelligence for Investment SolutionsIn the era of the fourth industrial revolution, every aspect of our lives is rapidly changing. What were once perceived as topics of science fiction – including artificial intelligence, robotics, autonomous vehicles, the Internet of Things, and quantum computing – are now being deployed in the real world, with a speed and on a scale never before seen. Thanks to the vast amount of data, increased computing power and newly developed technologies, the tasks that only human beings could do are now more efficiently conducted by and with machines. Without question, many industries will face fundamental changes in an unprecedented manner – from daily operations to the whole value chains.
The asset management industry is not an exception. In the face of this fast-evolving environment, this research programme has a focus on providing a rigorous academic framework to the analysis of the benefits of technology, big data, machine learning and artificial intelligence in the areas of automated wealth management (also known as robo-advisor) technologies, asset allocation decisions and security selection decisions.
This programme led to the 2017 launch of the Four-University Rotating FinTech Conference. EDHEC-Risk Institute, KAIST, Princeton and Tsinghua Universities have joined forces to jointly host a series of rotational conferences on financial technologies. The aim is to create a forum that facilitates discussion among all interested parties around the world (academics, practitioners and regulators alike).
Last September 2019, EDHEC-Risk Institute has teamed up with Coursera, a world leader in online training, to offer a new specialization in machine-learning techniques for financial professionals from September 2019. The online learning platform has 40 million registered users to date. The «Investment Management with Python and Machine Learning Specialisation» includes 4 MOOCs that will allow the learner to unlock the power of machine learning in asset management.
ESG Factors and Sustainable Investment Solutions Financial decisions worldwide are increasingly influenced by the scarcity of resources, and the physical and transition risks associated with climate change. The extent of the environmental impact from climate change is still uncertain but the recent scientific evidence is increasingly
worrisome and many governments are taking decisive steps in order to avert a catastrophe.
The transition towards a low-carbon economy requires a broad array of financial instruments and innovations that will have far-reaching implications for markets, corporations, intermediaries, and investors.
Given the widespread recognition of climate change as perhaps the most fundamental long-term risks for asset managers and asset owners, EDHEC-Risk Institute is committed to launching a number of research, education and outreach initiatives to help explore a number of issues of strategic importance in climate change finance.
This programme led to the 2019 launch of the EDHEC Climate Finance Conference. The conference aimed to showcase the highest quality thinking and research in the area of Sustainable Investing.
More generally, the focus of this programme will be on assessing the impact of Environmental, Social and Governance (ESG) factors on risk analysis and investment decisions for equity and bond portfolios.
Research ChairsResearch chairs involve close partnerships with their financial sponsors and a commitment from EDHEC-Risk to publishing related articles in international academic journals as well as to releasing the research results to the investment management profession through wide distribution of practitioner-oriented publications and presentations at industry conferences.
ETF, Index and Smart Beta Investment StrategiesIn partnership with Amundi ETF, Indexing & Smart BetaThe chair analyses the developments in the
use of exchange-traded funds (ETFs) as part
of the asset allocation process and looks at
advanced forms of risk budgeting within the
framework of a core-satellite approach. It also
conducts research which aims at presenting
a comprehensive analysis of the theoretical,
empirical and practical challenges related to
factor investing in the fixed-income space,
with a focus on facilitating the emergence of
more efficient approaches to bond risk premia
harvesting.
Goals-Based Wealth Management and Applications to Retirement InvestingSponsord by Bank of AmericaBuilding upon fundamental research related
to risk allocation and goals-based wealth
management conducted in prior years, EDHEC-
Risk Institute is collaborating with Bank of
America to develop new research on goals-based
investing for the construction of retirement
investment solutions for individuals. The aim of
the research is to develop a holistic goal-based
investing framework for analyzing optimal
retirement investing decisions for individuals in
the transition or de-accumulation phase of their
investment lifecycle, by using a broad range of
investment product categories including stocks,
bonds as well as annuity-related products.
Designing and Implementing Welfare-Improving Investment Solutions for Institutions and IndividualsIn partnership with FirstRandThe aim of the chair is to expand the scientific
literature on investor welfare-enhancing
methodologies for portfolio construction in a
goals-based investing framework. The chair will
focus on a detailed analysis of the interplay
between diversification and insurance, with the
purpose of determining whether it is possible to
achieve an improvement in investor welfare by
creating a diversified portfolio of insured assets,
as opposed to insuring a portfolio of diversified
assets.
Cross-Sectional and Time-Series Estimates of Risk Premia in Bond MarketsSponsored by Pimco The purpose of this chair is to conduct research
work in the areas of cross-sectional and time-
series analysis of risk premia in fixed-income
markets. More specifically, the topics will cover
the broad areas of estimation of volatility risk
premia embedded in interest rate derivatives
products, relative valuation of volatility products
such as swaptions and other interest rate and
foreign exchange derivatives instruments, as
well as affine term-structure modelling under
16
EDHEC-Risk Research Chairs and Private Research Projects
17
EDHEC-Risk Research Chairs and Private Research Projects both the physical and risk neutral measures,
with special attention devoted to topics such
as the estimation of risk premia, the effects
of very low interest rates on the extraction of
expectations and risk premia, and the value of
convexity.
Real Estate in Modern Investment SolutionsIn partnership with Swiss Life Asset ManagersThe aim of this research chair is to provide a
comprehensive analysis of the role of listed and
unlisted real estate investments in institutional
portfolios, with a particular emphasis on how
dedicated forms of real estate investments
can prove to be key ingredients within the
performance and hedging components of
welfare-improving forms of retirement solutions.
