Academic Roots & Practitioner Reach

EDHEC-Risk InstituteLondon — Nice

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For more than 15 years EDHEC Business School

has been pursuing an ambitious policy in

terms of practically relevant academic research.

This policy, known as “Make an Impact”, 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, investment management

has occupied a privileged position, leading to the

creation in 2001 of EDHEC-Risk Institute, which has

developed an ambitious portfolio of research and

educational initiatives in the domain of investment

solutions for institutional and individual investors.

EDHEC-Risk plays a noted role in furthering applied

financial research and systematically highlighting

its practical uses. As part of its “Make an Impact”

signature, the research institute maintains a

dialogue with professionals that benefits the

industry as a whole. At the same time, its proprietary

R&D provides sponsors with an edge over the

competition and joint ventures allow selected

partners to develop new business opportunities.

Building on the cutting-edge research of the

faculty, EDHEC-Risk Institute creates programmes

to help executives level up their financial expertise

on topics of considerable interest in the asset

management industry: factor investing, goal-based

investing, sustainable investing, data science and

machine learning.

In 2012, EDHEC-Risk Institute signed two strategic

partnership agreements with the Operations

Research and Financial Engineering department

of Princeton University for research and outreach

initiatives 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 risk and

investment management.

EDHEC-Risk Institute boasts a team of permanent

professors, engineers and support staff, and counts

a large number of affiliate professors and research

associates from the financial industry among its

ranks.

To ensure that its activities meet the highest

academic standards and truly benefit the industry,

EDHEC-Risk Institute subjects its activities to strict

validation processes. The scientific quality and

operational relevance of the Institute’s research

programmes are guaranteed by the centre’s

management structure and the oversight exercised

by the leading experts serving on its international

advisory board.

The following pages will provide you with a brief

introduction to the activities carried out by

EDHEC-Risk Institute. The Institute’s team is

available to help you analyse the ways in which you

could tap into its expertise for the benefit of your

organisation.

Emmanuel Métais, Dean,EDHEC Business School

Make an Impact

@EDHECRisk#MakeFinanceUsefulAgain

The Need for Investment Solutionsand Risk Management

Investment management is justified as an industry only to the extent that it can demonstrate a capacity to add value through the design of dedicated and meaningful investor-centric investment solutions, as opposed to one-size-fits-all manager-centric investment products. After several decades of relative inertia, the much needed move towards investment solutions has been greatly facilitated by a true industrial revolution triggered by profound paradigm changes in terms of (1) mass production of cost- and risk-efficient smart factor indices; (2) mass customisation of liability-driven investing and goal-based investing strategies; and (3) mass distribution, with robo-advisor technologies.

In parallel, the investment industry is strongly

impacted by two other major external revolutions,

namely the digital revolution and the environmental

revolution.

In this fast-moving environment, EDHEC-Risk

Institute positions itself as the leading academic

think-tank in the area of investment solutions,

which gives true significance to the investment

management practice. Through our multi-faceted

programme of research, outreach, education and

industry partnership initiatives, our ambition is

to support industry players, both asset owners

and asset managers, in their efforts to transition

towards a novel, welfare-improving, investment

management paradigm.

Investment management in the new era can

be defined as the art and science of efficiently

spending institutional or individual investors’

dollar and risk budgets to help them achieve their

meaningful goal-driven objectives (for individuals)

or liability-driven objectives (for institutions),

subject to a number of regulatory constraints

or otherwise. Whatever the context, meaningful

investment solutions are in fact invariably based

on three fundamental sources of added value, each

reflecting one particular form of risk management

technique: (1) the use of an efficient risky

performance-seeking portfolio (PSP); (2) the use of

an efficient safe liability-hedging or goal-hedging

portfolio; and (3) the use of an efficient allocation

strategy to the efficient risky and safe building

block portfolios.

The risky portfolio should be efficient at harvesting risk premia across and within asset classes, which is achieved through diversification.If one could reliably predict future returns, there

would be no need or desire for diversification; one

would instead invest in the highest-returning asset

at each point in time. Crystal balls, however, hardly

exist in the real world, and investors do not know

in advance how prices will evolve even in the near

future. In order to enjoy a higher expected return,

some risk must be taken. The goal of diversification

is precisely to find the most efficient way to harvest

risk premia across and within risky assets – in other

words, earn the highest expected return for a given

risk budget, and this is achieved by diversifying away

the largest possible amount of unrewarded risk.

Factor investing has become the dominant paradigm

for accomplishing this task. It has already become

operational in equity markets, and is receiving

increasing attention in fixed-income markets.

Lionel Martellini, PhDDirector, EDHEC-Risk Institute

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The Need for Investment Solutionsand Risk Management

The safe portfolio should be efficient at matching risk factor exposures on the asset and liability sides, which is achieved through hedging.Diversification can and should be used by investors

who want or need to take risk in the most efficient

way. However, by definition almost, one can

only diversify away unrewarded specific risk but

not systematic risk, and even a well-diversified

portfolio will experience severe losses in the worst

market conditions. The proper risk management

technique that should be used to ensure protection

against systematic risks is not diversification – it is

hedging. Just as diversification tells you how to be

efficient when taking risks, hedging tells you how

to be efficient when you avoid taking risks.

The allocation to the efficient risky and safe portfolios should secure investors’ essential goals while generating a high probability of achieving their aspirational goals, which is achieved through insurance.With a static hedging strategy, investors can only

put at risk the excess wealth that remains after

having secured all essential goals, which in general

is relatively little, thus implying a limited access to

the upside. The main benefit of insurance is that

it allows investors to dynamically allocate to the

well-diversified and risky performance-seeking

portfolio more than the surplus available after

having secured all essential goals. This is possible

thanks to a commitment to reducing this risk-

taking when / if the margin for error disappears.

As such, insurance can be formally regarded as

equivalent to dynamic hedging, which generates

non-linear exposures to underlying sources of

rewarded risk.

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“Amundi has continuously supported EDHEC-Risk Institute over the past years, convinced by the quality of their state-of-the-art academic contribution, including in the Smart Beta field where innovation remains very intense. The excellence of the literature produced within the “ETF and Passive Investment Strategies” research chair is of great help to investors and the industry as a whole, while enabling us to better accompany our clients in their asset allocation, with added value solutions.”

Valérie Baudson, Member of the ExecutiveCommittee, Amundi, CEO, CPR AM and Head of ETF, Indexing & Smart Beta

In the profound soul-searching process that is currently under way in investment management, EDHEC-Risk Institute strives to provide thought leadership and position itself as the world’s leading academic think-tank with the aim of accompanying the industry in this mutation toward a meaningful focus on investment solutions. This is a unique opportunity for our industry to add value to society as a whole. Incidentally, asset and wealth managers who are willing and able to embrace this challenge will afford to grow a profitable business, as they will start to address the needs of their clients more properly. This is also a unique opportunity for EDHEC Business School to make an impact, and add social value in the context of a novel welfare-improving investor-centric asset management paradigm.

In addition to the EDHEC Alternative Indexes,

which are used as performance benchmarks for

risk analysis by investors in hedge funds, and the

EDHEC-IEIF Monthly Commercial Property Index,

which tracks the performance of the French

commercial property market through SCPIs

(Sociétés Civiles de Placement Immobilier – the

equivalent of real estate investment trusts) that

invest in non-listed real estate, we are launching

a series of new initiatives. These initiatives

complement the work independently conducted by

our colleagues, at Scientific Beta on smart equity indices and at EDHECinfra on infrastructure indices, as part of the global efforts from EDHEC

Business School to have a meaningful impact in

the field of investment management.

EDHEC Bond Risk Premium MonitorThe ambition is to provide investors, academics,

students, policy makers and the financial

community in general with a series of estimates

of meaningful capital market assumptions (CMAs)

for the risk premia embedded in Treasury bonds

(with an initial focus on the US) based either on

statistical analysis or on term-structure modelling.

The estimations about the term premia for

various yield maturities of the US Treasuries will

be regularly provided, together with more formal

research papers on these and related topics. More

work remains to be done to extend the analysis

to different regions. However, we believe that the

present offering can already be of real practical use

and interest for practitioners and for academics.

The development of a similar initiative in the equity

space is subject to ongoing research.

EDHEC-Princeton Retirement Goal-Based Investing IndicesMeaningful investment solutions should start with

an understanding of clients’ goals. In retirement

planning, the main problem faced by individuals

is to finance a sufficient and stable stream of

replacement income in retirement. The Retirement

Goal-Based Investing Indices, developed with the

Operations Research and Financial Engineering

(ORFE) Department at Princeton University in

the context of our joint research programme

on Investment Solutions for Institutions and

Individuals, are an example of these concepts being

implemented. The research done to develop the

analytical framework was made possible through

the support of Bank of America’s Merrill Lynch

Wealth Management group. The index series

launched at the beginning of May 2018, represent

asset allocation benchmarks for innovative mass-

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EDHEC-Risk New Initiatives

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EDHEC-Risk New Initiatives

customised target date solutions for individuals

preparing for retirement. The index series answers

two important questions from a retirement

investing standpoint:

• How much replacement income can be acquired

from a given level of retirement savings? Given

that income, and not wealth, is what matters in

retirement, the ability to translate wealth into

replacement income is critically important in

assessing individual portfolios’ adequacy with

respect to retirement needs. The Goal Price Index

Series has been introduced as the appropriate tool

to measure the purchasing power of retirement

savings in terms of replacement income.

