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 (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.

Flexicure Retirement Solutions
EDHEC-Princeton Goal-Based Investing Indices
Retirement Income
May 2020 Returns (%)
Zone, Retirement year
Not adjusted
Cost-of-Living-adjusted
US, 2023
1.41
1.27
US, 2028
-0.03
-0.24
US, 2033
-2.33
-2.58
US, 2038
-4.94
-5.16
INVESTMENT MANAGEMENT WITH PYTHON AND MACHINE LEARNING
Beyond Beta Safe and Sound Smart Beta Fixed Income
Advances in Asset Allocation Online Course
Factor Investing in Liability Driven and Goal-Based Investing

 

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 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 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

ESG Factors and Sustainable Investment Solutionst
"Flexicure" Retirement Solutions - A part of the Answer to the Pension Crisis?

Practitioner Reach

Ostrum Bond Portfolio Optimization
Results of the 12th EDHEC European ETF Smart Beta Survey

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