An important part of this research effort will
be dedicated to assessing the theoretical,
empirical and practical challenges related to
factor investing in real estate markets, with the
ambition to facilitate the emergence of more
efficient approaches to real estate risk premia
harvesting. As part of the research chair, we also
expect to examine how dedicated forms of real
estate investments can be used as part of goal
hedging portfolios within improved retirement
solutions, based on their ability to generate
inflation-linked replacement income cash flows.
We shall also analyse how insurance products
can be integrated with real estate investments
to provide a comprehensive retirement solution
for all stages of retirement.
Private Research ProjectsIn addition to making important public
contributions to the advancement of academic
research and the improvement of industry practices,
EDHEC-Risk Institute also employs its expertise to
conduct proprietary research projects for selected
partners with a focus on the design of meaningful
welfare-improving forms of investment solutions
and assist them in the development of innovative
products, thus providing them with an edge over
the competition. There is a particularly strong focus
on retirement investing solutions.
With the need to supplement retirement savings
via voluntary contributions, individuals will
increasingly be responsible for their own retirement
investment decisions. This global trend already
poses substantial challenges to millions of baby-
boomers who typically lack the expertise needed
to make such educated investment decisions. These
concerns have led to a renewed interest in retirement
investment products inclusive or exclusive of
protection against longevity risk. Unfortunately,
these products, which are respectively known as
variable annuities and target date funds, often fall
short in their current form of implementation of
providing satisfactory solutions to the problems
faced by individuals when approaching investment
decisions in a retirement context.
In this context, EDHEC-Risk is working with Merrill
Lynch Wealth Management (MLWM). The focus
of the project is to design and calibrate a range
of standardised goal-based investment solutions,
with a focus on retirement solutions, which can be
used by MLWM to address the needs of individual
investors. The aim is to propose a limited number of
retirement solutions that could accommodate the
needs of a variety of investors; it will lead to a full
solution design exercise, with a focus on scalable
standardised goal-based investing solutions, as well
as a series of backtests and associated reporting
outcomes.
EDHEC-Risk is also partnering with the California
Public Employees’ Retirement System (CalPERS),
in cooperation with Professor John Mulvey
from Princeton University, to help them build
an integrated factor-based asset allocation and
asset-liability management process. The Institute
will explore, analyse and make recommendations
related to the potential benefits expected from
risk factor-based asset allocation, including the
assessment of a translation mechanism between
risk factor-based and asset class-based allocation.
18
Aberdeen Property Investors EDHEC European Real Estate Investment and Risk Management Survey
AFG (French Asset Management Association)Financial Risk Management as a Source of Performance
AXA Investment ManagersRegulation and Institutional Investment
BDF GestionOptimising Bond Portfolios
BNP Paribas Investment PartnersAsset-Liability Management and Institutional Investment Management
CACEISNew Frontiers in Risk Assessment and Performance Reporting
CME GroupExploring the Commodity Futures Risk Premium: Implications for Asset Allocation and Regulation
Deutsche Bank Asset-Liability Management Techniques for Sovereign Wealth Fund Management
Eurex The Benefits of Volatility Derivatives in Equity Portfolio Management
the French Banking Federation (FBF) Innovations and Regulations in Investment Banking
La Française AMDynamic Allocation Models and New Forms of Target-Date Funds for Private and Institutional Clients
Lyxor Asset Management Risk Allocation Solutions
Meridiam Infrastructure and Campbell LutyensInfrastructure Equity Investment Management and Benchma
Merrill Lynch Wealth ManagementRisk Allocation Framework for Goal-Driven Investing Strategies
Morgan Stanley Investment Management Financial Engineering and Global Alternative Portfolios for Institutional Investors
NatixisInvestment and Governance Characteristics of Infrastructure Debt Instruments
NYSE Euronext, SunGard and CACEISMiFID and Best Execution Transaction Cost Analysis A-Z: A Step towards Best Execution in the Post-MiFID Landscape
ORTEC FinancePrivate Asset-Liability Management
Ontario Teachers’ Pension Plan Advanced Investment Solutions for Liability Hedging for Inflation Risk
PictetPictet on ALM for Individual Research Project
PIMCOFixed-Income Term Structure Modelling and Volatility
Rothschild & CieActive Allocation to Smart Factor Indices
Société Générale Corporate & Investment Banking Structured Equity Investment Strategies for Long-Term Asian Investors
Russell Investments Solvency II
Société Générale Prime Services (Newedge) Advanced Modelling for Alternative Investments
UBS Global Asset Management and BNP Paribas Asset ManagementAssessing the Quality of Stock Market Indices: Requirements for Asset Allocation and Performance Measurement
They trusted us
19
EDHEC-Risk Institute’s Publication Strategy and Research Dissemination Policy
Publishing articles in academic journals
is a starting point for EDHEC-Risk Institute
that qualifies the academic value of the
research, but the ultimate objective is to
be able to change the practices of the
industry and ensure that our research results
are known and accessible for professionals.
EDHEC-Risk Publications – Financial Research that Corresponds to the Needs of the Corporate WorldEDHEC-Risk’s publication strategy is to break away
from a purely academic vision of research, whereby
any research carried out has only been evaluated
by academics and disseminated primarily to other
scholars, in favour of an approach where business is
at the heart of the researcher’s concerns.
To ensure that our financial research corresponds
to the needs of the corporate world, we present
our publications in such a way as to render the
research conclusions as accessible as possible to
finance professionals, by including clearly delineated
introductions, conclusions and an executive summary.
Recent EDHEC-Risk publications have covered the
following topics: factor investing in liability-driven
and goal-based investing, factor investing in fixed
income, the application of goal-based investing
principles to the retirement problem, maximising the
benefits of factor investing, the empirical analysis of
the benefits of maximising an equity portfolio, the
measure of volatility pumping benefits in equity
markets, mass customisation versus mass production
in retirement investment management, smart
beta replication costs, multi-dimensional risk and
performance analysis for equity portfolios, factor
investing and risk allocation.
