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.

EDHEC-Princeton Goal-Based Investing Indices
Retirement Income
October 2019 Returns (%)
Zone, Retirement year
Not adjusted
Cost-of-Living-adjusted
US, 2023
1.60
1.52
US, 2028
1.46
1.37
US, 2033
1.06
0.98
US, 2038
0.50
0.41
US, 2043
-0.11
-0.21
US, 2048
-0.92
-1.04
US, 2053
-2.00
-2.12
US, 2058
-2.62
-2.66
INVESTMENT MANAGEMENT WITH PYTHON AND MACHINE LEARNING
Smart Beta Fixed Income Beyond Beta
Executive Education
ETF Smart Beta Factor 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

Yale SOM - EDHEC-Risk Certificate in Risk and Investment Management
"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

News

“The financial system will be crucial to supporting and accelerating investment in clean energy and the technologies needed to decarbonise the economy”
28-11-2019

“The financial system will be crucial to supporting and accelerating investment in...

HOW HAS CLIMATE CHANGE IMPACTED FINANCE AND INVESTORS TO DATE? The ever-greater damage being done to people and property by climate change and the increasingly stringent climate policies being introduced by governments around the world have prompted the financial sector to pay much greater attention to climate-related issues. New estimates show that climate-change risks to the financial system...
Can financial theory make sense of the factor zoo?
20-11-2019

Can financial theory make sense of the...

EDHEC PhD in Finance Newsletter - November 2019  Editorial signed by Laurent Calvet, PhD, Chaired Professor of Finance, EDHEC Business School, and CEPR. Can financial theory make sense of the...
Riccardo Rebonato speaking on factor investing fixed income at TrackInsight European Summit in Paris
30-10-2019

Riccardo Rebonato speaking on factor...

Riccardo Rebonato, Professor of Finance, EDHEC Business School, and Factor Investing Fixed Income Lead Expert, EDHEC-Risk Institute, has been invited to give a keynote speech on the theme of ...

Events

17 Dec

EDHEC Climate Finance Conference

Palais Brongniart, Paris - France

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