• How does one generate the kind of upside

potential that is needed to achieve target levels

of replacement income while securing minimum

consumption levels in retirement? Dynamic

allocation to two suitably designed “safe” and

“risky” building blocks (namely the retirement

goal-hedging portfolio and the performance-

seeking portfolio), is required to achieve this dual

objective. The Goal-Based Investing Index Series

has been introduced to provide a benchmark for

such dynamic retirement solutions, which can be

regarded as improved, risk-managed forms of

target date funds.

In the months and years ahead, EDHEC-Risk Institute

will launch more initiatives of practical relevance,

including (i) the launch of an effort towards the

development of improved forms of stress testing strategies for investment solutions, (ii) the

launch of the ESG Indicators and Sustainable Investment Solutions research programme,

whose focus is on assessing the impact of ESG

factors on risk analysis and investment decisions,

for equity and bond portfolios, and (iii) the launch

of digital education programmes (MOOCs) on

a series of themes related to key developments in

investment management: machine learning and

sustainable investing. On the research side, we are

launching multi-year projects on various aspects

of relevance to the industrial revolution that is

taking place, including factor investing not only in

equities and fixed-income markets, but also in the

real estate, currency or commodity markets space,

as well as important topical issues such as green

investing, big data and machine learning applied to

investment decisions.

International academic journals in which EDHEC-Risk staff have published include:

> Applied Financial Economics> Canadian Journal of Economics> Economic Inquiry> European Financial Management> Finance and Stochastics> Financial Analysts Journal> Journal of Alternative Investments> Journal of Asset Management> Journal of Banking and Finance> Journal of Business> Journal of Business and Economic Statistics> Journal of Business Finance and Accounting> Journal of Econometrics> Journal of Economic Dynamics & Control> Journal of Economic Growth> Journal of Economic Literature> Journal of Empirical Finance> Journal of Finance> Journal of Financial and Quantitative Analysis> Journal of Financial Economics> Journal of Fixed Income> Journal of Futures Markets> Journal of International Money and Finance> Journal of Investment Management> Journal of Mathematical Economics> Journal of Political Economy> Journal of Portfolio Management> Journal of Wealth Management> Management Science> Quarterly Journal of Economics> Review of Finance> Review of Financial Studies

Bringing Research Insights to Investors

EDHEC-Risk Institute was set up to conduct world-class academic research and highlight its applications to the industry. In keeping with this mission, the Institute systematically seeks to validate the academic quality of its research through publications in leading scholarly journals, implements a multifaceted communications policy toinform investors and asset managers onstate-of-the-art concepts and techniques, and develops business partnerships to launch innovative products.

High Quality Academic Output with Professional RelevanceThe results of the research work performed by the

Institute have been published by leading specialised

scientific publications such as the Financial Analysts Journal, the Journal of Derivatives, Journal of Financial Economics, Journal of Financial and Quantitative Analysis, Journal of Fixed-income,

Journal of Monetary Economics, Journal of Portfolio Management, Management Science, the Review of Financial Studies, among others.

Recognition of the academic quality and professional

relevance of the Institute’s output is also evidenced

by the integration of a number of articles into the

required readings of professional designations, and

invitations to participate in curriculum design or

authoring of programme material.

Constant Dialogue with the IndustryTo maximise exchanges between the academic

and business worlds, in September 2017 EDHEC-

Risk launched a website (https://risk.edhec.edu)

devoted to asset and risk management research for

the industry, with a focus on investment solutions.

Additionally, EDHEC-Risk circulates a quarterly

newsletter to over 100,000 practitioners, conducts

regular industry surveys and consultations, and

organises annual conferences for the benefit of

asset owners, asset managers and wealth managers.

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For its scientific arm, the team is made up of permanent professors and full-time researchers from EDHEC Business School, and also of affiliate professors and research associates.

Faculty members of EDHEC-Risk Institute include a core team of full professors of finance at EDHEC Business School, some of whom have important responsibilities within the Institute.

Professor Noël Amenc is Associate

Dean for Business Development

at EDHEC Business School and the

founding Chief Executive Officer of

Scientific Beta. His concern for bridging the gap

between university and industry has led him to

pursue a double career in academe and business.

Prior to joining EDHEC Business School as founding

director of EDHEC-Risk Institute, which he ran

for nearly fifteen years, he was the Director of

Research of Misys Asset Management Systems,

having previously created and developed a portfolio

management software company. He has published

numerous articles in finance journals as well as

four books on quantitative equity management,

portfolio management, performance analysis,

and alternative investments. He is a member of

the editorial board of the Journal of Portfolio Management, associate editor of the Journal of Alternative Investments, and member of the

advisory board of the Journal of Index Investing. He

is also a member of the Finance Research Council

of the Monetary Authority of Singapore. He was

formerly a member of the Consultative Working

Group of the European Securities and Markets

Authority (ESMA) Financial Innovation Standing

Committee and of the Scientific Advisory Council of

the AMF (French financial regulatory authority). He

holds graduate degrees in economics, finance and

management and a PhD in finance.

Professor Laurent E. Calvet is a

specialist in asset pricing, household

finance, and volatility modelling. He

has served as the John Loeb Professor

of the Social Sciences at Harvard University, was

research professor at HEC, and a Professor and Chair

in Finance at Imperial College London. Together with

Adlai Fisher, he pioneered the Markov-switching

multifractal model of financial volatility, which is

used by academics and financial practitioners to

forecast volatility, compute value-at-risk, and price

derivatives. He is a Research Associate of Goethe

University Frankfurt’s Center for Financial Studies, a

Founding Member of the CEPR Household Finance

Network, and an editorial board member of several

academic journals, including Journal of Fractal Geometry. He is an engineering graduate from

Ecole Polytechnique and Ecole Nationale des Ponts

et Chaussée in Paris and holds a Ph.D. in Economics

from Yale University.

Professor Frank Fabozzi, is one of the

most respected figures in the academic

community in finance worldwide,

author and editor of over a hundred

reference textbooks in finance, and the eponymous

manager of an authoritative series of finance

books for practitioners and academics in numerous

fields including fixed income analytics, financial

modelling, mortgage-backed securities, municipal

Bringing Research Insights to Investors Outstanding Faculty and Research Team

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bonds, credit derivatives, and financial statement

analysis. He was previously Professor in the Practice

of Finance and Becton Fellow at the Yale School of

Management. He has been the editor of the Journal of Portfolio Management since 1986. In 2002,

Frank was inducted into the Fixed Income Analysts

Society’s Hall of Fame. He is the 2007 recipient

of the C. Stewart Sheppard Award and the 2015

recipient of the 2015 James R. Vertin Award both

given by the CFA Institute. He earned a doctorate

in economics from the City University of New York.

Gianfranco Gianfrate is Professor

of Finance at EDHEC Business School

and Sustainable Finance Lead Expert

at EDHEC-Risk Institute . He writes

and researches on topics related to innovation

financing, corporate valuation, and climate change

finance. Prior to joining EDHEC Business School, he

held teaching and research positions at Erasmus

University (Netherlands), Harvard University

(USA), and Bocconi University (Italy). Gianfranco

also has extensive experience in the financial

industry, having worked, among others, for Deloitte

Corporate Finance (Italy), Hermes Investment

Management (UK), and iStarter (UK). Gianfranco

holds a BA and a PhD in Business Administration

from Bocconi University and a Master in Public

Administration from Harvard University.

Professor Lionel Martellini, is

Director of EDHEC-Risk Institute.

He conducts research in a broad

range of topics related to investment

solutions for individual and institutional investors,

equity and fixed-income portfolio construction,

risk management and derivatives valuation. He

was previously on the faculty of the University of

Southern California and has held a visiting position

at Princeton University. He sits on the editorial

boards of various journals, including the Journal of Alternative Investments and the Journal of Portfolio Management. He holds a PhD in Finance

from the Haas School of Business, University of

California at Berkeley. Outside of his activities in

finance, he recently completed a PhD in Relativistic

Astrophysics (University Côte d’Azur) and has

become a member of the LIGO/Virgo international

collaboration for the observation of gravitational

waves.

