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First Annual Advances in Asset Allocation Seminar


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  • 1. First Annual Advances in Asset Allocation Seminar London, 17-19 March 2008, The Dorchester Asset Management Education
  • 2. First Annual Advances in Asset Allocation Seminar - London, 17-19 March 2008, The Dorchester The Choice of Asset Allocation õ Having learnt in recent years about the limited payoffs and õ Together with CFA Institute, the EDHEC Risk and Asset Management significant risks of excessive reliance on asset selection models, Research Centre is introducing an annual event that will take stock of investment managers and institutional investors are showing the latest research advances and clarify the distinction between true unprecedented interest in asset allocation approaches as sources of innovation and mere marketing claims in emerging industry trends. performance. Concurrently, the emergence of alternative asset classes CFA Institute is the world’s leading association of investment with risk profiles that are very different from those of traditional professionals and has been an unwavering promoter of higher industry investments is creating new opportunities for asset allocation in both standards for more than 60 years. conceptual and operational terms. õ In the brave new world of investment management, astute investors dynamically allocate their funds between a core of passive vehicles and actively managed satellites. While the core of the portfolio closely tracks a benchmark that is representative of the investor’s strategic asset allocation, satellite funds make greater use of alternative betas and are given leeway to work as alpha-factories. Return variation between funds õ It is against this backdrop that the EDHEC Risk and Asset 45.5% - Tactical Asset Allocation Management Research Centre has structured its work on asset 3.5% - Fees 40% - Strategic Asset Allocation allocation. Now regarded as the premier European centre for applied 11% - Stock Picking financial research, it plays a noted role in furthering asset allocation Source: EDHEC (2002) concepts and techniques and systematically highlighting their practical and Ibbotson, Kaplan (2000) uses to the investment management industry.
  • 3. First Annual Advances in Asset Allocation Seminar - London, 17-19 March 2008, The Dorchester First Annual Advances in Asset Allocation Seminar õ The inaugural Advances in Asset Allocation seminar is an intensive three-day course which will provide participants with an in-depth appreciation of the concepts and techniques that will shape the future of investment management as well as equip them with practical tools to improve asset allocation processes, implement novel investment management approaches, and develop new products. õ The seminar addresses estimation issues and model shortcomings to optimise portfolio construction in a world that does not conform to the tenets of modern portfolio theory. It explores optimal risk budgeting techniques in the context of core-satellite investing and applies them to the design of long-only absolute return funds and new liability driven investment (LDI) solutions. It also looks at the potential of alternative classes and strategies as diversification and substitution vehicles and imparts research-based insights into the Fundamental Index® strategy, optimal benchmarks, and efficient indices. õ Presented in a highly accessible manner by a team of instructors with established reputations for bringing together academic expertise and industry experience, the seminar balances exploration of new models and approaches with applications and case studies.
  • 4. First Annual Advances in Asset Allocation Seminar - London, 17-19 March 2008, The Dorchester Key Learning Benefits Who Should Attend õ Bridge the gap between modern portfolio theory and practical õ The programme is intended for investment management portfolio construction to build stable models: find out how to make professionals who advise on or participate in the design and parameter estimation manageable and reliable, discover how to implementation of asset allocation policies and portfolio account for non-normality, asymmetric risk preferences, parameter models and for sell-side practitioners who develop new asset uncertainty and views in portfolio construction. management and ALM solutions for investors. It should be of particular interest to practitioners with the following functions õ Use risk budgeting and dynamic core-satellite allocation to refine and from the following types of institutions. the investment management process and design new investment solutions: explore static and dynamic risk budgeting in a benchmark- relative and core-satellite framework, understand how to engineer portable alpha and portable beta strategies, learn to design long-only Functions absolute return funds and dynamic LDI solutions. Chief investment officer/Director of investments Head of asset allocation õ Implement new forms of alternative diversification to optimise Head of new product development/ the risk-return characteristics of the core portfolio: assess the structured products/institutional solutions return enhancement and risk reduction advantages of adding Head of research alternative investments to asset management (AM) and asset-liability Portfolio/Fund manager management (ALM) portfolios, find out how to select alternative Senior advisor/consultant investments to maximise diversification, learn to implement optimal Senior investment officer substitution strategies. Institutions õ Analyse the Fundamental Index® strategy, optimal benchmarks Asset management companies and efficient indices and assess their potential for asset allocation: Consultancies Family offices understand the limitations of traditional stock market indices, assess Insurance companies the Fundamental Index® strategy, learn to design optimal benchmarks, Investment banks discover efficient indices. Pension funds, endowments and foundations Private banks
