Alternative Asset Allocation Seminar New York, 11-13 April 2012 Institute
Alternative Asset Allocation Seminar — New York
The Choice of Asset Allocation and Risk Management õ Having learnt in recent years about the limited payoffs and significant risks of excessive reliance on asset selection models, investment managers and institutional investors are showing unprecedented interest in asset allocation approaches as sources of performance. õ Concurrently, the emergence of alternative asset classes and strategies with risk profiles that are very different from those of equity and fixed-income products has created new opportunities for asset allocation in both conceptual and operational terms. õ The latest financial market meltdown has exposed the error of reliance on diversification as the sole means of risk management, highlighted the challenges of alternative investment, and accelerated the recognition of asset allocation and state-of-the-art risk management as the keys to improved multi-style multi-class investment solutions.
õ It is against this backdrop that EDHEC-Risk Institute has structured its work on asset allocation and risk management and deployed it across both the traditional and alternative investment universes. Now regarded as the premier academic centre for industry-relevant financial research, it plays a noted role in furthering asset allocation and risk management concepts and techniques and systematically highlights their practical uses in the institutional, private, and retail investment spaces. õ With this latest Alternative Asset Allocation seminar EDHEC-Risk Institute continues to organize seminars that take stock of the latest industry trends and research advances and clarify the distinction between true innovation and mere marketing claims.
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EDHEC has demonstrated in a very short time a level of commitment to, and excellence in, the research of alternative assets. […] EDHEC pushes me to maintain my professional skills at the highest level.” Mark Anson, CFA, Managing Partner and Chair of the Investment Committee, Oak Hill Investment Management, Menlo Park, California, USA
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Alternative Asset Allocation Seminar — New York
Alternative Asset Allocation Seminar õ The Alternative Asset Allocation Seminar is an intensive three-day course that will impart advanced concepts and practical tools for optimal construction and risk management of multi-style multi-class portfolios. It will also enable participants to derive the full benefits of real assets for asset management and asset-liability management (ALM) while controlling for their specific risks. õ The first day of the seminar introduces the state of the art in multi-style multi-class portfolio management. It analyses the risks and return drivers and the conditional performance of the various alternative asset classes and strategies. It shows how to deal with non-Gaussian returns, illiquid assets, and flawed data and to account for extreme risks in multistyle multi-class portfolio optimisation. It presents qualitative techniques to control asset-class exposures and manage liquidity, valuation, and counterparty risks, and surveys quantitative tools for portfolio-wide risk management. õ The second day of the seminar focuses on asset allocation to real assets. It examines the short- and longterm inflation-hedging characteristics of real and financial assets. It then shows how to use real assets to optimise strategic asset allocation in both asset-only and assetliability management (ALM) contexts, paying particular attention to the impact of inflation regimes. It concludes with a review of tactical asset allocation with real assets that emphasises macro-momentum approaches.
õ The final day of the seminar explores new frontiers in alternative investments. It looks at volatility products and strategies and assesses the potential of volatility as an emerging asset class, reviewing its diversification and downside-risk-hedging properties. It explores infrastructure investing, analyses the risk-return profile and unique characteristics of the infrastructure sub-sectors, reviews alternative investment approaches and vehicles, discusses portfolio construction issues and infrastructure programme management, and concludes with an examination of direct and indirect infrastructure investing strategies and case studies. õ Presented in a highly accessible manner by a team of instructors with established reputations for bringing together academic expertise and industry experience, the seminar combines exploration of innovative models, concepts, and themes, presentation of state-of-the-art practical tools, and examination of best industry practices.
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A highly entertaining and educational hands on experience - very suited for practical applications.” Christoph Roos, CFA Head of Swiss Insurance & Pension Funds Clients, Cross Asset Solutions, Société Générale, Zurich, Switzerland Past participant
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Alternative Asset Allocation Seminar — New York
Key Learning Benefits
Who Should Attend
õ Understand the risks, return drivers, and conditional return characteristics of hedge funds, commodities, private equity, real estate, and emerging alternative assets.
