EDHEC-Risk Institute and Lyxor are launching a three-year research chair entitled “Risk Allocation Solutions” to develop academic insights that can be used towards the design of high-performance multi-asset investment solutions, based on specific investor needs.
Year 1 will focus on the next generation of risk parity, which may suffer from one major shortcoming,namely the fact that it is not explicitly sensitive to changes in economic conditions.
To find optimal ways to allocate risk budgets in investors’ portfolio construction, EDHEC-Risk Institute will in particular develop a dynamic risk allocation approach through three major topics:
Extending standard risk budgeting techniques to time-varying equity and bond volatility levels;
Extending standard risk budgeting techniques to downside risk measures with an asymmetric response to decreases in bond yield levels;
Extending standard risk budgeting techniques to mean-reverting risk premia for equity and bond markets.
The Chair will involve a research team led by Lionel Martellini, Scientific Director of EDHEC-Risk Institute with Vincent Milhau, Deputy Scientific Director. Nicolas Gaussel, CIO of Lyxor and Thierry Roncalli, Head of Quantitative Research will participate in the Scientific Committee of the Research Chair.
Thierry Roncalli, Head of Quantitative Research, Lyxor Asset Management said, “The risk parity approach colours many of the investment strategies on equities, bonds and multi-asset classes in Lyxor. Extending the risk parity approach by taking into account economic changes and the dynamics of risk premia is today a challenge to better manage multi-asset portfolios. At Lyxor, we are happy to collaborate with EDHEC-Risk Institute on the development of these investment solutions, which will bring our clients real added-value.”
Professor Lionel Martellini, Scientific Director of EDHEC-Risk Institute, said, “In the face of recent crises, asset allocation decisions appear as the main source of added value by the investment industry. With the support of Lyxor Asset Management, we very much look forward to advancing research in the different areas covered by this new research chair and assessing the superiority in various economic regimes of conditional risk parity strategies with respect to standard static risk parity techniques.”
To visit our website: www.lyxor.com
About EDHEC-Risk Institute
Since 2001, EDHEC Business School has been pursuing an ambitious policy in terms of international research. This policy, known as “Research for Business”, aims to make EDHEC an academic institution of reference for the industry in a small number of areas in which the school has reached critical mass in terms of expertise and research results. Among these areas, asset and risk management have occupied privileged positions, leading to the creation in 2001 of a major research facility: EDHEC-Risk Institute. This institute now boasts a team of 90 permanent professors, engineers and support staff, as well as 48 research associates from the financial industry and affiliate professors.
EDHEC-Risk Institute is located at campuses in Singapore, which was established at the invitation of the Monetary Authority of Singapore (MAS); the City of London in the United Kingdom; Nice and Paris in France; and New York in the United States.
The philosophy of the institute is to validate its work by publication in prestigious academic journals, but also to make it available to professionals and to participate in industry debate through its Position Papers, published studies and conferences. Each year, EDHEC-Risk organises three conferences for professionals in order to present the results of its research, one in London (EDHEC-Risk Days Europe), one in Singapore (EDHEC-Risk Days Asia), and one in New York (EDHEC-Risk Days North America) attracting more than 2,500 professional delegates.
To ensure the distribution of its research to the industry, EDHEC-Risk also provides professionals with access to its website, www.edhec-risk.com, which is entirely devoted to international risk and asset management research. The website, which has more than 58,000 regular visitors, is aimed at professionals who wish to benefit from EDHEC-Risk’s analysis and expertise in the area of applied portfolio management research. Its monthly newsletter is distributed to more than 1.5 million readers.
EDHEC-Risk Institute also has highly significant executive education activities for professionals. In partnership with CFA Institute, it has developed advanced seminars based on its research which are available to CFA charterholders and have been taking place since 2008 in New York, Singapore and London.
EDHEC-Risk Institute has an original PhD in Finance programme which, in addition to its highly selective residential track for young talents worldwide, has an executive track for high level professionals who already have master’s degrees from prestigious universities and significant industry experience. These professionals are looking to go beyond their usual activities in order to develop research on the concepts that are relevant to their occupation. Complementing the core faculty, this unique PhD in Finance programme has highly prestigious affiliate faculty from universities such as Princeton, Wharton, Oxford, Chicago and CalTech.
In 2012, EDHEC-Risk Institute signed two strategic partnership agreements with the Operations Research and Financial Engineering department of Princeton University to set up a joint research programme in the area of risk and investment management, and with Yale School of Management to set up joint certified executive training courses in North America and Europe in the area of investment management.
Building on its experience in the area of beta analysis and creation, EDHEC-Risk Institute has also created ERI Scientific Beta, which aims to be the leading provider of advanced beta for the investment industry. This initiative is based on all of the research conducted by EDHEC in the area of indices and benchmarks
About Lyxor Asset Management
A global specialized asset manager
Lyxor Asset Management, a subsidiary of Societe Generale Group, was founded in 1998. With over 600 professionals worldwide, Lyxor manages close to 100 Bn* of assets across four performance drivers: Alternative Investments, ETFs & Indexing, Multi-Asset Investments and Structured Investments.
Our investment specialists deliver asset management and advisory solutions, in all asset classes, to institutional investors. With a strong culture of risk-management and research, Lyxor stands amongst the leaders in innovative, transparent and flexible asset management.
* USD 98bn, equivalent to EUR 74bn - AuMs as of August 31th, 2013
Lyxor’s Business Model: performance anchored on Research and Risk Management
Lyxor’s unique positioning within Societe Generale, has enabled it to develop a culture of excellence and become a leader in each of its four areas of expertise. Lyxor’s model anchored on independent research and on cutting edge risk management, allows it to provide investors with expert investment solutions.
Focusing on the most dynamic sectors of the asset management spectrum, from beta to alternative alpha with ETFs & Indexing, Alternative, Multi-Asset and Structured investments, Lyxor is consistently recognized by the industry for the quality and innovation of its offering. Moreover, Lyxor has demonstrated dynamic growth since its creation with an average annual AuM growth of 30% between 2000 and 2011 (in EUR).
Advanced Risk Management:
Lyxor’s ability to offer transparent and sustainable sources of performance results from its established experience in risk management. Lyxor’s independent risk department thus conducts independent risk monitoring throughout the lifecycle of all investments, based on rigorous portfolio management processes and continual oversight.
An independent 30-people strong risk management department supervises risk during the entire lifecycle of any investment solution;
In Alternative, Indexing, Multi-Asset or Structured investments, Lyxor’s investment solutions all have to address risk issues. Lyxor’s Risk Management professionals define the appropriate portfolio management parameters (investment limits, procedural framework, and methodology) and design monitoring tools enabling optimum risk management and analysis.
Lyxor’s investment solutions are based on research in macroeconomics, quantitative and alternative investments. Recognized in the industry and among academics alike for its publications, white papers and proprietary portfolio management models, Lyxor’s research focus ensures constant innovation across all areas of expertise.
The close synergies established between portfolio managers and Lyxor’s independent research department ensure the robustness of every investment process and allow for the development of reliable and innovative investment solutions in each of Lyxor’s areas of expertise. 20 research professionals are exclusively dedicated to providing macro-economic, alternative and quantitative research across all Lyxor businesses. Lyxor Research’s comprehensive missions involve hedge fund sourcing and selection, cross-asset investment strategy, risk analysis, and the design of new proprietary models. It also ensures regular presentations and academic publications (White Paper Series) to communicate best practices and asset management methodologies to the industry. By focusing on critical topics such as portfolio construction, asset allocation and risk measurement, it leads to the development of new quantitative strategies and financial models that can be directly applied to Lyxor's investment solutions.