About Edhec

About Edhec [download corporate brochure]

Edhec Risk and Asset Management Research Centre

Edhec is one of the top five business schools in France owing to the high quality of its academic staff (over 100 permanent lecturers from France and abroad) and its privileged relationship with professionals that the school has been developing since it was established in 1906. Edhec Business School has decided to draw on its extensive knowledge of the professional environment and has therefore concentrated its research on themes that satisfy the needs of professionals.

Edhec is one of the few business schools in Europe to have received the triple international accreditation: AACSB (US-Global), Equis (Europe-Global) and AMBA (UK-Global).

Edhec pursues an active research policy in the field of finance. Its “Risk and Asset Management Research Centre” carries out numerous research programmes in the areas of asset allocation and risk management in both the traditional and alternative investment universes.

The choice of asset allocation

The Edhec Risk and Asset Management Research Centre structures all of its research work around asset allocation. This issue corresponds to a genuine expectation from the market. On the one hand, the prevailing stock market situation in recent years has shown the limitations of active management based solely on stock picking as a source of performance. On the other, the appearance of new asset classes (hedge funds, private equity), with risk profiles that are very different from those of the traditional investment universe, constitutes a new opportunity in both conceptual and operational terms. This strategic choice is applied to all of the centre's research programmes, whether they involve proposing new methods of strategic allocation, which integrate the alternative class; measuring the performance of funds while taking the tactical allocation dimension of the alphas into account; taking extreme risks into account in the allocation; or studying the usefulness of derivatives in constructing the portfolio.

Percent of variation between funds
Source: Edhec (2002) and Ibbotson, Kaplan (2000)

An applied research approach

In a desire to ensure that the research it carries out is truly applicable in practice, Edhec has implemented a dual validation system for the work of the Risk and Asset Management Research Centre. All research work must be part of a research programme, the relevance and goals of which have been validated from both an academic and a business viewpoint by the centre's advisory board.

This board is made up of both internationally recognised researchers and the centre's business partners. The management of the research programmes respects a rigorous validation process, which guarantees both the scientific quality and the operational usefulness of the programmes.

To date, the centre has implemented six research programmes:

Multi-style/multi-class allocation

This research programme has received the support of Misys Asset Management Systems, SG Asset Management and FIMAT. The research carried out focuses on the benefits, risks and integration methods of the alternative class in asset allocation. From that perspective, Edhec is making a significant contribution to the research conducted in the area of multi-style/multiclass portfolio construction.

Performance and style analysis

The scientific goal of the research is to adapt the portfolio performance and style analysis models and methods to tactical allocation. The results of the research carried out by Edhec thereby allow portfolio alphas to be measured not only for stock picking but also for style timing. This programme is part of a business partnership with the firm EuroPerformance (part of the Fininfo group).

Indices and benchmarking

Edhec carries out analyses of the quality of indices and the criteria for choosing indices for institutional investors. Edhec also proposes an original proprietary style index construction methodology for both the traditional and alternative universes. These indices are intended to be a response to the critiques relating to the lack of representativity of the style indices that are available on the market. Edhec was the first to launch composite hedge fund strategy indices as early as 2003. The indices and benchmarking research programme is supported by AF2I, Euronext, BGI, BNP Paribas Asset Management and UBS Global Asset Management.

Asset allocation and extreme risks

This research programme relates to a significant concern for institutional investors and their managers – that of minimising extreme risks. It notably involves adapting the current tools for measuring extreme risks (VaR) and constructing portfolios (stochastic check) to the issue of the long-term allocation of pension funds. This programme has been designed in co-operation with Inria's Omega laboratory. This research programme also intends to cover other potential sources of extreme risks such as liquidity and operations. The objective is to allow for better measurement and modelling of such risks in order to take them into consideration as part of the portfolio allocation process.

Asset allocation and derivative instruments

This research programme focuses on the usefulness of employing derivative instruments in the area of portfolio construction, whether it involves implementing active portfolio allocation or replicating indices. "Passive" replication of "active" hedge fund indices through portfolios of derivative instruments is a key area in the research carried out by Edhec. This programme is supported by Eurex and Lyxor.

ALM and asset management

This programme concentrates on the application of recent research in the area of asset liability management for pension plans and insurance companies. The research centre is working on the idea that improving asset management techniques and particularly strategic allocation techniques has a positive impact on the performance of Asset-Liability Management programmes. The programme includes research on the benefits of alternative investments, such as hedge funds, in long-term portfolio management. Particular attention is given to the institutional context of ALM and notably the integration of the impact of the IFRS standards and the Solvency II directive project.

Edhec Risk and Asset Management Advisory Board

In a desire to guarantee that its research work is both relevant and operational, the Edhec Risk and Asset Management Research Centre has set up an advisory board chaired by Mr. Jean-François Lepetit, associate professor with Edhec and former president of the French regulatory authority, the COB (Commission des Opérations de Bourse).

The board is made up of around twenty members, chosen according to their experience and their expertise in the financial domain and, more specifically, in asset management. The functions of the board are, on the one hand, to validate the objectives of the research programmes proposed by the management of the centre and, on the other, to evaluate the results of the research with a view to the impact that they could have on the practices of the asset management industry.

The board will also be called on to give its opinion on the content of the projects that Edhec develops from the research of its asset management research centre (initial training, executive training, etc.).

The board meets on a yearly basis during plenary sessions that allow current and future research centre developments to be reviewed. The board chairman may also, on certain subjects, form ad-hoc working groups that would be in charge of preparing or studying in greater detail themes that have been or will be brought up in the plenary session.

Research for business

In order to facilitate the dialogue between the academic and business worlds, the centre has recently undertaken four major initiatives:

Opening of a web site that is entirely devoted to the activity of international research into asset management. www.edhec-risk.com is aimed at a public of professionals who wish to benefit from Edhec's analyses and expertise in the field of applied portfolio management research such as detailed summaries, from a business perspective, of the latest academic research on risk and asset allocation as well as the latest industry news assessed in the light of the results of the Edhec research programme. www.edhec-risk.com is also the official site for the Edhec Indices.

Launch of Edhec-Risk Advisory, the consulting arm of the research centre focusing on risk management issues within the buy-side industry, and offering a wide range of services aimed at supporting fund managers and their service providers in the fields of operational risk, best execution, structured products, alternative investment due diligence and risk management system implementation.

Launch of Edhec Investment Research, in order to support institutional investors and asset managers in implementing the results of the Edhec Risk and Asset Management Research Centre’s research. Edhec Investment Research proposes asset allocation services in the context of a “core-satellite” approach encompassing alternative investments.

Launch of Edhec Alternative Investment Education, which is the exclusive official CAIA association course provider for Europe.

The Team

The aim of the Edhec Risk and Asset Management Research Centre is to become the leading European centre of research into asset management in the coming years. To that end, Edhec has invested significantly to give the centre an international research team made up of both professors and permanent researchers, with whom professionals are affiliated in the capacity of research associates.

To date, the Edhec Risk and Asset Management Research Centre has more than 28 members: 15 permanent members and 13 associates that are operating in firms that are reputed for their proficiency in asset management.

This team is managed by Professor Noël Amenc, who has considerable experience in asset management as both an academic and a professional.