Presentation of the Partner

About ORTEC Finance

Ortec Finance is a global provider of technology and advisory services for risk and return management. Established in Rotterdam in 1981, Ortec Finance has 160 employees who combine mathematical ability, business awareness, and practical application to deliver innovative and pragmatic solutions. Our client base operates in the pension, investment management, insurance and private wealth management markets, and is long-standing and global.

We help improve investors’ decision making and decision monitoring. We design, build, and apply solutions for assetliability management, risk management, performance measurement and attribution and private wealth management. Our solutions derive from the combination of software models and professional advisory services.

Our ALM is founded on a methodology that has been developed over the last 20 years and is based on stochastic analysis of both assets and liabilities. Ortec Finance’s Risk Management Solution starts where ALM finishes and provides a continuous ex ante and ex post overview of the risks in a holistic, objective and transparent way.

Ortec Finance is leading in innovation through strong ties with the academic community

 

Presentation of the Partnership

Objectives

The ORTEC Finance “Private Asset-Liability Management” Research Chair is a three-year research programme piloted by a joint ORTEC Finance/EDHEC-Risk Institute committee focused on understanding the application of Asset-Liability Management (ALM) methodology in Private Wealth Management (PWM).

Under the scientific responsibility of Lionel Martellini, the Scientific Director of EDHEC-Risk Institute, first-year research will focus on the superiority of the ALM approach in private wealth management (PWM), with special attention being given to the Life Cycle asset allocation developed in the academic literature over the past decade.

Subsequent research in the course of the three-year project will examine the shortcomings of current PWM practices, putting them in perspective in relation to best practices for Private ALM, and also look at the consequences of high levels of inflation for Private ALM. The latter will involve general inflation (global price index) or particular cases of inflation, e.g. the inflation exposure of HNWIs.

[Consult the press release announcing the launch of the research chair: 22/09/08]

 

Research Outputs:

“EDHEC-Risk European Private Wealth Management Survey“; Noël Amenc, Sergio Focardi, Felix Goltz, David Schröder, Lin Tang; November 2010

The EDHEC-Risk European Private Wealth Management Survey has been completed as part of the second year of the research chair.

The research for the first year of the chair showed that taking an ALM approach to private wealth management has great implications for the design of optimal portfolios. ALM has a direct impact on the selection of asset classes, as it leads to a focus on the liability-hedging properties of asset classes. In a conventional asset-only perspective, after all, the risk-free asset for any investor is cash, whereas in ALM the risk-free asset is not unique. It is the asset that best hedges the future consumption needs of the investor. These insights have great implications for the ways private wealth managers should go about providing solutions to clients, and the second year’s research looks into whether private wealth managers actually recognise these implications.

“Asset-Liability Management in Private Wealth Management“; Noël Amenc, Lionel Martellini, Vincent Milhau, Volker Ziemann; September 2009

The study argues that asset-only asset allocation models fail to account for the presence of investment and/or consumption goals and objectives, such as preparing for retirement or acquiring property. It instead provides a formal framework suggesting that asset-liability management can ensure that private wealth managers are able to offer their clients investment programmes and asset allocation advice that truly meet their needs.

[Press release announcing the results of the study: 28/09/09]

“Reactions to an EDHEC Study on Asset-Liability Management Decisions in Private Wealth Management“, Noël Amenc, Felix Goltz, David Schröder, October 2008

This report covers the industry reactions to an EDHEC-Risk study entitled “Asset-Liability Management Decisions in Private Banking“. That paper discussed the sources of added-value in private wealth management, and argued through a series of illustrations that asset-liability management is the natural approach for the design of truly client-driven services in private banking.

The objective of the current paper is to compare the conclusions drawn by the “Asset-Liability Management Decisions in Private Banking” study with current industry perceptions. The basic question we are asking is: what do practitioners think about using asset-liability management in private wealth management?

[Press release announcing the results of the survey: 06/10/08]

Related Research:

“Asset-Liability Management Decisions in Private Banking“; Noël Amenc, Lionel Martellini, Volker Ziemann; February 2007.
“The Benefits of Hedge Funds in Asset Liability Management“; Lionel Martellini, Volker Ziemann; September 2005.

 

ORTEC Finance Analysis:

ALM the solution for risk management and client-centered advice in Private Wealth Management (April 2009):