õ The programme is intended for investment management professionals who advise on or participate in the design and implementation of asset allocation and risk management policies, and for sell-side practitioners who develop new asset management and ALM solutions for investors. It is especially relevant to those who need to optimise the construction and management of alternative and multi-style multi-class solutions or examine the means—as well as the benefits—of making alternative classes and strategies an integral part of portfolios. The seminar should be of particular interest to practitioners with the following functions and from the following types of institutions:
õ Find out how to build resilient multi-style multi-class portfolios. Address data limitations and deal with illiquidity, non-normality, and extreme risks to optimise multi-style multi-class portfolio construction. Use quantitative and qualitative techniques to manage class exposure, to minimise the liquidity, valuation, and counterparty risks of alternative investments, and to implement portfolio-wide risk management. õ Learn to use real assets to improve the risk budgets in asset management and ALM programmes. Review the inflation-hedging properties of real and financial assets and use real assets to reduce the cost of inflation protection in the short and the long run. Assess the suitability of real investments for different types of investors and optimise allocation to real assets for investors with deterministic or uncertain liabilities. Examine tactical asset allocation to real and financial assets across the business cycle. õ Explore the potential of volatility for portfolio diversification and hedging of downside equity risk. Understand volatility products and strategies. õ Examine infrastructure investing as an asset class, understand the specificities of the various investment approaches and vehicles, study infrastructure programme management for different types of investors, and discover best practices for direct and indirect infrastructure investing. 4
Functions
Institutions
• Chief executive officers/ Managing directors • Chief investment officers/ Directors of investments • Heads of asset allocation/ investment strategy/ALM • Heads of investment solutions/ structuring/financial services • Portfolio managers • Risk managers • Senior analysts and investment officers • Senior investment advisers/ consultants • Senior research officers
• Asset management companies • Consultancies • Insurance and reinsurance companies • Investment banks • Non-financial companies • Pension funds, endowments and foundations • Private banks • Regulatory authorities • Research firms • Sovereign investment vehicles
Alternative Asset Allocation Seminar — New York
F ra n ç o i s - S e rg e L h a b i t a n t i s Affiliated Professor of Finance at EDHEC Business School and a member of EDHEC-Risk Institute, and Chief Investment Officer at Kedge Capital Fund Management. François-Serge is responsible for the investment management of the Kedge Capital Funds and investment mandates operated by the Kedge Group. Before joining Kedge, he was a senior executive at UBP, where he was in charge of the quantitative analysis and the management of dedicated hedge fund portfolios. Prior to that, he was a director at UBS Private Banking Division and Global Asset Management. His research has been published in refereed academic and practitioner journals such as the Journal of Alternative Investments, European Finance Review, and the Journal of Risk Finance. He is a member of the AIMA Investor Steering Committee, and he contributes to the International Association of Financial Engineers and the Professional Risk Managers’ International Association. François-Serge has written several bestsellers on hedge funds and co-edited books on commodities, hedge funds, and stock market liquidity. His latest reference text is the Handbook of Hedge Funds (Wiley Finance). He is a seasoned keynote speaker at top industry events. He holds graduate degrees in engineering, banking, and finance and a PhD in finance from the University of Lausanne.
Lionel Martellini, PhD
François-Serge Lhabitant, PhD
Seminar Instructors Lionel Martellini is Professor of Finance at EDHEC Business School, Scientific Director of EDHEC-Risk Institute, and Scientific Advisor at EDHECRisk Indices & Benchmarks. Lionel has consulted on risk management, asset allocation, portfolio construction and performance benchmarks for various institutional investors, investment banks, and asset management firms, both in Europe and in the United States. His research has been published in leading academic and practitioner journals, including Management Science, Review of Financial Studies, Journal of Portfolio Management, Financial Analysts Journal, and Risk Magazine. He sits on the editorial board of the Journal of Portfolio Management and the Journal of Alternative Investments. Lionel has coauthored and co-edited reference texts on fixedincome management and alternative investment and is regularly invited to deliver presentations at leading academic and industry conferences. He holds graduate degrees in business administration, economics, statistics and mathematics, as well as a PhD in finance from the Haas School of Business at UC Berkeley.
Latest Books and Chapters from the Instructors
“François-Serge Lhabitant has created the fundamental guide to hedge fund investments. It covers a lot of ground and can truly serve as an encyclopaedia for entry-level investors as well as those who would like to delve a little deeper into specific themes. It also includes information on legal environments as well as operational aspects, which other recent publications are clearly lacking.” Barbara Rupf Bee, Global Head of Institutional Sales, HSBC Investments
“Michael Underhill has prepared a very useful primer on infrastructure investing strategies. If you want to get serious about such strategies and need a good reference point, read this book.“ Bruce Feldman, Director of Alternative Investments, Pennsylvania State Employees’ Retirement System
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Alternative Asset Allocation Seminar — New York
Euan Sinclair is the Risk Manager for Bluefin Trading, a privately owned financial services business focused on listed derivative marketmaking, proprietary trading, and institutional sales and trading. Euan has fifteen years of professional experience in option trading. At Bluefin, he oversees firm risk by monitoring the positions and activity of its traders, and specialises in the design, implementation and risk management of quantitative trading strategies. He is the author of two books in the Wiley Trading series: Option Trading: Pricing and Volatility Strategies and Techniques and Volatility Trading. He has a PhD in theoretical physics from the University of Bristol.
