Seminar Description & detailed outline
Over the last 15 years or so, the investment industry has experienced a series of profound structural changes, and an increasing number of serious new challenges are being faced by both institutional and individual investors as a result of these changes. The investment management industry is actually currently experiencing a profound industrial revolution, which results from the confluence of historically powerful forces. These forces imply a dramatic acceleration in the pace of change on the following two main dimensions, which are reminiscent of industrial revolutions that have impacted other industries: mass production and mass customization.
This seminar is part of the Certificate in Risk and Investment Management. Please click here to play video
Day 1: Factor Investing and Risk Allocation Decisions in the Presence of Liability Constraints;
Morning Session: Harvesting Risk Premia Across Asset Classes
Afternoon Session: Liability-Driven Investment Solutions
The first day of the course, led by Professor Lionel Martellini, is designed to familiarise investors with risk and asset allocation decisions. The focus will be on bridging the gap between portfolio theory and portfolio construction. Participants will be introduced to a coherent framework, which can be used to frame optimal decisions for the design of a well-diversified performance portfolio through an efficient harvesting of risk premia within and across asset classes. It discusses the limits of modern portfolio theory and presents solutions to address estimation issues. Our main ambition is to provide a methodology for measuring the level of diversification at the level of a multi-asset portfolio, and propose suggestions for improving the portfolio diversification. In particular, we will discuss how to measure the effective number of constituents as well as the effective number of bets using various methods for extracting underlying risk factors. We will also test several risk and asset allocation methodologies with an efficient blend of techniques mixing naive and scientific approaches to portfolio diversification.
Day 2: Life-Cycle Investment Strategies and Goal-Based Investment Solutions;
Morning Session: Life-Cycle Investment Strategies
Afternoon Session: Goal-Based Investing
The second day of the seminar, also led by Professor Lionel Martellini, has a focus on the efficient use of the three forms of risk management (hedging, diversification and insurance) for the production and distribution of improved investment solutions for institutional and individual asset owners. The seminar will present disciplined approaches to liability-driven investing strategies and goal-based investing strategies, and explain how asset managers may help investors maximise the probability of reaching their objectives subject to dollar and risk budget constraints, with applications in institutional or individual money management.
Day 3: Exploiting Predictability in Asset and Factor Returns
The third and last day of the seminar, led by Professor Stefano Giglio, will begin with a discussion about the predictability of equity returns and volatility, and how this allows investors to achieve superior Sharpe ratios. It will then expand the analysis to the predictability of fixed income returns. Next, it will study predictability of individual stock returns using a large number of firm characteristics and modern statistical methods like machine learning. Finally, the seminar will present methodologies for identifying managers who are most likely to outperform in the future for situations when the asset allocation strategy is implemented via active mutual fund managers
Key Learning Objectives
- Learn how to perform factor investing and risk allocation
- Develop an understanding of strategic asset allocation in the presence of liability constraints
- Assess how to overcome effect of estimation error by imposing better constraints
- Understand how to implement liability-driven investment solutions with cash and derivatives instruments
- Learn about goal-based investing strategies in institutional and private wealth management
- Identify affordability conditions for essential and aspirational goals
- Discuss implementation and mass customization challenges for individual investment solutions
- Explore novel welfare-improving forms of investment solutions
- Discuss an application to the design of efficient retirement solutions
- Learn the evidence on return predictability
- Discuss the models, techniques and applications of active multi-asset allocation strategies
- Review the evidence on identifying active managers who are most likely to outperform
Professor Stefano Giglio, Yale School of Management and Professor Lionel Martellini, EDHEC-Risk Institute Director.
Seasoned instructors who combine academic expertise and industry experience