Global Asset Allocation and Risk Budgeting

Day One

10.00 - 10.15 Welcome and Introduction

10.15 - 12.45 Asset Allocation and the Investment Management Process

• Introduction to Asset Allocation
• The Case for a ”Global” Approach
• The Investment Management Process
• An Asset-Liability Framework for IM

Global Asset Classes and their Characteristics

• The Global Asset Markets
  • Equity Markets
  • Fixed Income
  • Emerging Markets
  • Commodities
• Funds and Trusts
  • Unit Trusts
  • Investment Trusts
  • Exchange-Trade Funds
  • Private Equity and Hedge Funds

12.45 - 13.45 Lunch

13.45 - 17.00 Strategic Asset Allocation and Portfolio Construction

• ”Classic” Mean/Variance Optimization
  • Risk/return forecasting
  • Shortfall-optimization
  • Lower Partial Moments optimization
• Dealing with the Problems in the Classic Optimization Approach
  • Time-varying volatility
  • Illiquid investments
  • Life cycle investing
  • Portfolio resampling
• Bayesian Analysis and Portfolio Choice
• Resampling the Efficient Frontier
• The Black-Litterman Asset Allocation Model
• Scenario Optimization
• Exercises

Day Two

09.00 - 09.15 Recap

09.15 - 12.00 Dynamic Asset Allocation Strategies

• Objectives of DAA
• Presentation and Evaluation of Dynamic Strategies
  • Buy-and-hold
  • Constant mix
  • Constant proportion
  • Option-based portfolio insurance
• Exercises

Indexation and Core-Satellite Investing

• Traditional Benchmark-relative Optimization
• Multiple Benchmark Optimization
• Tracking Error efficiency vs. Mean-Variance Efficiency
• The Core-Satellite Approach to Investing
  • Building a low-risk, low-cost core
  • Pursuing higher returns with active funds and individual positions
• Exercises

12.00 - 13.00 Lunch

13.00 - 16.30 Risk Budgeting, Surplus Risk Management and Liability Driven Investing

• Risk Allocation vs. Asset Allocation
• Active Risk vs. Passive Risk
• The Concept of “Portable Alpha”
• Constructing Optimal Portfolios under Risk Budgeting Constraints
  • Defining objective function and constraints
  • Maximizing the Information Ratio
• Surplus Risk Management
  • Defining the Surplus in an ALM Framework
  • Managing “Surplus-at-Risk”
• Liability Driven Investing
  • Considering risk on a relative basis versus liabilities when making asset allocation decisions
  • Measuring investment success as the ability to meet future cash payments
• Exercises

Evaluation and Termination of the Seminar