Professor Riccardo Rebonato is a

specialist in interest rate risk modelling

with applications to bond portfolio

management and fixed-income

derivatives pricing, he was previously Global Head

of Rates and FX Research at PIMCO, he also served

as Head of Front Office Risk Management and Head

of Clients Analytics, Global Head of Market Risk

and Global Head of Quantitative Research at Royal

Bank of Scotland (RBS). He is the author of several

books, in particular having published extensively

on interest rate modelling, risk management, and

most notably books on SABR/LIBOR Market Model

pricing of interest rate derivatives, as well as on the

use of Bayesian nets for stress testing and asset

allocation. He earned a PhD in Science of Materials/

Solid State Physics from Stony Brook University

(USA) and a doctorate in Nuclear Engineering from

Universita’ ‘Leonardo da Vinci’ (Italy)

Professor Nikkos Tessaromatis is

a financial economist with interest

and experience in applying modern

portfolio theory to the management

of institutional assets. His professional experience

includes the creation and management of

quantitatively driven investment products, index

fund management, portfolio risk management and

advice on strategic asset allocation. His research

and teaching focus on pension fund asset-liability

management, factor-based investment strategies,

fund manager selection and portfolio risk

management. Prior to joining EDHEC Business School,

he was CEO and CIO of EDEKT Asset Management.

He holds a PhD from Manchester Business School.

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Professor Raman Uppal is a specialist

in portfolio selection, asset pricing,

risk management, and exchange

rates. He was formerly Professor of

Finance and Chair of the Finance Subject Area at

the London Business School. He was previously

editor for the Review of Financial Studies and is

currently editorial board member of Mathematics

and Financial Economics, associate editor of the

Review of Asset Pricing Studies and the Critical Finance Review, and a director of the American

Finance Association. He holds a Ph.D in Finance

from The Wharton School of the University of

Pennsylvania.

The team of research engineers closely involved

in the Institute’s research chairs and is headed by

Dr Vincent Milhau, who is in charge of a variety of

research projects related to portfolio optimisation,

asset-and-liability management and goal-based

investing. He is also responsible for validating the

quantitative models and algorithms developed at

EDHEC-Risk Institute.

The 36 research associates of EDHEC-Risk Institute

provide direct links to the industry through their

professional activities. Many of these research

associates contribute to EDHEC-Risk Institute’s

position paper and working paper series and

participate in seminars and conferences while

playing leading roles within the industry.

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EDHEC-Risk Institute’s eight research programmes explore interrelated aspects of investment solutions to advance the frontiers of knowledge and foster industry innovation. These programmes correspond to a long-term investment on the part of the Institute. They are designed with the support ofEDHEC-Risk Institute’s International Advisory Board. They host research chairs and strategic research projects that are supported by the industry.

Investment Solutions in Institutional and Individual Money managementThe research conducted in this programme

relates to the design of novel welfare-improving

forms of investment solutions for institutions

and individuals.

On the institutional side, this research

programme has benefitted from the support of

BNP Investment Partners for a research chair on

dynamic liability-driven investment solutions. It

has also benefitted from the support of Ontario

Teachers’ Pension Plan for a research chair on

improved methods for inflation-linked liability

hedging, and Deutsche Bank for a research chair

on asset-liability management techniques for

sovereign wealth fund management.

The research conducted at EDHEC-Risk Institute

on liability-driven investment solutions has also

led to a consulting assignment with the California

Public Employees’ Retirement System (CalPERS)

on the construction of a comprehensive factor-

based asset-liability management framework

conducted jointly with Professor John Mulvey

from the Princeton University ORFE department.

On the individual side, this research programme

has benefitted from the support of Merrill Lynch

Wealth Management (MLWM) for a research

chair on risk allocation goals-based investing.

It has built upon previous work supported by

ORTEC and Pictet on ALM for individuals, as well

as a research chair supported by La Française

AM on improved forms of target date funds. The

research conducted at EDHEC-Risk Institute on

goals-based investment solutions has also led

to a consulting assignment with MLWM on the

construction of dynamic retirement solutions,

as well as the launch of the EDHEC-Princeton

retirement goal-based indices, again with

the support of MLWM. EDHEC-Risk Institute

strives to develop strategic partnerships with

investment managers worldwide for the launch

and promotion of meaningful mass-customised

investment solutions for individuals.

Equity Risk Premia in Investment Solutions An efficient harvesting of risk premia in equity

markets is a key component in the design of

meaningful investment solutions for institutions

and individuals.

As early as 2006, EDHEC-Risk Institute had

produced research on the inefficiency of cap-

weighted equity indices supported by Af2i (the

French association of institutional investors),

BNP Paribas Asset Management and UBS.

Eight Research Programmes

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Following up on this early work, EDHEC-Risk

Institute has developed an active research

programme in the area of constructing

and allocating to smart equity indices. This

programme includes the “ETF, Indexing and Smart

Beta Investment Strategies” research chair, in

partnership with Amundi, the “Active Allocation to

Smart Factor Indices” research chair, in partnership

with Rothschild & Cie, as well as the “Maximising

Volatility Pumping Benefits in Equity Markets”

research chair, in partnership with Bdf Gestion.

As part of its policy of transferring know-

how to the industry, EDHEC-Risk Institute has

set up ERI Scientific Beta. ERI Scientific Beta

is an original initiative which aims to favour

the adoption of the latest advances in smart

beta design and implementation by the whole

investment industry. Its academic origin

provides the foundation for its strategy: offer,

in the best economic conditions possible, the

smart beta solutions that are most proven

scientifically with full transparency of both the

methods and the associated risks.

Fixed-Income Risk Premia in Investment SolutionsFixed-income investing is a strategic area of

development for EDHEC-Risk Institute, with

a number of increasing relevant questions for

investors, including smart harvesting of interest

rate and credit risk premia, the impact of a zero-

interest rate environment on bond portfolio

management, or efficient interest rate risk

management in retirement investing solutions.

This research programme is led by some of the

world’s very best experts in the area of fixed-

income securities, starting with Riccardo Rebonato, a world leading expert in interest

rate risk modelling and management, Frank J. Fabozzi, author and editor of over one

hundred reference textbooks in finance, and the

eponymous manager of an authoritative series of

finance books for practitioners and academics in

numerous fields including fixed income analytics,

financial modelling, mortgage-backed securities,

municipal bonds, credit derivatives, and financial

statement analysis, Dominic O’Kane, a specialist

in credit modelling, derivative pricing and risk-

management who was Head of Fixed Income

Quantitative Research for 9 years at Lehman

Brothers, and Lionel Martellini, who has co-

authored reference textbooks in fixed-income

investment strategies.

The research programme has benefitted from

the support of Banque de France Gestion in the

context of a research chair on the benefits of

scientific and naive diversification for sovereign

bond and corporate bond portfolios. It also

benefits from the support of PIMCO in the

context of a research chair on cross-sectional

and time-series of bond risk premia.

Alternative Risk Premia in Investment SolutionsThe research carried out focuses on the

benefits, risks, and integration methods of

the alternative classes in asset allocation and

makes significant contributions to the field of

multi-style/multi-class portfolio construction.

In particular, EDHEC-Risk research has advanced

non-parametric risk estimation methods and

extended the Bayesian approach to portfolio

construction in the presence of preferences

about higher moments of return distributions.

The programme has included in the past the

“Advanced Modelling for Alternative Investments”

research chair, in partnership with Société Générale

Prime Services (Newedge), the “Investment and

Governance Characteristics of Infrastructure Debt

Investments” research chair, in partnership with

Natixis, and the “Infrastructure Equity Investment

Management and Benchmarking” research chair,

in partnership with Meridiam Infrastructure and

Campbell Lutyens.

Eight Research Programmes

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This programme has also benefitted as part of strategic research projects from the support of CME Group on “Exploring the Commodity Futures Risk Premium: Implications for Asset Allocation and Regulation”, of Aberdeen Property Investors on the EDHEC European Real Estate Investment and Risk Management Survey, and of Morgan Stanley Investment Management on “Financial Engineering and Global Alternative Portfolios for Institutional Investors”.

As part of this research programme, EDHEC-Risk Institute maintains a series of hedge fund indices as well as a real estate index for the French commercial property market produced in cooperation with IEIF.

Multi-Asset Multi-Factor Investment SolutionsFor more than 50 years, the investment industry has mostly focused on security selection as the main source of added value. This focus on security selection has somewhat distracted the industry from another key source of added value, namely asset allocation decisions. In the face of recent crises, and given the intrinsic difficulty of delivering added value through security selection decisions alone, the relevance of the old paradigm has been questioned with heightened intensity, and a new paradigm

is starting to emerge where asset allocation decisions appear as the main source of added value by the investment industry.

The ambition of this research programme is to develop new academic insights that can be used towards the design of improved forms of asset allocation solutions. The core challenge in the design of such asset allocation solutions is essentially to find optimal ways to spend dollar budgets as well as risk budgets that investors are reluctantly willing to set, with a focus on allowing the greatest possible access to performance potential while respecting such risk budgets. This programme has benefitted from the support of LYXOR Asset Management for research on dynamic forms of risk parity strategies, as well as the efficient harvesting of alternative risk premia across asset classes.

Reporting and Regulation for Investment SolutionsThis programme aims to adapt the portfolio performance and risk analysis models and methods to the new paradigm of investment solutions. Our research has historically looked at performance evaluation in traditional classes–investigating socially responsible investing or analysing rating methods for long-only funds–and at performance evaluation in the hedge

fund universe (implementing dynamic factor models).