Michael Underhill
Euan Sinclair, PhD
Seminar Instructors Michael Underhill is the Chief Investment Officer of Capital Innovations, an asset management firm he established in 2007. Capital Innovations explores novel approaches to real asset investment, optimal portfolio construction, and more efficient forms of capital deployment. The company distributes its investment products globally and manages infrastructure, timber and agriculture investments on behalf of some of the world’s largest institutional investors and family offices. Michael has over fifteen years of industry experience. He started his career at Lehman Brothers as a quantitative analyst, developed Janus Capital’s institutional fixed income money management capabilities, and subsequently managed institutional accounts at INVESCO and Alliance Bernstein. Michael has pioneered unconventional portfolio strategies that are now widely applied, including listed infrastructure, listed timber, and listed agribusiness investment strategies. His strategies have been featured in major news and business publications and he has published widely in trade publications. He sits as an industry expert on the curriculum committee of the CAIA® designation and contributes to the infrastructure work stream of the UN-backed Principles for Responsible Investment Initiative. He is author of the bestselling Handbook of Infrastructure Investing (Wiley Finance) and is frequently invited to speak at industry events. He is an economics graduate of Pennsylvania State University. 6
Day One
Alternative Asset Allocation Seminar — New York
Multi-Style Multi-Class Portfolio Construction Seminar contents: understanding the risks and return dynamics of alternative classes and strategies; measuring the linear and non-linear factor exposures of traditional and alternative investments; addressing data limitations, autocorrelation, and non-normality; managing asset class exposure; using tools for the operational management of liquidity, valuation, and counter-party risk; measuring extreme risk and accounting for it in portfolio optimisation.
Risk and return drivers of alternative investments õ Understanding alternative classes and alternative strategies
• Commodities • Private equity • Real estate • Hedge funds • Emerging alternative assets: infrastructure, art, etc.
õ Comprehensive factor model for alternative and traditional classes and sub-classes • Linear and non-linear exposure to risk factors—a class by class analysis • The conditional performance of alternative investments— economic conditions under which alternatives perform well/poorly • Diversification and hedging potential: mapping with respect to factors impacting return on traditional asset classes
Portfolio construction and risk management õ Dealing with data limitations, illiquid assets, and non-Gaussian returns • Issues with alternative investment data: low-frequency, biases in databases, etc. • Evidence of stale prices and methodologies for de-smoothing the return series • Evidence of non-normality in alternative investment styles
õ Operational risk management
• • •
Liquidity risk - Asset-liability liquidity matching - Subscriptions and redemptions, side pockets, and illiquid assets - Using credit lines and leverage versus using secondary markets - Side letters Valuation risks - Reviewing asset-pricing policies - Dealing with illiquid assets, complex products, and stale prices - Independent administration and net asset value production - The "too good to be true" risk Counterparty risk - Cash management - Asset custody and rehypothecation - Margins and collateralisation - Over-the-counter versus listed products - Financing and credit lines
õ Portfolio-wide risk management • Transparency issue: managed accounts versus funds, risk transparency versus asset transparency • Diversification issue: the law of small numbers • Risk measurement in alternative contexts: maximum drawdown, VaR and beyond VaR • Portfolio construction with extreme risk measures versus volatility • Portfolio rebalancing rules: buy and hold versus risk management
õ Managing the asset class exposure
• Capital calls versus upfront drawdown • Dealing with returned capital • Currency exposure and implicit leverage and deleverage
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Day Two
Alternative Asset Allocation Seminar — New York
Financial Engineering and Alternative Investments Seminar contents: optimising the integration of alternative investments into asset management and ALM; measuring the inflation-hedging properties of traditional and alternative assets; reducing the cost of inflation protection and hedging extreme inflation risk with alternative investments; optimising the diversification potential of alternative investments; designing alternative diversifiers for equity and bond portfolios; implementing dynamic risk-controlled strategies to optimally displace traditional assets with alternative investments; designing multi-style multiclass open-ended investment solutions with liquidity, drawdown, and performance constraints.