Industry Surveys – Confronting Research Advances with Industry Best PracticesEDHEC-Risk regularly conducts surveys on the
state of the international institutional investment
and asset management industry. These surveys
look specifically at the application of recent
research advances within investment management
companies and at best practices in the industry.
The surveys cover both the traditional investment
universe and alternative investments. Survey results
receive considerable attention from professionals
and are extensively reported by the international
financial media.
Recent EDHEC-Risk surveys include the EDHEC
European ETF and Smart Beta and Factor Investing
Survey 2019 (sponsored by Amundi), the EDHEC
Survey on Equity Factor Investing, and the survey
on Investor Perceptions about Smart Beta ETFs (also
sponsored by Amundi).
Maud Gauchon,Marketing & Communication Manager, EDHEC-Risk Institute
EDHEC-Risk Institute Institutional Money Management Supplement in association with Pensions & Investments (P&I)This bi-annual supplement with the leading
publication for North American asset owners
was first published in Fall 2013 and continues to
provide cutting-edge research-based insights for
institutional investors.
EDHEC-Risk Institute Research Insights Supplement in association with Investment & Pensions Europe (IPE)Since the inaugural issue in Winter 2010, EDHEC-Risk
Institute has been producing a Research Insights supplement that is distributed to European
institutional investment professionals with the
leading publication Investment & Pensions Europe (IPE). The aim of the supplement is to provide
information on research-based solutions to the
key challenges facing institutional investors and
to make a genuine contribution to improving
institutional investment practices.
In 2013, EDHEC-Risk Institute also entered into a
partnership with AsianInvestor to provide a regular
supplement for Asian investors.
Special edition of Investment Management Review (IMR), published with the support of EDHEC-Risk Institute.In this special edition, the emphasis is on two topical
subjects that are at the very heart of EDHEC-Risk
Institute’s current research activities: retirement
solutions for individuals and goals-based investing
and factor investing.
EDHEC-Risk Institute has been cited over 55,000
times in worldwide trade publications.
20
A non-exhaustive list of professional publications in which the work of the EDHEC-Risk Institute has been quoted can be found below:> Absolute Return> Asia Asset Management> Asian Investor> Australian Financial Review> Barrons> Bloomberg> Business Times Singapore> Challenges > Deutsche Pensions & Investment Nachrichten> Die Welt> European Pensions News> Financial Adviser> Financial News> Financial Times> Financial Times China > Funds Europe> Global Alternatives> Global Investor> Global Pensions> Hedge Funds Review> Hedge Pensions Review> Hedgeweek> Hong Kong Economic Journal> InvestHedge> Investment & Pensions Europe> Investment Adviser> Investment Magazine (Australia)> Investors Chronicle > L’Agefi> L’Agefi Suisse> Le Temps> Le Monde> Les Echos> Life & Pensions> Pensions Management> Pensions Week> Portfolio International> Professional Pensions> Risk> Times Higher Education> The Economist> The Hedge Fund Journal> Wall Street Journal> Wall Street Journal Europe
21
EDHEC-Risk Conferences
Since 2004, EDHEC-Risk Institute has been organising annual conferences devoted to the buy-side industry across Europe. By setting up the EDHEC Hedge Fund Days in May 2004, EDHEC-Risk created a new type of conference that aimed to provide professionals with state-of-the-art financial research in the various fields of risk and asset management. In view of our academic background, this was not about organising sales conferences where the speakers in turn deliver excessively brief messages that they do not have the time to discuss thoroughly, but about genuinely transmitting expertise on and debating current themes proposed by the EDHEC-Risk research team.
As such, the EDHEC-Risk conferences allow research
results to be compared with the practices and needs
of institutional investment and asset management
professionals. EDHEC-Risk’s independence, the
original approach—which leaves time for instruction
and discussion during the sessions—and the highly
selective speaker panel, make the EDHEC-Risk
conferences the must-attend annual events for
institutional investors and asset managers who are
concerned about maintaining best level practices in
both technical and conceptual terms.
The EDHEC-Risk Alternative Investment Days were
recognised as the most relevant and worthwhile
industry conference dedicated to alternative
investments. The inaugural event, then called EDHEC
Hedge Fund Day, was attended by over 400 senior
professionals ranging from private and institutional
investors to both hedge fund and fund of hedge fund
managers from 20 countries. The fourth edition,
which was held at the ExCeL Centre in Canary
Wharf on 9-10 December 2008, was attended by
over 1,200 delegates in the midst of the financial
crisis, confirming that this event has become the
most prestigious and well-attended academic and
professional conference on alternative investments
in Europe.
The first EDHEC-Risk Institutional Days ran in Paris
in November 2006. The 2008 and 2009 events
attracted more than 2,100 institutional investors,
asset managers and private bankers. In 2010, EDHEC-
Risk’s partnership with IPE enabled the EDHEC-
Risk Institutional Days to be held on the two days
following the IPE Pension Fund Awards in Monaco.
In 2012, in order to better satisfy the requirements
of institutional investors, EDHEC-Risk Institute
decided to merge its two annual conferences into
a unique three-day event in Europe, the EDHEC-Risk Days Europe, held at The Brewery in London
on 27-29 March 2012. The year 2012 also saw the
inaugural EDHEC-Risk Days Asia conference in
Singapore at the Marina Bay Sands Conference
Centre on 9-10 May 2012.
“The EDHEC Risk Days are a great way to meet top professionals from a wide area of expertise and to take part in hands-on workshops on very interesting research topics presented by excellent EDHEC staff. What I find most appealing is the practicality of the research, in other words – you can really use the outcomes and models in your everyday profession. Visiting the EDHEC Risk Days helps me to stay on top of my field.”