This programme has benefitted from research starting in 2013 in the area of risk reporting as part of a research chair on ”New Frontiers in Risk Assessment and Performance Reporting”, supported by CACEIS, as well as previous research in the area of the impact of regulation on institutional money management as part of a research chair on “Regulation and Institutional Investment” supported by AXA Investment Managers.

The programme has also led to a business partnership with SIX Telekurs and to the offering of the EuroPerformance-EDHEC style ratings, a service measuring the quality of active management in the European fund management industry, as well as the design of Solvency II Benchmarks dedicated to optimise capital charges expenditure by insurance companies in partnership with Russell Investments.

Finally this programme benefits from the support of Fédération Bancaire Française (FBF) on innovations and regulations in investment banking, with research projects on OTC derivatives markets, initial margin calibration, as well as impact of financial regulation on financial markets and the economy.

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Technology, Big Data and Artificial Intelligence for Investment SolutionsIn the era of the fourth industrial revolution, every aspect of our lives is rapidly changing. What were once perceived as topics of science fiction – including artificial intelligence, robotics, autonomous vehicles, the Internet of Things, and quantum computing – are now being deployed in the real world, with a speed and on a scale never before seen. Thanks to the vast amount of data, increased computing power and newly developed technologies, the tasks that only human beings could do are now more efficiently conducted by and with machines. Without question, many industries will face fundamental changes in an unprecedented manner – from daily operations to the whole value chains.

The asset management industry is not an exception. In the face of this fast-evolving environment, this research programme has a focus on providing a rigorous academic framework to the analysis of the benefits of technology, big data, machine learning and artificial intelligence in the areas of automated wealth management (also known as robo-advisor) technologies, asset allocation decisions and security selection decisions.

This programme led to the 2017 launch of the Four-University Rotating FinTech Conference. EDHEC-Risk Institute, KAIST, Princeton and Tsinghua Universities have joined forces to jointly host a series of rotational conferences on financial technologies. The aim is to create a forum that facilitates discussion among all interested parties around the world (academics, practitioners and regulators alike).

Last September 2019, EDHEC-Risk Institute has teamed up with Coursera, a world leader in online training, to offer a new specialization in machine-learning techniques for financial professionals from September 2019. The online learning platform has 40 million registered users to date. The «Investment Management with Python and Machine Learning Specialisation» includes 4 MOOCs that will allow the learner to unlock the power of machine learning in asset management.

ESG Factors and Sustainable Investment Solutions Financial decisions worldwide are increasingly influenced by the scarcity of resources, and the physical and transition risks associated with climate change. The extent of the environmental impact from climate change is still uncertain but the recent scientific evidence is increasingly

worrisome and many governments are taking decisive steps in order to avert a catastrophe.

The transition towards a low-carbon economy requires a broad array of financial instruments and innovations that will have far-reaching implications for markets, corporations, intermediaries, and investors.

Given the widespread recognition of climate change as perhaps the most fundamental long-term risks for asset managers and asset owners, EDHEC-Risk Institute is committed to launching a number of research, education and outreach initiatives to help explore a number of issues of strategic importance in climate change finance.

This programme led to the 2019 launch of the EDHEC Climate Finance Conference. The conference aimed to showcase the highest quality thinking and research in the area of Sustainable Investing.

More generally, the focus of this programme will be on assessing the impact of Environmental, Social and Governance (ESG) factors on risk analysis and investment decisions for equity and bond portfolios.

Research ChairsResearch chairs involve close partnerships with their financial sponsors and a commitment from EDHEC-Risk to publishing related articles in international academic journals as well as to releasing the research results to the investment management profession through wide distribution of practitioner-oriented publications and presentations at industry conferences.

ETF, Index and Smart Beta Investment StrategiesIn partnership with Amundi ETF, Indexing & Smart BetaThe chair analyses the developments in the

use of exchange-traded funds (ETFs) as part

of the asset allocation process and looks at

advanced forms of risk budgeting within the

framework of a core-satellite approach. It also

conducts research which aims at presenting

a comprehensive analysis of the theoretical,

empirical and practical challenges related to

factor investing in the fixed-income space,

with a focus on facilitating the emergence of

more efficient approaches to bond risk premia

harvesting.

Goals-Based Wealth Management and Applications to Retirement InvestingSponsord by Bank of AmericaBuilding upon fundamental research related

to risk allocation and goals-based wealth

management conducted in prior years, EDHEC-

Risk Institute is collaborating with Bank of

America to develop new research on goals-based

investing for the construction of retirement

investment solutions for individuals. The aim of

the research is to develop a holistic goal-based

investing framework for analyzing optimal

retirement investing decisions for individuals in

the transition or de-accumulation phase of their

investment lifecycle, by using a broad range of

investment product categories including stocks,

bonds as well as annuity-related products.

Designing and Implementing Welfare-Improving Investment Solutions for Institutions and IndividualsIn partnership with FirstRandThe aim of the chair is to expand the scientific

literature on investor welfare-enhancing

methodologies for portfolio construction in a

goals-based investing framework. The chair will

focus on a detailed analysis of the interplay

between diversification and insurance, with the

purpose of determining whether it is possible to

achieve an improvement in investor welfare by

creating a diversified portfolio of insured assets,

as opposed to insuring a portfolio of diversified

assets.

Cross-Sectional and Time-Series Estimates of Risk Premia in Bond MarketsSponsored by Pimco The purpose of this chair is to conduct research

work in the areas of cross-sectional and time-

series analysis of risk premia in fixed-income

markets. More specifically, the topics will cover

the broad areas of estimation of volatility risk

premia embedded in interest rate derivatives

products, relative valuation of volatility products

such as swaptions and other interest rate and

foreign exchange derivatives instruments, as

well as affine term-structure modelling under

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EDHEC-Risk Research Chairs and Private Research Projects

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EDHEC-Risk Research Chairs and Private Research Projects both the physical and risk neutral measures,

with special attention devoted to topics such

as the estimation of risk premia, the effects

of very low interest rates on the extraction of

expectations and risk premia, and the value of

convexity.

Real Estate in Modern Investment SolutionsIn partnership with Swiss Life Asset ManagersThe aim of this research chair is to provide a

comprehensive analysis of the role of listed and

unlisted real estate investments in institutional

portfolios, with a particular emphasis on how

dedicated forms of real estate investments

can prove to be key ingredients within the

performance and hedging components of

welfare-improving forms of retirement solutions.

An important part of this research effort will

be dedicated to assessing the theoretical,

empirical and practical challenges related to

factor investing in real estate markets, with the

ambition to facilitate the emergence of more

efficient approaches to real estate risk premia

harvesting. As part of the research chair, we also

expect to examine how dedicated forms of real

estate investments can be used as part of goal

hedging portfolios within improved retirement

solutions, based on their ability to generate

inflation-linked replacement income cash flows.

We shall also analyse how insurance products

can be integrated with real estate investments

to provide a comprehensive retirement solution

for all stages of retirement.

Private Research ProjectsIn addition to making important public

contributions to the advancement of academic

research and the improvement of industry practices,

EDHEC-Risk Institute also employs its expertise to

conduct proprietary research projects for selected

partners with a focus on the design of meaningful

welfare-improving forms of investment solutions

and assist them in the development of innovative

products, thus providing them with an edge over

the competition. There is a particularly strong focus

on retirement investing solutions.

With the need to supplement retirement savings

via voluntary contributions, individuals will

increasingly be responsible for their own retirement

investment decisions. This global trend already

poses substantial challenges to millions of baby-

boomers who typically lack the expertise needed

to make such educated investment decisions. These

concerns have led to a renewed interest in retirement

investment products inclusive or exclusive of

protection against longevity risk. Unfortunately,

these products, which are respectively known as

variable annuities and target date funds, often fall

short in their current form of implementation of

providing satisfactory solutions to the problems

faced by individuals when approaching investment

decisions in a retirement context.

In this context, EDHEC-Risk is working with Merrill

Lynch Wealth Management (MLWM). The focus

of the project is to design and calibrate a range

of standardised goal-based investment solutions,

with a focus on retirement solutions, which can be

used by MLWM to address the needs of individual

investors. The aim is to propose a limited number of

retirement solutions that could accommodate the

needs of a variety of investors; it will lead to a full

solution design exercise, with a focus on scalable

standardised goal-based investing solutions, as well

as a series of backtests and associated reporting

outcomes.

EDHEC-Risk is also partnering with the California

Public Employees’ Retirement System (CalPERS),

in cooperation with Professor John Mulvey

from Princeton University, to help them build

an integrated factor-based asset allocation and

asset-liability management process. The Institute

will explore, analyse and make recommendations

related to the potential benefits expected from

risk factor-based asset allocation, including the

assessment of a translation mechanism between

risk factor-based and asset class-based allocation.

