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EDHEC RESEARCH INSIGHTS

A Supplement to INVESTMENT & PENSIONS EUROPE

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Spring 2019

 

RESEARCH FOR INSTITUTIONNAL MONEY MANAGEMENT

A Supplement to PENSIONS & INVESTMENTS

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April 2019

 

EDHEC RESEARCH INSIGHTS

A Supplement to INVESTMENT & PENSIONS EUROPE

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Spring 2018

 

RESEARCH FOR INSTITUTIONNAL MONEY MANAGEMENT

A Supplement to PENSIONS & INVESTMENTS

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March 2018

 

Investment Management Review Special Edition

A Supplement to IMR

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Autumn 2017

 

Research for institutionnal Money Management

A Supplement to PENSIONS & INVESTMENTS

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Avril 2017

 

EDHEC RESEARCH INSIGHTS

A supplement to INVESTMENT & PENSIONS EUROPE

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Spring 2017

 

Research for Institutional Money Management

A Supplement to PENSIONS & INVESTMENTS

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May 2016

 

EDHEC RESEARCH INSIGHTS SPRING 2016 EDHEC-RISK DAYS SPECIAL

INVESTMENT & PENSIONS EUROPE

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Spring 2016

 

EDHEC RESEARCH INSIGHTS SPRING 2016 INVESTMENT & PENSIONS EUROPE EDHEC-RISK DAYS SPECIAL

A Supplement to AsianInvestor

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March 2016

 

RESEARCH FOR INSTITUTIONAL MONEY MANAGEMENT

A Supplement to PENSIONS & INVESTMENTS

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August 2015

 

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Industry Analysis

Feature     A Financially Justifiable and Practical Implementable Approach to Coherent Stress Testing  


In this month's interview, Caroline Prévost discusses the newly launched specialization Investment Management with Python and Machine Learning. She explains why EDHEC-Risk decided to partner with Coursera to develop this online programme and why they chose to explore asset management through the prism of machine learning. She provides further details of the 4 MOOCs delivered and tells us how these online courses fit into ERI's Executive Education offering.


  Insights from the 12th EDHEC European ETF, Smart Beta and Factor Investing Survey Véronique Le Sourd, Senior Research Engineer, EDHEC-Risk Institute      


Feature     Factor Investing in Sovereign Bond Markets: A Time-Series Perspective    


In this month's interview, Laurent Deville, professor of Finance and director of EDHEC Business School’s Financial Economics track, discusses climate change, one of the most important issues we face today, and the role that the finance industry can and should play. He also explains how to better equip students to help them tackle business issues relating to climate change and sustainability, before providing more details about the new programmes dedicated to climate change, sustainability and finance due to be offered by the school as early as the next academic year.


  Sustainable Investing – How Finance Can Help Address the Tragedy of the Horizon Lionel Martellini      


We strongly believe that creating a common language for all actors in the financial system will be helpful in promoting private sector’s contribution to long-term sustainable growth. This paper is an attempt to contribute to this effort by providing clarification and taxonomy with a focus on an investment process perspective. Similar to common practice in investment management, the paper initiates the discussion on the commitment to earning social and environmental returns by drawing on the key distinction between objectives and constraints. The paper then divides into two main sections to discuss the selection process and the allocation process. We hope our paper will provide useful clarification to asset managers and asset owners seeking to promote sustainable investing practices.


Riccardo Rebonato, Professor of Finance, EDHEC-Risk Institute, EDHEC Business School is specialist in interest rate risk modelling with applications to bond portfolio management and fixed-income derivatives pricing. He comments on yesterday FOMC & FED's meeting. The equity markets heaved a sigh of relief after Chairman Powell’s words at the post-FOMC meeting conference, interpreting his remarks as an implicit assurance that (if needed) the policy of the Greenspan / Bernanke / Yellen ‘put’ will be continued under his stewardship. Matters are not quite as straightforward, however, for two important reasons.


Industry Analysis   Second thoughts about adaptive markets David Stevenson, Research Associate, EDHEC-Risk, Chairman, ETF Stream and Columnist for the Financial Times (the Adventurous Investor), Investment Week and Money Week  


  EDHEC-Risk on Factor Investing in Sovereign Bond Universes Jean-Michel Maeso       Factor Investing and Smart Beta in Bond Markets


Industry Analysis   Peak Smart Beta David Stevenson, Research Associate, EDHEC-Risk, Chairman, ETF Stream and Columnist for the Financial Times (the Adventurous Investor), Investment Week and Money Week  


  Why Is the Market Not Believing the Fed? Riccardo Rebonato, Professor of Finance, EDHEC-Risk Institute, EDHEC Business School  


Industry Analysis   Introducing "Flexicure" Retirement Solutions Lionel Martellini, Professor of Finance, EDHEC Business School, Director, EDHEC-Risk Institute Vincent Milhau, , Research Director, EDHEC-Risk Institute   A major crisis is threatening the sustainability of pension systems across the globe


Industry Analysis   Main results from the EDHEC European ETF and Smart Beta and Factor Investing Survey 2018 Véronique Le Sourd, Senior Research Engineer, EDHEC-Risk Institute  


In this interview, we talk to Jaap van Dam, Principal Director of Investment Strategy at PGGM and Member of the EDHEC-Risk Institute Institutional Advisory Board, Kees Koedijk, Dean of TIAS Business School and Alfred Slager, Professor of Pension Fund Management at TIAS Business School and Trustee at SPH, the Dutch pension fund for General Practitioners, about the release of their new book: “ACHIEVING INVESTMENT EXCELLENCE - A Practical Guide for Trustees of Pension Funds, Endowments and Foundations”.