  • 5. First Annual Advances in Asset Allocation Seminar - London, 17-19 March 2008, The Dorchester Seminar Faculty Praise for Seminar Noël Amenc, PhD Lionel Martellini, PhD Bernd Scherer, PhD Faculty’s Latest Books “Dr Scherer has written a book that bridges the gap between classical MPT theory and the practical application Noël Amenc is Professor of Finance and Dean of Lionel Martellini is Professor of Finance at EDHEC Bernd Scherer is Managing Director and Global of MPT portfolio construction Research at EDHEC Business School and Director Business School and Scientific Director of the Head of Quantitative Structured Products at techniques. It is highly of the EDHEC Risk and Asset Management EDHEC Risk and Asset Management Research Morgan Stanley (London). recommended to the professional Research Centre. Centre. and academic communities.” He was previously in charge of Quantitative Stefan Hartmann, Global Head of Quantitative Analysis, ABN AMRO Before joining EDHEC Business School full-time, Lionel has served as a consultant for various Research and Portfolio Engineering at Deutsche Noël was Head of Research with Misys Asset institutional investors, investment banks, and Asset Management (New York). Bernd is widely Management Systems. Prior to this, he was the asset management firms both in Europe and in regarded as an expert on asset valuation, “A wonderful step forward president of SIP SA, a portfolio management the United States on questions related to risk portfolio construction, strategic asset allocation in portfolio management software company he founded, developed and management, alternative investment strategies, and asset liability modelling. texts! The material is well laid sold. and asset allocation decisions in the absence He is the author of four books on mathematical out, up-to-date, and strikes and in the presence of liability constraints and modelling of portfolio construction and risk a welcome balance between Noël has conducted research in the fields of performance benchmarks. His research has been management including the bestselling Portfolio presenting the academic quantitative asset management, portfolio published in leading academic and practitioner Construction and Risk Budgeting (Risk Books) and background for topics and performance analysis, and asset allocation journals including Management Science, has published over 50 articles in academic and providing a good feel for and published numerous articles in academic Review of Financial Studies, European Financial practitioner journals such as Financial Analysts current industry practice.” and practitioner journals such as Journal of Management, Financial Analysts Journal, and Journal, Journal of Portfolio Management, Risk, Terry Marsh, President and CEO, Quantal International and Emeritus Portfolio Management, Journal of Performance Risk. He sits on the editorial board of the Journal Journal of Investment Management and Journal Professor of Finance, University of California, Berkeley Measurement, Journal of Asset Management, and of Portfolio Management and the Journal of of Asset Management. Financial Analysts Journal. He has co-authored Alternative Investments. four books on quantitative equity management, Bernd serves as adjunct professor at several “The authors have produced portfolio management, performance analysis, Lionel has co-authored and co-edited reference universities worldwide and is a much sought- a work of the very highest and hedge funds including the notable Portfolio texts on fixed income management and after speaker in industry conferences. He holds quality. As focused as it is Theory and Performance Analysis (Wiley Finance). alternative investment such as the much- graduate degrees in economics and business comprehensive, this is a superb Noël is an Associate Editor of the Journal of praised Fixed-Income Securities: Valuation, Risk administration as well a PhD from the University contribution to the literature.” Alternative Investments and a member of the Management and Portfolio Strategies (Wiley of Giessen. Moorad Choudhry, Head of Treasury at KBC scientific advisory council of the AMF, the French Finance) and is regularly invited to deliver Financial Products and Senior Fellow, Centre presentations at leading academic and industry for Mathematical Trading and Finance, CASS financial markets authority. He holds graduate Business School degrees in economics, finance and management conferences. He holds graduate degrees in and a PhD in finance. business administration, economics, statistics and mathematics, as well as a PhD in finance from the Haas School of Business at UC Berkeley.