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Aberdeen Property Investors EDHEC European Real Estate Investment and Risk Management Survey

AFG (French Asset Management Association)Financial Risk Management as a Source of Performance

AXA Investment ManagersRegulation and Institutional Investment

BDF GestionOptimising Bond Portfolios

BNP Paribas Investment PartnersAsset-Liability Management and Institutional Investment Management

CACEISNew Frontiers in Risk Assessment and Performance Reporting

CME GroupExploring the Commodity Futures Risk Premium: Implications for Asset Allocation and Regulation

Deutsche Bank Asset-Liability Management Techniques for Sovereign Wealth Fund Management

Eurex The Benefits of Volatility Derivatives in Equity Portfolio Management

the French Banking Federation (FBF) Innovations and Regulations in Investment Banking

La Française AMDynamic Allocation Models and New Forms of Target-Date Funds for Private and Institutional Clients

Lyxor Asset Management Risk Allocation Solutions

Meridiam Infrastructure and Campbell LutyensInfrastructure Equity Investment Management and Benchma

Merrill Lynch Wealth ManagementRisk Allocation Framework for Goal-Driven Investing Strategies

Morgan Stanley Investment Management Financial Engineering and Global Alternative Portfolios for Institutional Investors

NatixisInvestment and Governance Characteristics of Infrastructure Debt Instruments

NYSE Euronext, SunGard and CACEISMiFID and Best Execution Transaction Cost Analysis A-Z: A Step towards Best Execution in the Post-MiFID Landscape

ORTEC FinancePrivate Asset-Liability Management

Ontario Teachers’ Pension Plan Advanced Investment Solutions for Liability Hedging for Inflation Risk

PictetPictet on ALM for Individual Research Project

PIMCOFixed-Income Term Structure Modelling and Volatility

Rothschild & CieActive Allocation to Smart Factor Indices

Société Générale Corporate & Investment Banking Structured Equity Investment Strategies for Long-Term Asian Investors

Russell Investments Solvency II

Société Générale Prime Services (Newedge) Advanced Modelling for Alternative Investments

UBS Global Asset Management and BNP Paribas Asset ManagementAssessing the Quality of Stock Market Indices: Requirements for Asset Allocation and Performance Measurement

They trusted us

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EDHEC-Risk Institute’s Publication Strategy and Research Dissemination Policy

Publishing articles in academic journals

is a starting point for EDHEC-Risk Institute

that qualifies the academic value of the

research, but the ultimate objective is to

be able to change the practices of the

industry and ensure that our research results

are known and accessible for professionals.

EDHEC-Risk Publications – Financial Research that Corresponds to the Needs of the Corporate WorldEDHEC-Risk’s publication strategy is to break away

from a purely academic vision of research, whereby

any research carried out has only been evaluated

by academics and disseminated primarily to other

scholars, in favour of an approach where business is

at the heart of the researcher’s concerns.

To ensure that our financial research corresponds

to the needs of the corporate world, we present

our publications in such a way as to render the

research conclusions as accessible as possible to

finance professionals, by including clearly delineated

introductions, conclusions and an executive summary.

Recent EDHEC-Risk publications have covered the

following topics: factor investing in liability-driven

and goal-based investing, factor investing in fixed

income, the application of goal-based investing

principles to the retirement problem, maximising the

benefits of factor investing, the empirical analysis of

the benefits of maximising an equity portfolio, the

measure of volatility pumping benefits in equity

markets, mass customisation versus mass production

in retirement investment management, smart

beta replication costs, multi-dimensional risk and

performance analysis for equity portfolios, factor

investing and risk allocation.

Industry Surveys – Confronting Research Advances with Industry Best PracticesEDHEC-Risk regularly conducts surveys on the

state of the international institutional investment

and asset management industry. These surveys

look specifically at the application of recent

research advances within investment management

companies and at best practices in the industry.

The surveys cover both the traditional investment

universe and alternative investments. Survey results

receive considerable attention from professionals

and are extensively reported by the international

financial media.

Recent EDHEC-Risk surveys include the EDHEC

European ETF and Smart Beta and Factor Investing

Survey 2019 (sponsored by Amundi), the EDHEC

Survey on Equity Factor Investing, and the survey

on Investor Perceptions about Smart Beta ETFs (also

sponsored by Amundi).

Maud Gauchon,Marketing & Communication Manager, EDHEC-Risk Institute

EDHEC-Risk Institute Institutional Money Management Supplement in association with Pensions & Investments (P&I)This bi-annual supplement with the leading

publication for North American asset owners

was first published in Fall 2013 and continues to

provide cutting-edge research-based insights for

institutional investors.

EDHEC-Risk Institute Research Insights Supplement in association with Investment & Pensions Europe (IPE)Since the inaugural issue in Winter 2010, EDHEC-Risk

Institute has been producing a Research Insights supplement that is distributed to European

institutional investment professionals with the

leading publication Investment & Pensions Europe (IPE). The aim of the supplement is to provide

information on research-based solutions to the

key challenges facing institutional investors and

to make a genuine contribution to improving

institutional investment practices.

In 2013, EDHEC-Risk Institute also entered into a

partnership with AsianInvestor to provide a regular

supplement for Asian investors.

Special edition of Investment Management Review (IMR), published with the support of EDHEC-Risk Institute.In this special edition, the emphasis is on two topical

subjects that are at the very heart of EDHEC-Risk

Institute’s current research activities: retirement

solutions for individuals and goals-based investing

and factor investing.

EDHEC-Risk Institute has been cited over 55,000

times in worldwide trade publications.

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A non-exhaustive list of professional publications in which the work of the EDHEC-Risk Institute has been quoted can be found below:> Absolute Return> Asia Asset Management> Asian Investor> Australian Financial Review> Barrons> Bloomberg> Business Times Singapore> Challenges > Deutsche Pensions & Investment Nachrichten> Die Welt> European Pensions News> Financial Adviser> Financial News> Financial Times> Financial Times China > Funds Europe> Global Alternatives> Global Investor> Global Pensions> Hedge Funds Review> Hedge Pensions Review> Hedgeweek> Hong Kong Economic Journal> InvestHedge> Investment & Pensions Europe> Investment Adviser> Investment Magazine (Australia)> Investors Chronicle > L’Agefi> L’Agefi Suisse> Le Temps> Le Monde> Les Echos> Life & Pensions> Pensions Management> Pensions Week> Portfolio International> Professional Pensions> Risk> Times Higher Education> The Economist> The Hedge Fund Journal> Wall Street Journal> Wall Street Journal Europe

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EDHEC-Risk Conferences

Since 2004, EDHEC-Risk Institute has been organising annual conferences devoted to the buy-side industry across Europe. By setting up the EDHEC Hedge Fund Days in May 2004, EDHEC-Risk created a new type of conference that aimed to provide professionals with state-of-the-art financial research in the various fields of risk and asset management. In view of our academic background, this was not about organising sales conferences where the speakers in turn deliver excessively brief messages that they do not have the time to discuss thoroughly, but about genuinely transmitting expertise on and debating current themes proposed by the EDHEC-Risk research team.

As such, the EDHEC-Risk conferences allow research

results to be compared with the practices and needs

of institutional investment and asset management

professionals. EDHEC-Risk’s independence, the

original approach—which leaves time for instruction

and discussion during the sessions—and the highly

selective speaker panel, make the EDHEC-Risk

conferences the must-attend annual events for

institutional investors and asset managers who are

concerned about maintaining best level practices in

both technical and conceptual terms.

The EDHEC-Risk Alternative Investment Days were

recognised as the most relevant and worthwhile

industry conference dedicated to alternative

investments. The inaugural event, then called EDHEC

Hedge Fund Day, was attended by over 400 senior

professionals ranging from private and institutional

investors to both hedge fund and fund of hedge fund

managers from 20 countries. The fourth edition,

which was held at the ExCeL Centre in Canary

Wharf on 9-10 December 2008, was attended by

over 1,200 delegates in the midst of the financial

crisis, confirming that this event has become the

most prestigious and well-attended academic and

professional conference on alternative investments

in Europe.

The first EDHEC-Risk Institutional Days ran in Paris

in November 2006. The 2008 and 2009 events

attracted more than 2,100 institutional investors,

asset managers and private bankers. In 2010, EDHEC-

Risk’s partnership with IPE enabled the EDHEC-

Risk Institutional Days to be held on the two days

following the IPE Pension Fund Awards in Monaco.

In 2012, in order to better satisfy the requirements

of institutional investors, EDHEC-Risk Institute

decided to merge its two annual conferences into

a unique three-day event in Europe, the EDHEC-Risk Days Europe, held at The Brewery in London

on 27-29 March 2012. The year 2012 also saw the

inaugural EDHEC-Risk Days Asia conference in

Singapore at the Marina Bay Sands Conference

Centre on 9-10 May 2012.

“The EDHEC Risk Days are a great way to meet top professionals from a wide area of expertise and to take part in hands-on workshops on very interesting research topics presented by excellent EDHEC staff. What I find most appealing is the practicality of the research, in other words – you can really use the outcomes and models in your everyday profession. Visiting the EDHEC Risk Days helps me to stay on top of my field.”

Michael Kaal, Director Finance & Risk, Pensioenfondsen Unilever Nederland

“The JOIM is extremely pleased to collaborate with Oxford and EDHEC-Risk Institute to showcase the best from academia and the practice on Retirement Investing. This is an opportunity to not only learn but interact with leading participants in this important area.”

