Wed, 16/12/2009 - 11:19
Edhec-Risk Institute has launched a risk and investment management programme after a survey found that further education was needed to close the gap between real-word practice and research.
The Executive MSc in Risk and Investment Management will provide experienced practitioners with a 17-month part-time programme.
It builds on the results of an Edhec-Risk Institute survey of 229 financial institutions, which found that investment professionals were aware of research advances but that only a minority of institutions actually used advanced techniques and more often than not in ways inconsistent with sound risk and investment management.
The survey identified major inefficiencies in the very organisation of risk and investment management as well as in all steps of the process.
In terms of investment management organisation, the survey found widespread adoption of the core/satellite framework but it also documented that it was used in a way that is inconsistent with optimal diversification of the core portfolio or best-in-class risk management across portfolio and satellites.
While it is recognised that investment objectives and liabilities should play a central role in asset allocation and risk management policies, the survey found that asset-liability management remained the preserve of institutional investors. Even within this group, nearly 40 per cent of respondents did not account for shortfalls with respect to liabilities, and those who did typically used the crudest methods, ignoring techniques for optimising the risk/return trade-off and extreme risks.
For asset allocation within a given class, the choice of indices and benchmarks was found to be made with little regard for the risk and return characteristics of competing indices.
Portfolio optimisation suffered from two major flaws. First, over two-thirds of respondents used traditional techniques to estimate the inputs of their models making no effort to reduce or model estimation risk. Second, while a majority of professionals explained they were taking account of extreme risk for portfolio construction, only a fraction of these had adopted the metrics to properly do so.
In terms of performance measurement and attribution, the tools used by the investment management profession as a whole were found to be very basic and only a minority of institutions had adopted models that rigorously accounted for risks when measuring performance.
“The Executive MSc offered by Edhec-Risk Institute will help the investment profession bridge the gap between research advances and industry practices by providing practitioners with the tools to improve the organisation of the risk and investment management process, optimise each of its steps, and integrate investor needs and constraints in the design of novel solutions for institutional, private and retail investment management,” says director of Edhec-Risk Institute Noël Amenc,
Offered from January 2011 in Europe from London and Nice, and in Asia from Singapore, the programme will be delivered by a team of instructors with established reputations for combining academic expertise and industry relevance.
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