Michael Kaal, Director Finance & Risk, Pensioenfondsen Unilever Nederland
“The JOIM is extremely pleased to collaborate with Oxford and EDHEC-Risk Institute to showcase the best from academia and the practice on Retirement Investing. This is an opportunity to not only learn but interact with leading participants in this important area.”
Gifford Fong, Editor,Journal Of Investment Management (JOIM)
The 2014 edition of EDHEC-Risk Days Asia took
place in Singapore on 3-4 July 2014. 2013 saw
the inaugural EDHEC-Risk Days North America
conference at the Crowne Plaza in New York on 8-9
October 2013.
The global EDHEC-Risk Days 2015 conference,
which became a single, unique event, took place
at The Brewery in London on 24-25 March 2015.
The EDHEC-Risk Days 2016 conference took
place at The Brewery in London on 15-16 March
2016. The conference included three major events
that allowed professionals to review major industry
challenges, explore state-of-the art investment
techniques and benchmark practices to research
advances.
EDHEC-Risk, JOIM and Oxford University have
joined forces for the first time to feature the
best of the current state of the art, which has an
immediate as well as a future impact on the practice
of Retirement Investing. The JOIM-Oxford-EDHEC Retirement Investing Conference took place on
11-13 September 2016 on the Oxford University
Campus and showcased the highest quality
thinking and research in the area. The programme
was developed on a foundation of academic rigour
with an overriding objective of identifying practical
significance. Leading experts
from the US and Europe featured, including the
Nobel Prize recipient, Robert Merton, Andrew Lo and Deborah Lucas (MIT Sloan School of
Management), Mark Kritzman (Windham Capital),
Martin Leibowitz (Morgan Stanley Research),
Tim Jenkinson (University of Oxford) and Lionel Martellini (EDHEC-Risk Institute).
In the context of the fourth industrial revolution,
the digital revolution, which is likely to have a
dramatic impact on the investment industry, four
prominent academic institutions renowned for
the quality and relevance of their educational and
research programmes in finance and technology
– EDHEC-Risk Institute, KAIST, Princeton and
Tsinghua Universities – have partnered for the
first time. Together, they will host an international
series of rotational conferences on financial
technologies and offer a forum that will facilitate
discussion among all interested parties (academics,
practitioners and regulators) around the world.
The annual conferences were launched in April
2017 with the Four-University Rotating FinTech Conference: Wealth Management Systems for Individual Investors, which took place on the
Princeton Campus, and was jointly organised by
EDHEC-Risk Institute and the Princeton University
ORFE department. Leading experts from the US, Asia
and Europe featured at the conference including
Andrew Yao (Turing Award recipient and founder
of IIIS FinTech Center at Tsinghua University),
John Bogle (Founder of The Vanguard Group, and
President of the Bogle Financial Markets Research
Center), Woo Chang Kim (Associate Professor at
KAIST), Lionel Martellini (Director of EDHEC-Risk
Institute), John Mashey (Consultant, Techviser),
and John Mulvey (Professor and founding member
of the Bendheim Center for Finance at Princeton
University).
The second edition “State of the Art in Robo-Advising Systems: Financial Technologies for Enhanced Social Security Conference”, organised by
KAIST, took place on 12 - 13 April 2018 in Seoul.
The audience – which consisted of top executives
from investment and wealth management
companies, banks, institutional investors and
academics – overwhelmingly appreciated the good
balance between academic insights and practical
22
applications. It proved to be a nice opportunity
to interact with experts on financial technologies,
includin, John Bogle (Founder of The Vanguard
Group, and President of the Bogle Financial Markets
Research Center), Woo Chang Kim (Professor and
Head of KAIST Center for Wealth Management
Technologies), Giorgio Consigli (Professor of
Applied Mathematics at University of Bergamo),
Michael Dempster (Professor Emeritus at
Cambridge University), Lionel Martellini (Director
of EDHEC-Risk Institute), John Mulvey (Professor
and founding member of the Bendheim Center
for Finance at Princeton University), and Wei Xu
(Professor at Tsinghua University).
The third edition, organised by EDHEC-Risk, took
place in Paris on 2 April 2019. The next conference
will be held in China in Spring of 2021.
The Four-University Rotating FinTech Conference
series lies within the broader context of our
cooperation with Princeton University.
Organised by EDHEC-Risk Institute, the 1st edition
of EDHEC Climate Finance Conference took
place in Paris on 17 December 2019, at the Palais
Brongniart,. The conference presented the research
carried out by EDHEC-Risk Institute, EDHEC
Business School and Scientific Beta and discussed
it with institutional investment, asset management,
investment banking, regulatory and academic
communities. The conference aimed to showcase
the highest quality thinking and research in the area
of Sustainable Investing.
During this one-day conference, which combined
academic lectures and panel discussions, our
experts discussed several issues of increasing
importance including: the efficiency of the market
pricing of climatic risks, the climate risks assessment
and disclosure for corporations and their impact on
credit analysis, the financial management decisions
affected by climate risks and policies, the design of
investment strategies to hedge climate risks and
liabilities, as well as the impact of green quantitative
easing policies by central banks.
The 2nd edition of the EDHEC Climate Finance
conference will be held in Paris in Spring of 2021
and will focus on measuring and managing climate
risk in investors’ portfolios.
23
Institute
In 2012, EDHEC-Risk Institute signed a strategic partnership agreement with the Department of Operations Research and Financial Engineering (ORFE) at Princeton University for research and outreach initiatives in the area of risk and investment management.