Gifford Fong, Editor,Journal Of Investment Management (JOIM)

The 2014 edition of EDHEC-Risk Days Asia took

place in Singapore on 3-4 July 2014. 2013 saw

the inaugural EDHEC-Risk Days North America

conference at the Crowne Plaza in New York on 8-9

October 2013.

The global EDHEC-Risk Days 2015 conference,

which became a single, unique event, took place

at The Brewery in London on 24-25 March 2015.

The EDHEC-Risk Days 2016 conference took

place at The Brewery in London on 15-16 March

2016. The conference included three major events

that allowed professionals to review major industry

challenges, explore state-of-the art investment

techniques and benchmark practices to research

advances.

EDHEC-Risk, JOIM and Oxford University have

joined forces for the first time to feature the

best of the current state of the art, which has an

immediate as well as a future impact on the practice

of Retirement Investing. The JOIM-Oxford-EDHEC Retirement Investing Conference took place on

11-13 September 2016 on the Oxford University

Campus and showcased the highest quality

thinking and research in the area. The programme

was developed on a foundation of academic rigour

with an overriding objective of identifying practical

significance. Leading experts

from the US and Europe featured, including the

Nobel Prize recipient, Robert Merton, Andrew Lo and Deborah Lucas (MIT Sloan School of

Management), Mark Kritzman (Windham Capital),

Martin Leibowitz (Morgan Stanley Research),

Tim Jenkinson (University of Oxford) and Lionel Martellini (EDHEC-Risk Institute).

In the context of the fourth industrial revolution,

the digital revolution, which is likely to have a

dramatic impact on the investment industry, four

prominent academic institutions renowned for

the quality and relevance of their educational and

research programmes in finance and technology

– EDHEC-Risk Institute, KAIST, Princeton and

Tsinghua Universities – have partnered for the

first time. Together, they will host an international

series of rotational conferences on financial

technologies and offer a forum that will facilitate

discussion among all interested parties (academics,

practitioners and regulators) around the world.

The annual conferences were launched in April

2017 with the Four-University Rotating FinTech Conference: Wealth Management Systems for Individual Investors, which took place on the

Princeton Campus, and was jointly organised by

EDHEC-Risk Institute and the Princeton University

ORFE department. Leading experts from the US, Asia

and Europe featured at the conference including

Andrew Yao (Turing Award recipient and founder

of IIIS FinTech Center at Tsinghua University),

John Bogle (Founder of The Vanguard Group, and

President of the Bogle Financial Markets Research

Center), Woo Chang Kim (Associate Professor at

KAIST), Lionel Martellini (Director of EDHEC-Risk

Institute), John Mashey (Consultant, Techviser),

and John Mulvey (Professor and founding member

of the Bendheim Center for Finance at Princeton

University).

The second edition “State of the Art in Robo-Advising Systems: Financial Technologies for Enhanced Social Security Conference”, organised by

KAIST, took place on 12 - 13 April 2018 in Seoul.

The audience – which consisted of top executives

from investment and wealth management

companies, banks, institutional investors and

academics – overwhelmingly appreciated the good

balance between academic insights and practical

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applications. It proved to be a nice opportunity

to interact with experts on financial technologies,

includin, John Bogle (Founder of The Vanguard

Group, and President of the Bogle Financial Markets

Research Center), Woo Chang Kim (Professor and

Head of KAIST Center for Wealth Management

Technologies), Giorgio Consigli (Professor of

Applied Mathematics at University of Bergamo),

Michael Dempster (Professor Emeritus at

Cambridge University), Lionel Martellini (Director

of EDHEC-Risk Institute), John Mulvey (Professor

and founding member of the Bendheim Center

for Finance at Princeton University), and Wei Xu

(Professor at Tsinghua University).

The third edition, organised by EDHEC-Risk, took

place in Paris on 2 April 2019. The next conference

will be held in China in Spring of 2021.

The Four-University Rotating FinTech Conference

series lies within the broader context of our

cooperation with Princeton University.

Organised by EDHEC-Risk Institute, the 1st edition

of EDHEC Climate Finance Conference took

place in Paris on 17 December 2019, at the Palais

Brongniart,. The conference presented the research

carried out by EDHEC-Risk Institute, EDHEC

Business School and Scientific Beta and discussed

it with institutional investment, asset management,

investment banking, regulatory and academic

communities. The conference aimed to showcase

the highest quality thinking and research in the area

of Sustainable Investing.

During this one-day conference, which combined

academic lectures and panel discussions, our

experts discussed several issues of increasing

importance including: the efficiency of the market

pricing of climatic risks, the climate risks assessment

and disclosure for corporations and their impact on

credit analysis, the financial management decisions

affected by climate risks and policies, the design of

investment strategies to hedge climate risks and

liabilities, as well as the impact of green quantitative

easing policies by central banks.

The 2nd edition of the EDHEC Climate Finance

conference will be held in Paris in Spring of 2021

and will focus on measuring and managing climate

risk in investors’ portfolios.

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Institute

In 2012, EDHEC-Risk Institute signed a strategic partnership agreement with the Department of Operations Research and Financial Engineering (ORFE) at Princeton University for research and outreach initiatives in the area of risk and investment management.

One of the key ambitions of this partnership is to

develop innovative academic research in finance

that could have a strong influence on the practice

of investment management, at a time when

the industry is facing a number of key paradigm

changes leading to an increased focus on risk

management. These developments also question

a number of fundamental insights from modern

portfolio theory, including for example the risk-

return relationship in equity and bond markets from

the cross-sectional and time-series perspectives,

and the proposed joint research agenda is expected

to address some questions that are not only

practically relevant, but also at the forefront of

outstanding problems in financial economics.

The common ambition of EDHEC-Risk Institute and

Princeton ORFE is to develop and manage a research

programme related to investment solutions for

institutions and individuals, and more precisely

with a focus on a comprehensive use of the three

forms of risk management (diversification, hedging

and insurance) regarded as the true source of

added-value in investment management.

These various research directions heavily draw

on tools borrowed from various academic

fields where strong expertise is present in both

institutions, particularly in financial engineering,

financial econometrics, mathematical finance and

stochastic optimisation. The EDHEC-Risk Institute

and Princeton ORFE faculties include some of the

leading experts in these fields and their combined

expertise is expected to lead to influential

developments that would re-enforce the visibility

of the two partnering institutions around these

domains, in both academia and investment

practice.

In terms of outreach activities, the broad ambition

of EDHEC-Risk and Princeton ORFE is not only

to develop cutting-edge research in investment

solutions, but also to make sure that the

investment industry will benefit from whatever

useful academic insights will be generated through

these research efforts.

Over the years, the research partnership has evolved

to encompass a number of dimensions including:

• Joint consulting initiatives

Following a formal RFP process, EDHEC-Risk

Institute and Princeton ORFE have been jointly

selected to provide assistance to CalPERS in the

design, development and implementation of a

factor-based approach to asset allocation and

asset-liability management (ALM). The project

is currently in its second phase, with a focus on

smart equity factor indices and capital market

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Cooperation between EDHEC-Risk Institute and Princeton University

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assumptions for ALM analysis. Within the

partnership itself, the selection of a small number

of private research projects contributes to satisfying

two key criteria: coherence with the strategic focus

of the partnership (investment solutions) and

impact of the private research (to compensate for

the lack of public output).

•  Joint educational initiatives

The partnership between EDHEC-Risk and

Princeton ORFE includes the possibility to have

PhD candidates from ORFE spend one year on the

EDHEC-Risk campuses in Europe (Nice and London)

or Asia (Singapore), where they can benefit from

access to the EDHEC-Risk PhD Finance programme,

subject to the successful completion of admission

requirements. The joint ambition of EDHEC-Risk

and Princeton ORFE is to have exceptionally gifted

candidates who could obtain both the Princeton

PhD in Operations Research and Financial

Engineering and the EDHEC-Risk PhD in Finance;

these candidates would benefit from the combined

network of both faculties, who will seek to help

them secure placements in finance departments at

top business schools worldwide.

•  Joint outreach initiatives

In this context, EDHEC-Risk and Princeton ORFE

have set up a bi-annual event, the EDHEC-Princeton

“Academia Meets Practice” conference. At the

last edition of this conference, speakers from

EDHEC-Risk Institute, from Princeton ORFE, and

also from the Bendheim Center for Finance at

Princeton University, provided selected investment

professionals with the latest academic insights

related to new frontiers in institutional money

management. The format of the conference

is meant to facilitate the exchange of views

between academicians and practitioners; it

involves presentations given by a faculty member,

followed by a discussion with the audience. After

launching three successful events, the format

changed in 2017, since we took the opportunity to

leverage our partnership with KAIST and Tsinghua

University to jointly organise the first edition of the

“Four-University Rotating FinTech International

Conference Series” (see page 22).