  • 6. First Annual Advances in Asset Allocation Seminar - London, 17-19 March 2008, The Dorchester Improving Portfolio Construction Day One in a Non-Markowitz World Bridging the Gap between Modern Portfolio Theory and Portfolio Construction Objectives: understanding when and why modern portfolio theory fails in the real world, making covariance matrix estimation manageable and improving parameter estimates, implementing alternative portfolio models integrating non-normality risks, parameter uncertainty, and realistic risk preferences, using Bayesian analysis in portfolio construction. Short application cases are used throughout the day to help participants synthesise concepts and master techniques. From portfolio theory to portfolio construction—limits of the Dealing with non-normality risks and asymmetric risk preferences Markowitz model õ Measures, statistical significance, and persistence of non-normality risks: õ Feasibility issues: Markowitz optimisation as a formidable econometric problem recognising when non-normality matters and when it should be taken into account. yielding noisy and unstable results. õ Partial moments and how they allow incorporation of deviations from õ Relevance issues: how theoretical assumptions about investor behaviour and return normality in portfolio construction: partial moments as behaviour-motivated distributions compare to empirical facts; how differences affect portfolio construction; measures of risks; defining and measuring partial moments; avoiding error Markowitz portfolios in the asset management and ALM contexts and why they are maximisation in estimation; portfolio optimisation using lower partial moments as sub-optimal. risk measures. õ Scenario optimisation as a tool to account for non-normality and parameter uncertainty: utility- and risk-based scenario optimisation; scenario generation. Examples include optimising with mean-absolute deviation, minimum regret, and Implementing and improving parameter estimation conditional Value-at-Risk. õ Covariance matrix estimation and state-of-the art factor models: reducing dimensionality and estimating the covariance matrix with explicit-, implicit-, and explicit/implicit factor models. õ Advanced techniques to address autocorrelation: de-smoothing the returns Using Bayesian analysis in portfolio construction of illiquid sectors and asset classes (small caps, real estate, private equity, hedge õ Basics of Bayesian analysis; applying Bayesian analysis to combine historical funds); conditional estimation of parameters with autoregressive conditional estimates and non-sample views of varying reliability; the Black-Litterman model as heteroskedasticity and state-dependent models. a special case; using Bayesian analysis to extract the full information from time series of different lengths. õ Dealing with low-frequency and low-density data: improving estimation with portfolio resampling.
  • 7. First Annual Advances in Asset Allocation Seminar - London, 17-19 March 2008, The Dorchester Advanced Risk Budgeting and New Forms of Alternative Day Two Day Three Dynamic Core-Satellite Allocation Diversification, Indices and Benchmarks Risk Budgeting and the Core-Satellite Framework New Forms of Alternative Diversification Objectives: understanding the risk budgeting approach in the asset-only and asset-liability Objectives: understanding the return enhancement and risk reduction benefits of alternative environments, measuring and decomposing risk, realising the benefits of the core-satellite investments in long-only portfolios, asset management and ALM perspectives, alternative organisation for risk allocation, implementing portable alpha and portable beta strategies in investments for optimal diversification, alternative strategies for optimal substitution. the core-satellite framework. Short application exercises are complemented by two case studies helping participants to Short application cases are used throughout the module. thoroughly understand how to apply optimal alternative diversification and substitution strategies. õ Risk management: asset vs. risk allocation, absolute vs. relative-return risk, asset vs. liability- relative risk budgeting. õ Alternative investments in the core portfolio: return enhancement vs. risk reduction benefits; õ Risk budgeting: measuring and decomposing risk; benefits of the core-satellite organisation alternative investments as diversification and substitution vehicles; alternatives in asset management (clarifying the sources of value added, optimising management fees and/or transaction costs, and ALM perspectives. simplifying alpha selection and management); financial engineering and core-satellite architecture õ Optimal risk diversification: selecting alternative classes and strategies to maximise diversification; (beta management and portable betas, portable alpha, completeness portfolio). measuring and managing higher-moment benefits; recognising the challenges of beta management. Case study: designing optimal diversifiers for equity and bond portfolios. õ Optimal substitution: Displacing traditional assets with alternative investments—an optimal use of beta sources, dynamic management of the alpha and beta risk budgets. Dynamic Core-Satellite Management and New Investment Offerings Case study: optimal substitution strategy for long and long/short equity portfolios. Objectives: understanding how to use dynamic core-satellite investing to achieve dissymmetric management of the risk budget and implement absolute return strategies, developing dynamic strategies for the asset management and the ALM worlds. Short application exercises are complemented by two capstone cases helping participants to New Forms of Indices and Benchmark “put the pieces together” and honing their abilities to design and implement radical investment Objectives: understanding the limitations of traditional stock market benchmarks and exploring management innovations. alternative solutions; assessing the Fundamental Index® strategy, optimal benchmarks and efficient indices. õ Dynamic core-satellite allocation: principles, derivation and implementation of the model. Short application cases are used throughout the module. Illustrations include non-linear payoff management, asymmetric tracking error management, asymmetric de-correlation, and optimal substitution. õ The Fundamental Index® strategy: reviewing the rationale for non-cap-weighted indexing; õ Asset management case study: designing long-only absolute return funds with dynamic core- understanding and assessing the RAFI® methodology; performing return-based style analysis of RAFI® satellite management. portfolios in search of low-cost alternatives. õ Asset-liability management case study: developing dynamic liability-driven investment products. õ Optimal benchmarks: designing optimally diversified benchmarks with sector and style indices. õ Efficient indices: introducing new forms of diversity-weighted indices (constant correlation and constant volatility approaches, stochastic portfolio, etc.).