One of the key ambitions of this partnership is to
develop innovative academic research in finance
that could have a strong influence on the practice
of investment management, at a time when
the industry is facing a number of key paradigm
changes leading to an increased focus on risk
management. These developments also question
a number of fundamental insights from modern
portfolio theory, including for example the risk-
return relationship in equity and bond markets from
the cross-sectional and time-series perspectives,
and the proposed joint research agenda is expected
to address some questions that are not only
practically relevant, but also at the forefront of
outstanding problems in financial economics.
The common ambition of EDHEC-Risk Institute and
Princeton ORFE is to develop and manage a research
programme related to investment solutions for
institutions and individuals, and more precisely
with a focus on a comprehensive use of the three
forms of risk management (diversification, hedging
and insurance) regarded as the true source of
added-value in investment management.
These various research directions heavily draw
on tools borrowed from various academic
fields where strong expertise is present in both
institutions, particularly in financial engineering,
financial econometrics, mathematical finance and
stochastic optimisation. The EDHEC-Risk Institute
and Princeton ORFE faculties include some of the
leading experts in these fields and their combined
expertise is expected to lead to influential
developments that would re-enforce the visibility
of the two partnering institutions around these
domains, in both academia and investment
practice.
In terms of outreach activities, the broad ambition
of EDHEC-Risk and Princeton ORFE is not only
to develop cutting-edge research in investment
solutions, but also to make sure that the
investment industry will benefit from whatever
useful academic insights will be generated through
these research efforts.
Over the years, the research partnership has evolved
to encompass a number of dimensions including:
• Joint consulting initiatives
Following a formal RFP process, EDHEC-Risk
Institute and Princeton ORFE have been jointly
selected to provide assistance to CalPERS in the
design, development and implementation of a
factor-based approach to asset allocation and
asset-liability management (ALM). The project
is currently in its second phase, with a focus on
smart equity factor indices and capital market
24
Cooperation between EDHEC-Risk Institute and Princeton University
25
assumptions for ALM analysis. Within the
partnership itself, the selection of a small number
of private research projects contributes to satisfying
two key criteria: coherence with the strategic focus
of the partnership (investment solutions) and
impact of the private research (to compensate for
the lack of public output).
• Joint educational initiatives
The partnership between EDHEC-Risk and
Princeton ORFE includes the possibility to have
PhD candidates from ORFE spend one year on the
EDHEC-Risk campuses in Europe (Nice and London)
or Asia (Singapore), where they can benefit from
access to the EDHEC-Risk PhD Finance programme,
subject to the successful completion of admission
requirements. The joint ambition of EDHEC-Risk
and Princeton ORFE is to have exceptionally gifted
candidates who could obtain both the Princeton
PhD in Operations Research and Financial
Engineering and the EDHEC-Risk PhD in Finance;
these candidates would benefit from the combined
network of both faculties, who will seek to help
them secure placements in finance departments at
top business schools worldwide.
• Joint outreach initiatives
In this context, EDHEC-Risk and Princeton ORFE
have set up a bi-annual event, the EDHEC-Princeton
“Academia Meets Practice” conference. At the
last edition of this conference, speakers from
EDHEC-Risk Institute, from Princeton ORFE, and
also from the Bendheim Center for Finance at
Princeton University, provided selected investment
professionals with the latest academic insights
related to new frontiers in institutional money
management. The format of the conference
is meant to facilitate the exchange of views
between academicians and practitioners; it
involves presentations given by a faculty member,
followed by a discussion with the audience. After
launching three successful events, the format
changed in 2017, since we took the opportunity to
leverage our partnership with KAIST and Tsinghua
University to jointly organise the first edition of the
“Four-University Rotating FinTech International
Conference Series” (see page 22).
• Joint industrial initiatives
With the support of Merrill Lynch Wealth
Management, we launched a series of EDHEC-
Princeton Retirement Goal-Based Investing
Indices in May 2018. The index series represents
an incarnation of some of the latest academic
thinking in Goal-Based Investing, and are meant
to encourage and facilitate the launch of welfare-
improving forms of investment solutions. They are
expected to provide strong marketing impact in
the arena of investment solutions for individuals,
especially in the context of retirement investing.
For more details, visit our EDHEC-Risk Institute and
Princeton ORFE websites.
Cooperation between EDHEC-Risk Institute and Princeton University
EDHEC-Risk Institute Executive Education
The Executive Education Seminars offered by EDHEC-Risk Institute bring research advances and state-of- the-art practices into the practitioner’s portfolio of skills. Designed and delivered by some of the most respected practitioners and academics in the area, these short executive courses provide participants with workable knowledge of the most recent approaches that investment professionals may benefit from. Presented in a highly accessible manner, these executive courses appeal to senior officers, investment specialists and administrators working for buy- and sell-side institutions, as well as consultants and key account representatives advising high net worth individuals and institutional investors.
Building on the exclusive and latest research
advances developed within EDHEC-Risk Institute
and beyond, our programmes are continually
evolving, ensuring that they stay relevant and meet
the finance industry’s expectations. We provide
learners with choice and flexibility, putting the
emphasis on different entry pathways:
• Online course: Advances in Asset Allocation Seminar: From Investors’ Problems to Investment Solutions;• Online specialisation on Coursera’s platform: Investment Management with Python and Machine Learning;• Bespoke programmes at the request of companies.
All courses will provide participants with a certification and will equip them with IT tools for
practical implementation.
The Advances in Asset Allocation Seminar in a 100% Online Format Investors are facing problems, for which they need
dedicated investment solutions, as opposed to off-
the-shelf investment products. This recognition is
giving rise to a whole new investment paradigm,
taking on slightly different forms in individual
versus institutional contexts:
• Liability-Driven Investing (LDI) in Institutional
Money Management;
• Goal-Based Investing (GBI) in Individual Money
Management.