• Joint industrial initiatives

With the support of Merrill Lynch Wealth

Management, we launched a series of EDHEC-

Princeton Retirement Goal-Based Investing

Indices in May 2018. The index series represents

an incarnation of some of the latest academic

thinking in Goal-Based Investing, and are meant

to encourage and facilitate the launch of welfare-

improving forms of investment solutions. They are

expected to provide strong marketing impact in

the arena of investment solutions for individuals,

especially in the context of retirement investing.

For more details, visit our EDHEC-Risk Institute and

Princeton ORFE websites.

Cooperation between EDHEC-Risk Institute and Princeton University

EDHEC-Risk Institute Executive Education

The Executive Education Seminars offered by EDHEC-Risk Institute bring research advances and state-of- the-art practices into the practitioner’s portfolio of skills. Designed and delivered by some of the most respected practitioners and academics in the area, these short executive courses provide participants with workable knowledge of the most recent approaches that investment professionals may benefit from. Presented in a highly accessible manner, these executive courses appeal to senior officers, investment specialists and administrators working for buy- and sell-side institutions, as well as consultants and key account representatives advising high net worth individuals and institutional investors.

Building on the exclusive and latest research

advances developed within EDHEC-Risk Institute

and beyond, our programmes are continually

evolving, ensuring that they stay relevant and meet

the finance industry’s expectations. We provide

learners with choice and flexibility, putting the

emphasis on different entry pathways:

• Online course: Advances in Asset Allocation Seminar: From Investors’ Problems to Investment Solutions;• Online specialisation on Coursera’s platform: Investment Management with Python and Machine Learning;• Bespoke programmes at the request of companies.

All courses will provide participants with a certification and will equip them with IT tools for

practical implementation.

The Advances in Asset Allocation Seminar in a 100% Online Format Investors are facing problems, for which they need

dedicated investment solutions, as opposed to off-

the-shelf investment products. This recognition is

giving rise to a whole new investment paradigm,

taking on slightly different forms in individual

versus institutional contexts:

• Liability-Driven Investing (LDI) in Institutional

Money Management;

• Goal-Based Investing (GBI) in Individual Money

Management.

Broadly speaking, investment management is the

art, science and engineering of efficiently spending

investors’ dollar and risk budgets to help them

achieve their meaningful goals in the presence of

uncertain market conditions.

Meeting this challenge involves institutional

or individual asset owners (and/or investment

managers acting on their behalf) efficiently using

the three known forms of risk management within a

comprehensive disciplined investment framework:

• Diversification, which is used to construct well-

rewarded risky performance-seeking portfolios,

that is portfolios enjoying an efficient harvesting

of risk premia across and within asset classes;

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Caroline Prévost, Sales Manager, Executive Education, EDHEC-Risk Institute

“Truly outstanding faculty...a melding of relevant academic studies by actual practitioners. Highly useful material to what is unfolding in today’s investing world.“

James Egan, Senior Vice President and Director of Fixed Income Department, Janney Capital Management LLC - USA

• Hedging, which is used to construct truly safe

portfolios, that is portfolios allowing for an efficient

matching of factor exposure on the asset and the

liability sides;

• Insurance, which is used to dynamically allocate

to the risky performance portfolio and the safe

hedging portfolio as a function of changes in

market conditions as well as distance with respect

to investors’ goals.

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.

The digital material is made up of videos, lecture

notes and technical supplements which cover a

set of concepts and techniques that we believe

are most relevant in asset allocation and portfolio

construction decisions.

This online programme is an open enrolment

process. Participants will get access to our

e-learning platform to explore asset allocation

concepts and techniques at their own pace

relying on exclusive e-learning material developed

by EDHEC-Risk Institute. Participants have the

opportunity to discuss both course concepts and

evaluations online. This is an unique oppportunity

to tap into a broad community of learners from the

finance industry.

Coursera’s Online CoursesEducation should be accessible and inclusive. That

is why we wanted to expand our offering and have

partnered with the world leader in e-learning:

Coursera.

Given the current relevance and expected impact

of this topic, we have launched in September 2019

a digital specialisation on Investment Management

with Python and Machine Learning, which will

attract substantial attention from investment

professionals as well as students aspiring to become

investment professionals. This specialisation

consists of four massive open online courses (or

MOOCs):

• Introduction to Portfolio Construction and

Analysis with Python;

• Advanced Portfolio Construction and Analysis

with Python;

• Python Machine-Learning for Investment

Management;

• Python Machine-Learning for Investment

Management with Alternative Datasets.

Each MOOC consists of videos, recommended

readings, discussion prompts and assignments

that needs to be completed to get a certificate.

Participants will learn at their own pace and benefit

from the expertise of global thought leaders from

EDHEC Business School, Princeton University

and the finance industry. Participants who have

successfully submitted the assignments for all four

MOOCs will get the Certificate for the Investment

Management with Python and Machine Learning

specialisation.

This first specialisation launched in September

2019, will be followed by a second specialisation

on climate change and sustainable finance, to be

launched in 2021.

EDHEC-Risk Institute Executive Education

27

“We expect that the use of machine learning techniques and their application to big new data sets, will profoundly impact all dimension of the investment management process, including security selection, portfolio construction as well as risk management practices.“

Lionel Martellini, Director, EDHEC-Risk Institute

28

Customised Programmes: Bespoke Solutions Tailored to Companies’ Unique ChallengesThe 2020 Executive Education ranking from the

Financial Times, which assesses both Custom

Programmes (bespoke programmes for individual

companies) and Open Programmes (for executives

and senior managers of different companies)

confirmed EDHEC’s leadership among the world

Top 20 for Executive Education (17th worldwide in the combined ranking) and the world Top 10

for the custom programmes (8th worldwide, up 19

places vs 2018).

Building on the cutting-edge research of the faculty,

EDHEC-Risk Institute creates tailored programmes

to help executives level up their financial expertise

on topics of considerable interest in the asset

management industry.

EDHEC-Risk’s aims to offer a client-centred

approach. Indeed companies will have the

opportunity to share with us its biggest challenges,

and we will work with the company on how to

develop impactful practices. Companies will work

as a team with both EDHEC-Risk institute’s director

and research director to validate specific objectives

in the framework of the centre’s core expertise

(factor investing, goal-based investing and ESG

investing).

At the end of the seminar, the companies will

be ready to put insights into actions as they will

have explored the latest investment management

concepts and worked on real and concrete

problems, using exclusive tools developed by

EDHEC-Risk institute and supervised by Professor

Martellini.

Programmes will take place in London, Nice,

Paris and Singapore (EDHEC campuses) or on

the companies’ premises. The format will consist

of a 3 day-event where delegates will have the

opportunity to discuss cutting edge concepts and

practices exclusively developed by EDHEC-Risk and

be engaged in concepts and a variety of real-world

case study applications.

Companies will also have the opportunity to add a

blended-learning option to enable their employees

to access a digital platform to cover the concepts

in advance in order to prepare the seminar and

attend a webinar to take stock of their elearning

journey prior to the seminar and anticipate any

barriers prior to the event.

29

Participants in the executive education programmes offered by EDHEC-Risk Institute represent the leading names in investment banking, traditional and

alternative asset management, private banking and wealth management, advisory services and technology as well as the financial industry’s foremost end-

investors such as pension funds and foundations, sovereign funds, insurance companies, and family offices.