  • 8. First Annual Advances in Asset Allocation Seminar - London, 17-19 March 2008, The Dorchester About the Organisers “ CFA Institute is the global, not-for-profit With 111 permanent professors and over 4,700 professional association that administers the students, the EDHEC Group is one of the leading Chartered Financial Analyst (CFA) curriculum and EDHEC has demonstrated in a very short time a level business schools in Europe. Founded in 1906, it has examination program worldwide, publishes research, of commitment to, and excellence in, the research of earned the triple crown of international academic conducts professional-development programmes, alternative assets. (…) EDHEC pushes me to maintain accreditations (AACSB, EQUIS, AMBA). and sets voluntary, ethics-based professional and my professional skills at the highest level. performance-reporting standards for the investment Mark Anson, CFA, CPA, CAIA The EDHEC Risk and Asset Management Research industry. President and Executive Director, Investment Service, Nuveen Investments Centre conducts world-class academic research and highlights its applications to the investment As part of its commitment to professional management industry. The centre’s team of 35 By consistently delivering academic work with excellence, it has developed the Advances in Asset researchers carries out five industry-sponsored remarkable added value for the industry, the EDHEC Allocation Seminar jointly with EDHEC Business programmes focusing on asset allocation and risk Risk and Asset Management Research Centre has School specifically for senior-level investment established itself as the premier European centre for management in the traditional and alternative professionals. applied financial research. investment universes. Alain Dubois, CFA Institute has more than 95,000 members in 133 Chairman, Lyxor Asset Management The centre systematically seeks to validate countries and territories, including the world’s 82,000 the academic quality of its research through charterholders, as well as 135 affiliated professional I have been following the research that EDHEC-Risk publications in leading scholarly journals and societies in 56 countries and territories. has been doing during the past few years with great implements a multifaceted policy to optimise interest. The research programme is of high academic exchanges with the industry. It maintains a CFA Institute is headquartered in Charlottesville, VA, quality but is nevertheless always relevant and website ( devoted to USA, with regional headquarters in London, Hong applicable from a practitioner’s point of view. asset management research for professionals, “ Kong, and New York. More information may be Erik Valtonen, circulates a monthly newsletter to over 125,000 Chief Investment Officer, AP3 found at practitioners, conducts regular industry surveys and consultations, organises research conferences for the industry, and delivers executive education programmes to hundreds of institutions yearly.
  • 9. First Annual Advances in Asset Allocation Seminar - London, 17-19 March 2008, The Dorchester Continuing Education Credits Registration and Fee Information EDHEC Asset Management Education is registered with CFA Institute as an Approved Provider of the Continuing Education Programme. This seminar qualifies for 20 CE credits Fees (exc.VAT) under the guidelines of the CFA Institute Continuing Education Programme. Please see Seminar Fee: €6,000 for more information. CFA Institute Member/Candidate Rate: €5,000 VAT at a rate of 19.6% applies to sales to EU residents, Schedule to companies based in France, and to EU institutions A typical programme day lasts from 8:30 to 18:00 and is usually divided into lectures, case without a VAT number. Non-EU residents/companies studies, and discussions. The two class sessions in each half-day period are separated by are not liable to VAT. thirty-minute refreshment breaks scheduled at 10:30 and 15:30. Lunch is served at 12:30. Fees include instruction, teaching materials, refreshments at breaks, and lunches. Accommodation is not included. Venue Overlooking Hyde Park, The Dorchester is one of the world’s most sought after hotels. Billing and payment A luxury Mayfair hotel of great repute, it embodies the highest of traditional values and The fee is billed following registration and must be offers the latest technology. settled before the programme begins. Payment can The Dorchester, Park Lane, London W1K 1QA, England, be made by credit card or wire transfer. Tel: +44 (0) 207 629 8888, Fax: +44 (0) 207 629 8080 Transfer or cancellation Further Information Transfer of registration to a colleague, upon written notice, is allowed and free of charge. and Registration Transfer of registration fees to another EDHEC For further information, Asset Management Education programme must be contact Mélanie Ruiz at: requested in writing and is subject to the following or charges: 45 to 30 days’ notice: 15% of the tuition on: +33 (0) 493 187 819 fee; 29 to 11 days’ notice: 30% of the tuition fee; 10 days’ notice or less: 50% of the tuition fee. To apply for registration, log on to: Cancellations of confirmed seats must be received in writing and are subject to the following charges: 45 to 30 days’ notice: 25% of the tuition fee; 29 to 11 or send the completed application form: days’ notice: 50% of the tuition fee; 10 days’ notice by email to: or less: 100% of the tuition fee. by fax to: +33 (0) 493 184 554 by post to: Mélanie Ruiz EDHEC AM Education 393-400 Promenade des Anglais 06202 Nice Cedex 3 - France Fundamental Index® and RAFI® are trade marks of Research Affiliates, LLC.