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
June 2018 Returns (%)
Zone, Retirement year
Not adjusted
Cost-of-Living-adjusted
US, 2023
0.19
0.21
US, 2028
0.23
0.26
US, 2033
0.22
0.24
US, 2038
0.03
0.03
US, 2043
-0.15
-0.15
US, 2048
-0.15
-0.15
US, 2053
-0.15
-0.15
US, 2058
-0.15
-0.15
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

Bond Portfolio Optimization in the Presence of Duration Constraints - EDHEC-Risk Institute research article in the Journal of Fixed Income
19-07-2018

Bond Portfolio Optimization in the Presence of Duration Constraints - EDHEC-Risk...

We are pleased to enclose an EDHEC-Risk Institute research article published in the Summer 2018 issue of the Journal of Fixed Income entitled "Bond Portfolio Optimization in the Presence of Duration Constraints". In this article, authors Romain Deguest, Frank J. Fabozzi, Lionel Martellini and Vincent Milhau discuss the implementation and the benefits of portfolio optimization techniques by...
Lionel Martellini discussed ageing population: goal-based investing and its application to the retirement problem
10-07-2018

Lionel Martellini discussed ageing...

Lionel Martellini, Professor of Finance at EDHEC Business School and Director of EDHEC-Risk Institute, was invited to make a keynote address on the subject of ageing population: goal-based investing...
Lionel Martellini speaking at the French Embassy in London at a conference on the topic “Paris, a Leading European Research Center in Asset Management”, organised by AFG - Association Française de la Gestion financière, on 29 May, 2018
31-05-2018

Lionel Martellini speaking at the...

Lionel Martellini, Professor of Finance, EDHEC Business School and Director, EDHEC-Risk Institute, has been invited to speak on the theme "Three Examples of Successful Research Programs, Conducted...

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Participants trained
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