Broadly speaking, investment management is the
art, science and engineering of efficiently spending
investors’ dollar and risk budgets to help them
achieve their meaningful goals in the presence of
uncertain market conditions.
Meeting this challenge involves institutional
or individual asset owners (and/or investment
managers acting on their behalf) efficiently using
the three known forms of risk management within a
comprehensive disciplined investment framework:
• Diversification, which is used to construct well-
rewarded risky performance-seeking portfolios,
that is portfolios enjoying an efficient harvesting
of risk premia across and within asset classes;
26
Caroline Prévost, Sales Manager, Executive Education, EDHEC-Risk Institute
“Truly outstanding faculty...a melding of relevant academic studies by actual practitioners. Highly useful material to what is unfolding in today’s investing world.“
James Egan, Senior Vice President and Director of Fixed Income Department, Janney Capital Management LLC - USA
• Hedging, which is used to construct truly safe
portfolios, that is portfolios allowing for an efficient
matching of factor exposure on the asset and the
liability sides;
• Insurance, which is used to dynamically allocate
to the risky performance portfolio and the safe
hedging portfolio as a function of changes in
market conditions as well as distance with respect
to investors’ goals.
The Investment Solutions course is designed to be
an introduction to the technical and conceptual
challenges involved in the design of innovative
forms of welfare-improving investment solutions,
building upon the expertise developed within.
The digital material is made up of videos, lecture
notes and technical supplements which cover a
set of concepts and techniques that we believe
are most relevant in asset allocation and portfolio
construction decisions.
This online programme is an open enrolment
process. Participants will get access to our
e-learning platform to explore asset allocation
concepts and techniques at their own pace
relying on exclusive e-learning material developed
by EDHEC-Risk Institute. Participants have the
opportunity to discuss both course concepts and
evaluations online. This is an unique oppportunity
to tap into a broad community of learners from the
finance industry.
Coursera’s Online CoursesEducation should be accessible and inclusive. That
is why we wanted to expand our offering and have
partnered with the world leader in e-learning:
Coursera.
Given the current relevance and expected impact
of this topic, we have launched in September 2019
a digital specialisation on Investment Management
with Python and Machine Learning, which will
attract substantial attention from investment
professionals as well as students aspiring to become
investment professionals. This specialisation
consists of four massive open online courses (or
MOOCs):
• Introduction to Portfolio Construction and
Analysis with Python;
• Advanced Portfolio Construction and Analysis
with Python;
• Python Machine-Learning for Investment
Management;
• Python Machine-Learning for Investment
Management with Alternative Datasets.
Each MOOC consists of videos, recommended
readings, discussion prompts and assignments
that needs to be completed to get a certificate.
Participants will learn at their own pace and benefit
from the expertise of global thought leaders from
EDHEC Business School, Princeton University
and the finance industry. Participants who have
successfully submitted the assignments for all four
MOOCs will get the Certificate for the Investment
Management with Python and Machine Learning
specialisation.
This first specialisation launched in September
2019, will be followed by a second specialisation
on climate change and sustainable finance, to be
launched in 2021.
EDHEC-Risk Institute Executive Education
27
“We expect that the use of machine learning techniques and their application to big new data sets, will profoundly impact all dimension of the investment management process, including security selection, portfolio construction as well as risk management practices.“
Lionel Martellini, Director, EDHEC-Risk Institute
28
Customised Programmes: Bespoke Solutions Tailored to Companies’ Unique ChallengesThe 2020 Executive Education ranking from the
Financial Times, which assesses both Custom
Programmes (bespoke programmes for individual
companies) and Open Programmes (for executives
and senior managers of different companies)
confirmed EDHEC’s leadership among the world
Top 20 for Executive Education (17th worldwide in the combined ranking) and the world Top 10
for the custom programmes (8th worldwide, up 19
places vs 2018).
Building on the cutting-edge research of the faculty,
EDHEC-Risk Institute creates tailored programmes
to help executives level up their financial expertise
on topics of considerable interest in the asset
management industry.
EDHEC-Risk’s aims to offer a client-centred
approach. Indeed companies will have the
opportunity to share with us its biggest challenges,
and we will work with the company on how to
develop impactful practices. Companies will work
as a team with both EDHEC-Risk institute’s director
and research director to validate specific objectives
in the framework of the centre’s core expertise
(factor investing, goal-based investing and ESG
investing).
At the end of the seminar, the companies will
be ready to put insights into actions as they will
have explored the latest investment management
concepts and worked on real and concrete
problems, using exclusive tools developed by
EDHEC-Risk institute and supervised by Professor
Martellini.
Programmes will take place in London, Nice,
Paris and Singapore (EDHEC campuses) or on
the companies’ premises. The format will consist
of a 3 day-event where delegates will have the
opportunity to discuss cutting edge concepts and
practices exclusively developed by EDHEC-Risk and
be engaged in concepts and a variety of real-world
case study applications.
Companies will also have the opportunity to add a
blended-learning option to enable their employees
to access a digital platform to cover the concepts
in advance in order to prepare the seminar and
attend a webinar to take stock of their elearning
journey prior to the seminar and anticipate any
barriers prior to the event.
29
Participants in the executive education programmes offered by EDHEC-Risk Institute represent the leading names in investment banking, traditional and
alternative asset management, private banking and wealth management, advisory services and technology as well as the financial industry’s foremost end-
investors such as pension funds and foundations, sovereign funds, insurance companies, and family offices.