Alternatives in ALM
Integrating alternative investments in an ALM context
õ Organisation of ALM: LDI, liability-hedging portfolio versus
õ Beyond the fund separation theorem and the LDI paradigm: enhancing the liability-hedging properties of alternative assets held for performance-seeking purposes
performance-seeking portfolio
õ Risk budgeting for LDI solutions: case without leverage (liabilitydriven benchmark) versus case with leverage (absolute return benchmark)
õ Financial engineering with alternatives: optimising the risk budget
Alternatives for optimal diversification
õ Alternative investment vehicle selection: exploring the co-moment beta approach
by introducing alternatives in the performance-seeking and liabilitymatching portfolios
õ Enhanced parameter estimation for alternatives: extending
Alternatives in the liability-hedging portfolio
õ Optimal design of equity and bond portfolio diversifiers—towards an
techniques for covariance matrix estimation to co-skewness and cokurtosis matrices
õ Short-term inflation matching versus long-term inflation hedging:
optimal blend of traditional and alternative beta: an illustration using hedge fund strategies
term structure of risk from an asset management and an ALM perspective
Alternatives for optimal substitution
Inflation-hedging properties of alternatives
õ Inflation hedging with alternatives: inflation-hedging properties of real estate and commodities
õ Comparison with traditional asset classes: inflation-linked securities
õ Dynamic risk-controlled strategies for optimal substitution—towards an optimal replacement of traditional factor exposures with alternative factor exposures
and stocks as possible ingredients in the liability-hedging portfolio
õ Dynamic core-satellite techniques with alternatives: meeting the
Inflation-hedging versus liability-hedging
õ Extending the dynamic core-satellite techniques to allow for the
õ Liability-hedging properties of alternative asset classes: focus on
design of open-ended investment solutions mixing traditional and alternative beta: accounting for relative maximum drawdown and trailing performance constraints
inflation hedging versus focus on liability hedging
õ Liability-hedging in the short-run and in the long-run: the trade-off between the short-term perspective, where interest rate risk dominates, and the long-term perspective, where inflation risk dominates 8
Alternatives in the performance-seeking portfolio
challenge of liquidity
Day Three
Alternative Asset Allocation Seminar — New York
New Frontiers in Alternative Asset Allocation Seminar contents: exploring volatility and infrastructure investing as asset classes; understanding the characteristics, the pros and cons, and the pricing of first- to third-generation volatility products; reviewing systematic and tactical volatility strategies; volatility as a portfolio diversifier, volatility as a hedge against downside equity risk—infrastructure as an asset class and its place in institutional portfolios; exploring investment approaches and vehicles; understanding portfolio construction and risk management issues; designing infrastructure investing programmes across the spectrum of investors; reviewing best practices for direct and indirect investment strategies.
Understanding volatility õ What is volatility? õ Volatility characteristics: jumps, mean reversion, implied volatility skews, smiles, and smirks, term structure of volatility, correlation of volatilities õ Understanding the volatility risk premium
Volatility vehicles õ Options strategies: straddles, strangles, delta-hedged options,
Volatility as an emerging asset class–asset allocation and portfolio construction considerations õ Volatility as a hedge against downside risk and black swans õ Risk characteristics of volatility strategies and their potential diversification benefits
õ How to deal with the liquidity issue õ The fallacy of back-testing
long-dated out-of-the-money options and their limits
õ Second-generation volatility products: pricing, properties, and pros and cons of variance swaps, forward-start variance swaps, and VIX futures õ Third-generation volatility products: pricing, properties, and pros and cons of corridor variance swaps, conditional variance swaps, correlation swaps, options on realised variance, volatility indices, range-accrual and dispersion notes. õ Option on volatility: option on VIX, option on variance
Volatility strategies õ Listed and/or systematic volatility strategies
• From VIX to VXX • The long and short of systematic volatility strategies • Going long volatility as a hedge • Going short volatility as a carry • Implementing a mean reversion volatility strategy as a tail hedge • Buying volatility indices as a hedge and the benchmarking issue õ OTC volatility strategies and beyond • Using variance swaps for macro trades • Strategies for trading volatility skew • Correlation and dispersion trading
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Day Three
Alternative Asset Allocation Seminar — New York
Infrastructure as an asset class õ Fiscal and monetary policies worldwide and their effects on economies and local infrastructure markets
õ Emerging opportunities in infrastructure markets õ Risk-return and unique characteristics of infrastructure investments
õ Importance and classification of infrastructure investments in institutional investors’ asset allocation
õ Allocations to emerging market asset classes õ Infrastructure investments in inflation- and deflation-centric allocations
õ New developments in asset and risk allocation: sub-sector asset allocation, geographic asset allocation/diversification, derivatives and risk policies for fund structures
Typology of infrastructure investments õ Analysing alternative approaches allowing institutional investors to take advantage of global infrastructure spending
õ Understanding investment approaches and vehicles and looking at the risk mitigation techniques relevant to different investment types (direct and indirect investment, private funds, public/private partnerships, listed companies, and more)
Portfolio construction and infrastructure programme management õ Asset class and vehicle considerations for portfolio constructions õ Infrastructure programme development and management case studies (public pension fund, sovereign wealth fund, foundation/ endowment, family office, high-net-worth investor) õ Unique characteristics of infrastructure investing risk management and best practices õ Learning from the global financial crisis: practical lessons for managing and improving processes at investment organisations
Infrastructure strategies õ Direct investments: valuation approaches and strategies for various infrastructure projects õ Indirect investments: strategies for selecting managers and conducting due diligence õ Case studies: institutional investors evaluating and investing in smart-grid, energy, and transportation projects.
