The Need for Investment Solutions

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 mass production (of cost- and risk-efficient smart factor indices), mass customisation (of liability-driven investing and goal-based investing strategies) and 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 and virtue 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.

EDHEC-Princeton Goal-Based Investing Indices
Retirement Income
August 2018 Returns (%)
Zone, Retirement year
Not adjusted
Cost-of-Living-adjusted
US, 2023
1.91
1.97
US, 2028
2.38
2.42
US, 2033
2.72
2.76
US, 2038
3.05
3.10
US, 2043
3.42
3.48
US, 2048
3.85
3.91
US, 2053
4.33
4.39
US, 2058
4.81
4.88
Executive Education
FT Ranking
Executive Education
Executive Education

 

Risk Management as the Key Source of Added Value in Investment Management

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 wealth-/income-/consumption- or liability-driven objectives, subject to regulatory constraints. Addressing this challenge involves institutional and individual asset owners (or their investment managers) efficiently using a holistic risk management framework known as liability-driven investing or goal-driven investing. Whatever the context, meaningful investment solutions are based on three fundamental sources of added value: (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 for efficient risky and safe building block portfolios.

 

Diversification

The risky portfolio should be efficient at harvesting risk premia across and within asset classes: It’s all about diversification!

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Hedging

The safe portfolio should be efficient at matching risk factor exposures on the asset and liability sides: It’s all about hedging!

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Insurance

The allocation to the efficient risky and safe portfolios should secure investors’ essential goals while generating a high probability of achieving their aspirational goals: It’s all about insurance!

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Academic Roots

EDHEC Bond Risk Premium
Bayesian Nets for Stress Testing

EDHEC Risk Expertise

From Investment Products to Investment Solutions
Perspectives on Retirement Investing

Practitioner Reach

Ostrum Bond Portfolio Optimization
EDHEC-PRINCETON Goal-Based Investing Indices

News

Raman Uppal appointed as new chairman of the Society for Financial Studies (SFS) Council
21-09-2018

Raman Uppal appointed as new chairman of the Society for Financial Studies (SFS) Council

Raman Uppal, Professor of Finance at EDHEC Business School and Member of EDHEC-Risk Institute, has been appointed as new chairman of the Society for Financial Studies (SFS) Council, succeeding Adlai Fisher, Professor of Finance, Sauder School of Business, University of British Columbia. The Society for Financial Studies (SFS) is a nonprofit, academic society in the field of finance. It owns and...
New session announced for the seminar on Harvesting risk premia in equity and bond markets on 12-14 November, 2018 on Yale campus
13-09-2018

New session announced for the seminar...

Get a cutting-edge understanding of the foundations of factor investing and portfolio choice Learning in the seminar involves a mix of interactive lectures and case study discussions. There will be...
Riccardo Rebonato speaking on smart beta fixed income at 14th Quantitative Finance Conference
10-09-2018

Riccardo Rebonato speaking on smart...

Riccardo Rebonato, Professor of Finance, EDHEC Business School and Member, EDHEC-Risk Institute, will be speaking on fixed-income smart beta at the 14th Quantitative Finance Conference in Nice on 27...

Events

12 Nov

Yale SOM – EDHEC-Risk Harvesting Risk Premia in Equity and Bond Market...

Yale Campus New Haven

Register

30 Jan

Yale SOM – EDHEC-Risk Harvesting Risk Premia in Alternative Asset Clas...

Yale Campus New Haven

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19 Mar

Advances in Asset Allocation Seminar - Blended Learning Programme

EDHEC Campus London

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