ABERDEEN ASSET MANAGEMENT
ABU DHABI INVESTMENT AUTHORITY
AEGON ASSET MANAGEMENT
ALBERTA INVESTMENT MANAGEMENT CORPORATION
ALLIANCE BERNSTEIN
ALLIANZ GLOBAL INVESTORS
AMF PENSION
AMUNDI
AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY
AUSTRALIAN SUPER
ALLIANZ
AP2
APG INVESTMENTS
ASPECT CAPITAL
ATP
AVIVA INVESTORS
AXA
BAE SYSTEMS PENSION FUND
BANK OF CANADA
BARCLAYS
BLACKROCK
BNP PARIBAS
BRUNEI INVESTMENT AGENCY
CALPERS
CALSTRS
CANADA PENSION PLAN INVESTMENT BOARD
CAPITAL GROUP
CITIGROUP
COLUMBIA THREADNEEDLE ASSET MANAGEMENT
CREDIT SUISSE
DEUTSCHE BANK
EDF
EUROPEAN CENTRAL BANK
FIDELITY
FINANCIAL SERVICES AUTHORITY
FRANKLIN TEMPLETON INVESTMENTS
GIC
GOLDMAN SACHS
HARVARD MANAGEMENT COMPANY
HSBC
INVESCO
IRISH NATIONAL PENSION RESERVE FUND
JP MORGAN
KPMG
LEGAL & GENERAL INVESTMENT MANAGEMENT
LEGG MASON
MAINEPERS
MERRILL LYNCH
MONETARY AUTHORITY OF SINGAPORE
MORGAN STANLEY
NATIONAL BANK OF KUWAIT
NATIXIS
NESTLE PENSION FUND
NEW ZEALAND SUPERANNUATION FUND
NORGES BANK INVESTMENT MANAGEMENT
NORTHERN TRUST
OLD MUTUAL ASSET MANAGERS
ONTARIO TEACHERS’ PENSION PLAN
OSLO PENSJONSFORSIKRING
PICTET & CIE
PRICEWATERHOUSECOOPERS
QATAR INVESTMENT AUTHORITY
ROYAL BANK OF CANADA
ROYAL BANK OF SCOTLAND
STANDARD LIFE INVESTMENTS
STATE BOARD OF ADMINISTRATION OF FLORIDA
SAUDI ARABIAN MONETARY AGENCY
SCHRODERS
SOCIETE GENERALE
STATE STREET GLOBAL ADVISORS
T. ROWE PRICE
TEACHER RETIREMENT SYSTEM OF TEXAS
THE ROCKEFELLER FOUNDATION
TIAA-CREF
TOWERS WATSON
UBP
UBS
UNITED NATIONS JOINT STAFF PENSION FUND
UNITED PARCEL SERVICE
UNIVERSITIES SUPERANNUATION SCHEME
VANGUARD
WASHINGTON STATE INVESTMENT BOARD
WELLINGTON MANAGEMENT COMPANY
ZURICH FINANCIAL SERVICES
30
International Advisory Board
EDHEC-Risk Institute has adopted a strict
corporate governance structure and rigorous
processes which guarantee both the scientific
quality and the operational relevance of its
activities. The centre’s management and its
international advisory board enforce strict
validation and evaluation processes to ensure
that all efforts remain focused on issues which
are central to the development of the
profession.
Upholding High Standards of Corporate Governance
External Validation and Evaluation by
International Experts
In line with best practices of corporate governance,
EDHEC-Risk Institute has set up an advisory board
which brings together distinguished scholars,
representatives of regulatory bodies as well as
senior executives from business partners and other
leading institutions. These international experts
advise on the relevance and goals of the research
programme proposals presented by the Institute’s
management and evaluate research outcomes
with respect to their potential impact on industry
practices. The board also advises on the objectives
and contents of projects deriving from the expertise
of the Institute, thereby ensuring that graduate and
executive programmes remain at the forefront of
developments in the marketplace.
Mark Fawcett,Chairman, EDHEC-Risk Institute’s International Advisory Board, CIO, NEST Corporation
“What makes EDHEC-Risk unique is its determined effort to keep on the cutting edge of research that is of operational relevance to investors, particularly those with heavy involvement in alternatives. The quality of the dialogue at the EDHEC-Risk Advisory Board provides very useful insights into what is a rapidly changing industry and a unique opportunity to take stock of commonly accepted practices. The debate on how to implement technically superior approaches to old problems will continue for many years to come, and it is critical to have thought-leaders like EDHEC-Risk help investors and the industry re-evaluate the frameworks in which we operate.”
Gumersindo Oliveros, CEO & CIO,KAUST Investment Management Company
Phase Opportunity Study Incubation Development
Nature of work
carried out
Academic review – state of the art.
Assessment of industry expectations.
“Founding” research and modelling.
Initiation of a business partnership.
Development of applied research.
Testing of the results in a business context.
Validation Validation by the advisory board.
Validation of the research by an international academic publication.
Validation of the business plan by management.
Validation of the work and evaluation of the results by
the advisory board.
Rigorous validation and evaluation processes throughout the life-cycle of research programmes
31
International Advisory Board Members of EDHEC-Risk Institute’s International Advisory Board as of 1 May 2020Chairman: Mr Mark Fawcett, Chief Investment Officer, NEST Corporation.
• Mr Kasper Ahrndt Lorenzen, Chief Investment Officer, PFA Pension.
• Mr Christopher Ailman, Chief Investment Officer, CalSTRS.
• Mr Noël Amenc, CEO, Scientific Beta, part of SGX Group.
• Mr Patrick Armstrong, Member of the Secretariat, Financial Stability Board (FSB).
• Ms Jayne Atkinson, Chief Investment Officer, Unilever UK Pension Fund.
• Ms Valérie Baudson, Member of the Executive Committee, Amundi, CEO of CPR AM and Head of ETF, Indexing & Smart Beta
• Mr Stefan Bichsel, Executive Board Member and Head of the Asset Management & Trading Division, BCV, and former Chairman, EFAMA.