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“
Excellent opportunity to take a deep dive into the role of alternative investments in an institutional investment portfolio. Good balance of both theoretical and practical application.” James Leckinger, Chief Investment Officer, Foundation & Institutional Advisory Practice, Northern Trust Company, Schaumburg, Illinois, USA Past participant
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EDHEC-Risk Institute is a highly respected institute that can think both literally and figuratively across boundaries. It not only produces sound theoretical frameworks for identifying and analysing risks but is also able to come up with pragmatic solutions for direct implementation by the investment industry, be they pension funds, banks or insurance companies. And on top of this they are really fun to work with. Jaap Maassen, Senior Vice President International Affairs, APG, Amsterdam, The Netherlands
Alternative Asset Allocation Seminar — New York
About the Organiser Since 2001, EDHEC 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 80 permanent professors, engineers and support staff, as well as 18 research associates from the financial industry and 6 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, and Nice, France. In addition, it has a research team located 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 two conferences for professionals in order to present the results of its research, one in London (EDHEC Risk Days— Europe) and one in Singapore (EDHEC Risk Days—Asia), attracting more than 2,000 professional delegates.
Institute
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 50,000 regular visitors, is aimed at professionals who wish to benefit from EDHECRisk’s analysis and expertise in the area of applied portfolio management research. Its monthly newsletter is distributed to more than 1,000,000 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 masters 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.
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Registration and Fee Information Fees Standard rate: EUR 6,000 CFA Institute Member Rate: EUR 4,500
Continuing Education Credits
As a participant in the CFA Institute Approved-Provider Programme, EDHEC-Risk has determined that this programme qualifies for 21 credit hours. If you are a CFA Institute member, continuing education credit for your participation in this programme will be automatically recorded in your CE Diary.
Fees include instruction, teaching materials, refreshments at breaks, and lunches. Accommodation is not included. Billing and payment The fee is billed following registration and must be settled before the seminar begins. Payment can be made by credit card or wire transfer.
Transfer or cancellation
Schedule
A typical programme day lasts from 8:30 to 5:30 and is usually divided into lectures and application cases. The two class sessions in each half-day period are separated by thirty-minute refreshment breaks scheduled at 10:30 and 3:30. Lunch is served at 12:30.
Venues
Millenium Hilton 55 Church Street, New York, United States 10007 Tel: 1-212-693-2001 Fax: 1-212-571-2316 http://www1.hilton.com
Transfer of registration to a colleague, upon written notice, is allowed and free of charge. Transfer of registration fees to another EDHEC-Risk Institute programme must be requested in writing and is subject to the following charges: 45 to 30 days’ notice: 15% of the fee; 29 to 11 days’ notice: 30% of the fee; 10 days’ notice or less: 50% of the fee. Cancellations of confirmed seats must be received in writing and are subject to the following charges: 45 to 30 days’ notice: 25% of the fee; 29 to 11 days’ notice: 50% of the fee; 10 days’ notice or less: 100% of the fee.
Institute
EDHEC-Risk Institute 393 promenade des Anglais BP 3116 - 06202 Nice Cedex 3 France Tel: +33 (0)4 93 18 78 24 EDHEC Risk Institute—Europe 10 Fleet Place, Ludgate London EC4M 7RB United Kingdom Tel: +44 208 150 6740 EDHEC Risk Institute—Asia 1 George Street #07-02 Singapore 049145 Tel: +65 6438 0030 www.edhec-risk.com
Further Information and Registration For further information, contact Mélanie Ruiz at:
[email protected] or on: +33 493187819 To register, visit: http://store.edhec-risk.com or send the completed registration form: by email to:
[email protected] by fax to: +33 (0)4 93 18 45 54