ABERDEEN ASSET MANAGEMENT

ABU DHABI INVESTMENT AUTHORITY

AEGON ASSET MANAGEMENT

ALBERTA INVESTMENT MANAGEMENT CORPORATION

ALLIANCE BERNSTEIN

ALLIANZ GLOBAL INVESTORS

AMF PENSION

AMUNDI

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY

AUSTRALIAN SUPER

ALLIANZ

AP2

APG INVESTMENTS

ASPECT CAPITAL

ATP

AVIVA INVESTORS

AXA

BAE SYSTEMS PENSION FUND

BANK OF CANADA

BARCLAYS

BLACKROCK

BNP PARIBAS

BRUNEI INVESTMENT AGENCY

CALPERS

CALSTRS

CANADA PENSION PLAN INVESTMENT BOARD

CAPITAL GROUP

CITIGROUP

COLUMBIA THREADNEEDLE ASSET MANAGEMENT

CREDIT SUISSE

DEUTSCHE BANK

EDF

EUROPEAN CENTRAL BANK

FIDELITY

FINANCIAL SERVICES AUTHORITY

FRANKLIN TEMPLETON INVESTMENTS

GIC

GOLDMAN SACHS

HARVARD MANAGEMENT COMPANY

HSBC

INVESCO

IRISH NATIONAL PENSION RESERVE FUND

JP MORGAN

KPMG

LEGAL & GENERAL INVESTMENT MANAGEMENT

LEGG MASON

MAINEPERS

MERRILL LYNCH

MONETARY AUTHORITY OF SINGAPORE

MORGAN STANLEY

NATIONAL BANK OF KUWAIT

NATIXIS

NESTLE PENSION FUND

NEW ZEALAND SUPERANNUATION FUND

NORGES BANK INVESTMENT MANAGEMENT

NORTHERN TRUST

OLD MUTUAL ASSET MANAGERS

ONTARIO TEACHERS’ PENSION PLAN

OSLO PENSJONSFORSIKRING

PICTET & CIE

PRICEWATERHOUSECOOPERS

QATAR INVESTMENT AUTHORITY

ROYAL BANK OF CANADA

ROYAL BANK OF SCOTLAND

STANDARD LIFE INVESTMENTS

STATE BOARD OF ADMINISTRATION OF FLORIDA

SAUDI ARABIAN MONETARY AGENCY

SCHRODERS

SOCIETE GENERALE

STATE STREET GLOBAL ADVISORS

T. ROWE PRICE

TEACHER RETIREMENT SYSTEM OF TEXAS

THE ROCKEFELLER FOUNDATION

TIAA-CREF

TOWERS WATSON

UBP

UBS

UNITED NATIONS JOINT STAFF PENSION FUND

UNITED PARCEL SERVICE

UNIVERSITIES SUPERANNUATION SCHEME

VANGUARD

WASHINGTON STATE INVESTMENT BOARD

WELLINGTON MANAGEMENT COMPANY

ZURICH FINANCIAL SERVICES

30

International Advisory Board

EDHEC-Risk Institute has adopted a strict

corporate governance structure and rigorous

processes which guarantee both the scientific

quality and the operational relevance of its

activities. The centre’s management and its

international advisory board enforce strict

validation and evaluation processes to ensure

that all efforts remain focused on issues which

are central to the development of the

profession.

Upholding High Standards of Corporate Governance

External Validation and Evaluation by

International Experts

In line with best practices of corporate governance,

EDHEC-Risk Institute has set up an advisory board

which brings together distinguished scholars,

representatives of regulatory bodies as well as

senior executives from business partners and other

leading institutions. These international experts

advise on the relevance and goals of the research

programme proposals presented by the Institute’s

management and evaluate research outcomes

with respect to their potential impact on industry

practices. The board also advises on the objectives

and contents of projects deriving from the expertise

of the Institute, thereby ensuring that graduate and

executive programmes remain at the forefront of

developments in the marketplace.

Mark Fawcett,Chairman, EDHEC-Risk Institute’s International Advisory Board, CIO, NEST Corporation

“What makes EDHEC-Risk unique is its determined effort to keep on the cutting edge of research that is of operational relevance to investors, particularly those with heavy involvement in alternatives. The quality of the dialogue at the EDHEC-Risk Advisory Board provides very useful insights into what is a rapidly changing industry and a unique opportunity to take stock of commonly accepted practices. The debate on how to implement technically superior approaches to old problems will continue for many years to come, and it is critical to have thought-leaders like EDHEC-Risk help investors and the industry re-evaluate the frameworks in which we operate.”

Gumersindo Oliveros, CEO & CIO,KAUST Investment Management Company

Phase Opportunity Study Incubation Development

Nature of work

carried out

Academic review – state of the art.

Assessment of industry expectations.

“Founding” research and modelling.

Initiation of a business partnership.

Development of applied research.

Testing of the results in a business context.

Validation Validation by the advisory board.

Validation of the research by an international academic publication.

Validation of the business plan by management.

Validation of the work and evaluation of the results by

the advisory board.

Rigorous validation and evaluation processes throughout the life-cycle of research programmes

31

International Advisory Board Members of EDHEC-Risk Institute’s International Advisory Board as of 1 May 2020Chairman: Mr Mark Fawcett, Chief Investment Officer, NEST Corporation.

• Mr Kasper Ahrndt Lorenzen, Chief Investment Officer, PFA Pension.

• Mr Christopher Ailman, Chief Investment Officer, CalSTRS.

• Mr Noël Amenc, CEO, Scientific Beta, part of SGX Group.

• Mr Patrick Armstrong, Member of the Secretariat, Financial Stability Board (FSB).

• Ms Jayne Atkinson, Chief Investment Officer, Unilever UK Pension Fund.

• Ms Valérie Baudson, Member of the Executive Committee, Amundi, CEO of CPR AM and Head of ETF, Indexing & Smart Beta

• Mr Stefan Bichsel, Executive Board Member and Head of the Asset Management & Trading Division, BCV, and former Chairman, EFAMA.

• Mr Frédéric Bôl, Chief Executive Officer, Swiss Life Asset Managers.

• Mr Kevin Bong, Director of the Economics and Investment Strategy Department, Government of Singapore Investment Corporation (GIC).

• Mr James C. Davis, Chief Investment Officer, OPSEU Pension Trust.

• Mr Albert De Wet, Group Treasury Portfolio Manager, FirstRand.

• Mr Patrick Fenal, Deputy Chairman, Unigestion.

• Mr Tomas Franzén, former Chief Investment Strategist, Andra AP-fonden (AP2) and Founder, Franzen Advisory.

• Mr Henrik Gade Jepsen, Senior Vice President, Head of Asset Management, Danske Bank Wealth Management.

• Mr David Iverson, Head of Asset Allocation, Guardians of New Zealand Superannuation.

• Mr Theo Jeurissen, Senior Adviser, Goldman Sachs Asset Management (GSAM).

• Mr Jean-Louis Laurens, Independant Director and Senior Advisor.

• Mr Xavier Lépine, Chairman, La Française AM.

• Mr François-Serge Lhabitant, Associate Professor, EDHEC Business School, Chief Investment Officer, Kedge Capital.

• Ms Jacqueline Loh, Deputy Managing Director, Monetary Authority of Singapore (MAS).

• Mr Lionel Martellini, Director, EDHEC-Risk Institute, Professor of Finance, EDHEC Business School.

• Mr Joseph Masri, Head of Risk Management, General Retirement and Social Insurance Authority (GRSIA).

• Mr Stéphane Monier, Head of Private Client Investments, Lombard Odier.

• Mr Gumersindo Oliveros, Chief Executive Officer, KAUST Investment Management Company.

• Mr Bruno de Pampelonne, President, Tikehau Investment Management.

• Mr Olivier Rousseau, Executive Director, Fonds de Réserve pour les Retraites (The French Pension Reserve Fund).

• Mr Adiaan Ryder, Chief Strategist, Abu Dhabi Investment Council (ADIC).

• Mr Günther Schiendl, Director and Chief Investment Officer, VBV-Pensionskasse.

• Ms Lisa Shalett, Head of Investment & Portfolio Strategies, Morgan Stanley Wealth Management.

• Mr Anil Suri, Managing Director, Head of Portfolio Construction & Investment Analytics, Merrill Lynch Wealth Management.

• Mr Philippe Teilhard de Chardin, Managing Partner, Advisors & Partners.

• Mr Brnic Van Wyk, Head of Asset/ Liability Management, Investments Division, QSuper.

• Mr Jaap van Dam, Managing Director Investment Strategy, PGGM.

• Mr Jean-Paul Villain, Director, Strategy Unit, Managing Director’s Office, Abu Dhabi Investment Authority.

About EDHEC Business School

• 5 campuses: Lille, Nice, Paris, London and Singapore

• 8,000 students in academic education

• 18 degree programmes: BBA, Master in Management, MSc, MBAs, PhD, etc.

• Over 40,000 alumni in 125 countries

• 172 permanent professors

• 11 centres of expertise

• A €121.5m budget

• €20m of R&D revenues, including €15m from international sources

• One of the first business schools worldwide to hold the triple crown of accreditations

from AACSB, EQUIS and AMBA

Operating from campuses in Lille, Nice, Paris, London and Singapore, EDHEC

is one of the top 15 European business schools. Fully international and directly connected

to the business world, EDHEC commands a strong reputation for research excellence and the

ability to train entrepreneurs and managers capable of breaking new ground. EDHEC functions

as a genuine laboratory of ideas and produces innovative solutions valued by businesses.

The School’s teaching is inspired by its research work and a focus on “learning by doing”,

all with the aim of equipping people with the skills to succeed in business.

About EDHEC-Risk Institute

Part of EDHEC Business School and 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 permanent professors, engineers, and support staff, and

research associates and affiliate professors, implements eight research programmes and six

research, industrial partnerships and private research projects focusing on asset allocation

and risk management. Additionally, it has developed an ambitious portfolio of research and

educational initiatives in the domain of investment solutions for institutional and individual

investors.

As part of its “Make an Impact” signature, EDHEC-Risk plays a noted role in furthering applied

financial research and systematically highlighting its practical uses.

For more information, please contact:

Maud Gauchon on +33 4 93 18 78 87 or by e-mail: maud.gauchon@edhec-risk.com

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EDHEC-Nice393 Promenade des Anglais - BP311606202 Nice Cedex 3 - FranceTel: + 33 (0)4 93 18 99 66

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EDHEC-Risk Institute393 promenade des AnglaisBP 3116 - 06202 Nice Cedex 3FranceTel: +33 (0)4 93 18 78 87

EDHEC Risk Institute—Europe10 Fleet Place, LudgateLondon EC4M 7RBUnited KingdomTel: +44 (0)20 7332 5600

https://risk.edhec.edu

https://www.edhec.edu