• Mr Frédéric Bôl, Chief Executive Officer, Swiss Life Asset Managers.
• Mr Kevin Bong, Director of the Economics and Investment Strategy Department, Government of Singapore Investment Corporation (GIC).
• Mr James C. Davis, Chief Investment Officer, OPSEU Pension Trust.
• Mr Albert De Wet, Group Treasury Portfolio Manager, FirstRand.
• Mr Patrick Fenal, Deputy Chairman, Unigestion.
• Mr Tomas Franzén, former Chief Investment Strategist, Andra AP-fonden (AP2) and Founder, Franzen Advisory.
• Mr Henrik Gade Jepsen, Senior Vice President, Head of Asset Management, Danske Bank Wealth Management.
• Mr David Iverson, Head of Asset Allocation, Guardians of New Zealand Superannuation.
• Mr Theo Jeurissen, Senior Adviser, Goldman Sachs Asset Management (GSAM).
• Mr Jean-Louis Laurens, Independant Director and Senior Advisor.
• Mr Xavier Lépine, Chairman, La Française AM.
• Mr François-Serge Lhabitant, Associate Professor, EDHEC Business School, Chief Investment Officer, Kedge Capital.
• Ms Jacqueline Loh, Deputy Managing Director, Monetary Authority of Singapore (MAS).
• Mr Lionel Martellini, Director, EDHEC-Risk Institute, Professor of Finance, EDHEC Business School.
• Mr Joseph Masri, Head of Risk Management, General Retirement and Social Insurance Authority (GRSIA).
• Mr Stéphane Monier, Head of Private Client Investments, Lombard Odier.
• Mr Gumersindo Oliveros, Chief Executive Officer, KAUST Investment Management Company.
• Mr Bruno de Pampelonne, President, Tikehau Investment Management.
• Mr Olivier Rousseau, Executive Director, Fonds de Réserve pour les Retraites (The French Pension Reserve Fund).
• Mr Adiaan Ryder, Chief Strategist, Abu Dhabi Investment Council (ADIC).
• Mr Günther Schiendl, Director and Chief Investment Officer, VBV-Pensionskasse.
• Ms Lisa Shalett, Head of Investment & Portfolio Strategies, Morgan Stanley Wealth Management.
• Mr Anil Suri, Managing Director, Head of Portfolio Construction & Investment Analytics, Merrill Lynch Wealth Management.
• Mr Philippe Teilhard de Chardin, Managing Partner, Advisors & Partners.
• Mr Brnic Van Wyk, Head of Asset/ Liability Management, Investments Division, QSuper.
• Mr Jaap van Dam, Managing Director Investment Strategy, PGGM.
• Mr Jean-Paul Villain, Director, Strategy Unit, Managing Director’s Office, Abu Dhabi Investment Authority.
About EDHEC Business School
• 5 campuses: Lille, Nice, Paris, London and Singapore
• 8,000 students in academic education
• 18 degree programmes: BBA, Master in Management, MSc, MBAs, PhD, etc.
• Over 40,000 alumni in 125 countries
• 172 permanent professors
• 11 centres of expertise
• A €121.5m budget
• €20m of R&D revenues, including €15m from international sources
• One of the first business schools worldwide to hold the triple crown of accreditations
from AACSB, EQUIS and AMBA
Operating from campuses in Lille, Nice, Paris, London and Singapore, EDHEC
is one of the top 15 European business schools. Fully international and directly connected
to the business world, EDHEC commands a strong reputation for research excellence and the
ability to train entrepreneurs and managers capable of breaking new ground. EDHEC functions
as a genuine laboratory of ideas and produces innovative solutions valued by businesses.
The School’s teaching is inspired by its research work and a focus on “learning by doing”,
all with the aim of equipping people with the skills to succeed in business.
About EDHEC-Risk Institute
Part of EDHEC Business School and established in 2001, EDHEC-Risk Institute has become the
premier academic centre for industry-relevant financial research. In partnership with large
financial institutions, its team of permanent professors, engineers, and support staff, and
research associates and affiliate professors, implements eight research programmes and six
research, industrial partnerships and private research projects focusing on asset allocation
and risk management. Additionally, it has developed an ambitious portfolio of research and
educational initiatives in the domain of investment solutions for institutional and individual
investors.
As part of its “Make an Impact” signature, EDHEC-Risk plays a noted role in furthering applied
financial research and systematically highlighting its practical uses.
For more information, please contact:
Maud Gauchon on +33 4 93 18 78 87 or by e-mail: [email protected]
Febr
uary
202
0
Institute
EDHEC-Nice393 Promenade des Anglais - BP311606202 Nice Cedex 3 - FranceTel: + 33 (0)4 93 18 99 66
EDHEC-Lille24 avenue Gustave Delory - CS 5041159057 Roubaix Cedex 1 - FranceTel: + 33 (0)3 20 15 45 00
EDHEC-Paris16-18 rue du 4 septembre75002 Paris - FranceTel: +33 (0)1 53 32 76 30
EDHEC-London10 Fleet Place - LudgateLondon EC4M 7RB - EnglandTel: +44 (0)207 7332 56 00
EDHEC-Singapore1 George Street#15-02 Singapore 049145Tel: +65 (0)6438 0030
EDHEC-Risk Institute393 promenade des AnglaisBP 3116 - 06202 Nice Cedex 3FranceTel: +33 (0)4 93 18 78 87
EDHEC Risk Institute—Europe10 Fleet Place, LudgateLondon EC4M 7RBUnited KingdomTel: +44 (0)20 7332 5600
https://risk.edhec.edu
https://www.edhec.edu