Feature     Do Financial Mistakes by Households Matter for Society? Harjoat S. BhamraRaman Uppal  


  The December ‘dot plot’: even lower future yields than meets the eye Riccardo Rebonato, Professor of Finance, EDHEC-Risk Institute      


  Advances in Financial Technologies and Applications to Investment Solutions for Individuals Maud Gauchon      


Feature     Factor-Based Commodity Investing  


In this month’s interview, Frédéric Bôl, Founder and CEO of Swiss Life REIM (France) and Béatrice Guedj, Head of Research and Innovation at Swiss Life REIM (France) discuss the recent launch of the research chair at EDHEC-Risk Institute supported by Swiss Life REIM (France) on the role of real estate in investment solutions, their hopes for the research that will be conducted within the chair, the changes and challenges in the domain


In the Autumn 2018 Scientific Beta special issue of the Research for Institutional Money Management supplement to Pensions & Investments, we first show that achieving robust exposure to long-term rewarded factors, good diversification of unrewarded risks, and high levels of investability are key requirements for adding value with factor indices. It is clear that this added value is expressed over the long term, but that risk control options can increase the short-term consistency of the outperformance that investors expect.


Industry Analysis   Wheat Futures Contracts: Liquidity, Spreading Opportunities, and Fundamental Factors By Hilary Till Research Associate, EDHEC-Risk Institute; and Principal, Premia Research LLC  


In this month's interview, John Mulvey, Professor of Operations Research and Financial Engineering (ORFE) Department at Princeton University, Anil Suri, Managing Director and Head of Portfolio Analytics & the Innovation Development Center at Merrill Lynch Wealth Management and Lionel Martellini, Professor of Finance at EDHEC Business School and Director of EDHEC-Risk Institute, discuss the newly-launched EDHEC-Princeton goa


  Individuals need flexicurity in retirement solutions Vincent Milhau Uncertain perspectives for the first two pillars of pension systems


Industry Analysis   Applying Goal-Based Investing to the Retirement Issue Lionel Martellini Vincent Milhau John Mulvey    


Industry Analysis   Individual Investment Processes for the 21st Century Arjuna Sittampalam, Editor, IMR Magazine    


Feature   Applying Goal-Based Investing Principles to the Retirement Problem


Industry Analysis   A Portfolio Perspective on the Multitude of Firm Characteristics Victor DeMiguel Alberto Martin-Utrera Francisco J. Nogales Raman Uppal  


Industry Analysis   Retirement Goal-Based Investing Kevin GironLionel Martellini The need for new retirement solutions


Industry Analysis   Multi-Asset Products and Solutions Vincent Milhau  


Industry Analysis Goal-Based Investing and its Application to the Retirement Problem Lionel Martellini Vincent Milhau John Mulvey


In this month’s interview, Laurent Trottier, Global Head of ETF, Indexing & Smart Beta Management, Amundi, comments on the growth of Factor Investing in an institutional context. He tells us about the demand for Smart Beta strategies in equity and also bond markets, and shares his views on the main challenges for asset managers involved in Smart Beta and Factor Investing.    


  Smart Beta and Beyond: Maximising the Benefits of Factor Investing Lionel Martellini Vincent Milhau   Full publication, supported by Amundi ETF, Indexing and Smart Beta, is available here.  


  EDHEC-Risk on Factor Investing for a More Efficient Harvesting of Risk Premia Across and Within Asset Classes Lionel Martellini


Individual Investment Solutions And Other Research - IMR Special Edition Autumn 2017 Arjuna Sittampalam


In this month’s interview, Jean-Louis Laurens, French Asset Management Association (AFG) international ambassador, discusses the recent launch of a partnership at EDHEC-Risk Institute supported by AFG on risk management as a source of performance, as well as the main challenges and perspectives for the French asset management industry and for AFG for the future.  


In the April 2017 issue of the Research for Institutional Money Management supplement to Pensions & Investments, the first article explores a novel approach to address the challenge raised by the standard investment practice of treating attributes as factors, with respect to how to perform a consistent risk and performance analysis for equity portfolios across multiple dimensions that incorporate micro attributes. Our study suggests a meaningful new dynamic approach, which consists of treating attributes of stocks as instrumental variables to estimate betas with respect to risk factors for explaining notably the cross-section of expected returns.


In this article, the problems with equity factor methodologies used by some providers, when they depart from academically accepted practices, are analysed. These include the same provider using different definitions of the value factor at various times. Excessively concentrated bets without adequate diversification are also identified. 


The concepts of factor investing and smart beta are much less developed in bonds compared to equites. In the identification of factors, various difficulties arise. Existing bond indices have serious deficiencies which are partly related to factor exposures being unstable. A broad overview of current first generation smart beta approaches also highlights various weaknesses.


Academic research has come up with a remarkable result of considerable interest to pension funds, using liability-driven approaches. Modern Portfolio Theory advocates that pension plans should invest in two portfolios, a liability-hedging portfolio consisting of fixed income securities and a performanceseeking portfolio exposed to riskier assets. However, the finding is that selecting certain types of equity in the risky portfolio can not only enhance the liability hedging benefits, but can also increase the overall performance. Alternatively, a higher allocation to equities becomes possible with commensurate extra performance with the same liability hedging benefits.


Predicting Risk Premia for Treasury Bonds: The ERI Risk Premium Monitor by Riccardo Rebonato, professor of Finance, EDHEC Business School Investors in the Treasury market often observe an upward-sloping yield curve. This means that, by assuming ‘duration risk’, they can very often invest at a higher yield than their funding cost. Yet, if the steepness of the yield curve purely reflected expectations of future rising rates, no money could on average be made from this strategy. This prompts the obvious question: When does the steepness of the yield curve simply reflect expectations of rising rates, and when does it embed a substantial risk premium?