To date, EDHEC-Risk Institute has conducted two research projects on structured investment strategies with the support of Société Générale Corporate & Investment Banking (SGCIB):
This research in 2005 documented the relevance of structured products in institutional investment. It looked at structured products used in institutional management, explained their correspondence with dynamic trading strategies, and documented their diversification benefits using a guaranteed structured product as illustration. This was the first academic study to look at the place of structured products in institutional investors’ portfolios. The study’s empirical findings showed that investing in the guaranteed structured product generated considerable improvement in the efficient frontiers depicting the risk return trade-offs of institutional investors. It accordingly advocated that institutional investors make significant allocations to structured investment strategies.
The objective of this strategic research project is to develop a framework for the comparative analysis of various forms of allocation to equities, including new structured forms of investment management, from an institutional asset allocation and risk management standpoint.
The research will build on the earlier work conducted above whose approach focused on relatively simple structured payoffs. The aim of this new project is to extend the analysis to structured forms of investment management involving in particular a target volatility for the risky underlying asset as well as the introduction of short option positions, both of which initiatives aim at reducing the opportunity cost of downside risk protection.