Edhec-Risk Institute NWL
November, 2017

Editorial
Lionel Martellini

Launch of EDHEC-Risk’s new website
EDHEC-Risk Institute is launching a new website, with a focus on investment solutions. The launch of the website takes place at a moment when the investment management industry is 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 three main dimensions, which are reminiscent of industrial revolutions that have impacted other industries: mass production, mass customisation, mass distribution. More...


Table of Contents

5. News
6. Events

FEATURE

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? More...


INTERVIEW
Jean Louis Laurens

"We are convinced that French asset managers are at the forefront of innovation" - an interview with Jean-Louis Laurens
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. More...


Industry Analysis

Individual Investment Solutions and Other Research - IMR Special Edition Autumn 2017
In the special edition of Investment Management Review (IMR) some recent EDHEC insights into important topics are outlined. A large proportion of this edition is devoted to two papers on individuals’ retirement investing. If adopted by the industry, they should have a radical impact on individual investment management. The two papers on the goals-based framework and mass customisation together are applicable to the entire wealth spectrum of individuals with the former covering the mass affluent upwards and the latter addressing the needs of the investor closer to the average. They will provide tailor-made solutions currently not available except to the wealthiest. More...

Equity Portfolios with Liability-Hedging Benefits
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 performance-seeking 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. More...

Bond Risk Premia: The New Frontier in Factor Investing and Smart Beta
The concepts of factor investing and smart beta are much less developed in bonds compared to equities. 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. More...

Factor-Based Approaches to the Design of Smart Bond Portfolios
The difficulties of measuring and identifying factors are referred to in this article. A review is carried out of the most consistently identified fixed income factors and it is pointed out that more research is required before bond risk factors can be reliably used in efficiently extracting risk premia. More...

Be Serious with Equity Factor Investing
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. More...


IN VIDEO

"Risk Premia in Equity Markets" - with Professor Lionel Martellini. While cap-weighted indices are often used as default options for equity benchmarks, they suffer from two main shortcomings, namely poor diversification of unrewarded risks and poor exposure to rewarded risk factors.

"Perspectives on Retirement Investing"
- an Interview with Mark Fawcett, CIO of the UK’s National Employment Savings Trust (NEST), Chairman of ERI’s IAB, tells us about retirement investing challenges in the UK, and EDHEC-Risk’s contribution to the industry.

Risk Premia in Equity Markets by Lionel Martellini

Perspectives on Retirement Investing by Mark Fawcett

"EDHEC-Princeton Goal-Based Investing Indices" - Anil Suri, Managing Director, Head of Portfolio Construction & Investment Analytics, Merrill Lynch Wealth Management expresses the need for new indices for goal-based investment solutions.

"Introducing the EDHEC Bond Risk Premium Monitor" - Riccardo Rebonato, Professor of Finance at EDHEC Business School, introduces a tool to derive a state-of-the-art estimation of the risk premia in bond markets using market and monetary policy information.

EDHEC-Princeton Goal-Based Investing Indices by Anil Suri

Introducing The EDHEC Bond Risk Premium Monitor by Riccardo Rebonato

Learn more in video by subscribing to our YouTube channel.


News
Advances in Asset Allocation seminar

The Advances in Asset Allocation seminar: the new blended-learning programme
The Investment Solutions course is designed to be an introduction to the technical and conceptual challenges involved in the design of innovative forms of welfare-improving investment solutions, building upon the expertise developed within EDHEC-Risk Institute over the last 15 years. Emphasis will be made on real world examples of application and on the development of problem-solving skills through the use of dedicated portfolio simulation/construction tools. More...

Launching Investment Solutions YouTube Channel

Launch of an Investment Solutions YouTube Channel
Digital disruption is impacting the Investment Management industry, but also research and education. EDHEC-Risk Institute intends to make the most of it by launching its YouTube channel, and aims to create thought-leading playlists for industry players. More...

Advisory Board

EDHEC-Risk Institute welcomes five distinguished new members to its international advisory board
EDHEC-Risk Institute is pleased to announce that five members have joined its international advisory board. The role of the international advisory board is to validate the relevance and goals of the research programme proposals presented by the institute’s management and to evaluate research outcomes with respect to their potential impact on industry practices. The five new members are as follows. More...


EVENTS

Advances in Asset Allocation new Blended Learning Programme, London, 14 February, 2018

Four-University Rotating FinTech Conference: Wealth Management Systems for Individual Investors, Seoul, 12/13 April, 2018


Press Review

EDHEC-Risk Institute has been cited widely in the business and industry press. A selection of articles may be found below.

  • "Volatility fears push investors into factor strategies", Insitutional Investor (02/10/2017) More...

  • "Why investors — and advisers — need to question myths about their performance", MarketWatch (28/09/2017) More...

  • "Ethical investment is booming. But what is it?", The Economist (21/09/2017) More...

  • "Sin-Stock Returns Without the Sin Stocks", Barrons (11/09/2017) More...

  • "Investors Can Be Ethical and Still Beat the Market, Study Says", Bloomberg (11/09/2017) More...

  • "EDHEC-Risk Institute welcomes 5 distinguished new members to its international advisory board Investment Europe", Financial Investigator (07/09/2017) More...

  • "People moves", IPE (07/09/2017) More...

  • "Retirement planning needs a tailored, solution-based approach", WealthAdviser (22/08/2017) More...

  • "The Absurdity of Asset Allocation Studies", Advisor Perspectives (14/08/2017) More...

  • "Till and Heckinger on Commodity Debacles, Part I & II ", AllAboutAlpha (06/08/2017) More...

  • "Capital markets: Investors assess the challenge of QE exit volatility", Euromoney (01/08/2017) More...


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About EDHEC-Risk Institute:

Established in 2001, EDHEC-Risk Institute has become the premier academic centre for industry-relevant financial research. In partnership with large financial institutions, its team of close to 30 permanent professors, engineers, and support staff, and 39 research associates and affiliate professors, implements 7 research programmes and 6 research chairs, industrial partnerships and private research projects focusing on asset allocation and risk management and has developed an ambitious portfolio of research and educational initiatives in the domain of investment solutions for institutional and individual investors.

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