Despite the accepted fact that a substantial part of the risk and return of any portfolio comes from asset allocation, we find today that the majority of investment professionals worldwide are focused on security selection. Multi-Asset Investing: A Practitioner s Framework questions this basic structure of the investment process and investment industry. Who says we have to separate alpha and beta? Are the traditional definitions for risk and risk premium relevant in a multi-asset class world? Do portfolios cater for the real risks in their investment processes? Does the whole Emerging Markets demarcation make sense for investing? Why do active Asian managers perform much poorer compared to developed market managers? Can you distinguish how much of a strategy s performance comes from skill rather than luck? Does having a performance fee for your manager create alignment or misalignment? Why is the asset management transitioning from multi-asset strategies to multi-asset solutions? These and many other questions are asked, and suggestions provided as potential solutions. Having worked together for fifteen years, the authors present implementable solutions which have helped them successfully manage large asset pools. The Academic Perspective Multi-Asset Investing asks fundamental questions about the asset allocation investment processes in use today, and can have a substantial impact on the future structure of the finance industry. It clarifies and distils the techniques that investment professionals need to master to add value to client portfolios. Paul Smith, President & CEO, CFA Institute Pranay Gupta, Sven Skallsjo, and Bing Li describe the essential concepts and applications of multi-asset investing. Their treatment is far ranging and exceptionally lucid, and always with a nod to practical application. Buy this book and keep it close at hand. Mark Kritzman, MIT Sloane School of Management Innovative solutions to some of the most difficult investment problems we are faced with today. Multi-asset Investing tackles investment issues which don t have straight forward solutions, but nevertheless are faced by every investment professional. This book sets the standard for investment processes of all asset managers. SP Kothari, MIT Sloane School of Management The Asset Owner Perspective Multi-asset means different things to different people. This is the first text that details a comprehensive framework for managing any kind of multi-asset investment problem. Further, its explanation of the commercial aspects of managing a multi-asset investment business for an asset manager, private bank or asset owner make it an indispensable tool Sadayuki Horie, Dy. Chairman - Investment Advisory Comm., Government Pension Investment Fund, Japan Multi-Asset Investing shows the substantial scope there is to innovate the asset allocation process. With its novel approaches to allocation, portfolio construction and risk management it demonstrates the substantial value that can be added to any portfolio. The solutions proposed by Multi-Asset Investing are creative, thought provoking, and may well be the way all portfolios need to be managed in the future. Mario Therrien, Senior Vice President, Caisse de Depot et Placement du Quebec, Canada The Asset Manager s Perspective Never has astute asset allocation and diversification been more crucial than today. Asset Managers which are able to innovate their investment processes and products in this area, are more likely to be the winners. Multi-Asset Investing provides both

PRANAY GUPTA has over 25 years of experience in managing multi-asset and multi-strategy portfolios of up to US$85 billion across the world for asset managers, sovereign wealth funds, insurance companies, pension plans, endowments and high-net-worth individuals. He has served as the Chairman of the Investment Committee at the CFA Institute Research Foundation and has been awarded as the Best Discretionary Asset Manager in Asia.

SVEN R. SKALLSJÖ has designed and developed risk models at Ignis Asset Management, AGL Structured Finance and Shell Asset Management.

BING LI is the president of BC Capital Management Ltd., a Hong Kong-based firm providing investment solutions for high-net-worth individuals in mainland China.

Klappentext

Over the last fifteen years, the authors of Multi-Asset Investing have combined their individual skills in asset allocation, financial mathematics and portfolio management to innovate and implement original solutions to practical problems inherent in managing large pools of assets invested across global asset classes. Multi-Asset Investing critically evaluates traditional investment management practices and proposes a fresh approach with a proven framework for managing global multi-asset portfolios.

Asset allocation functionally accounts for a majority of a portfolio's total return, but most of today's investment industry is focused on the smaller amount related to security selection. This forward-thinking guidebook proposes a redesign of the traditional plan sponsor allocation process into a multi-strategy framework, implemented using a range of approaches to reduce risk and increase diversification. It goes in-depth into two tested processes which the authors have used for allocating assets, together with unique approaches to multi-asset portfolio construction and the management of intra-horizon tail risk. Every tool and technique inside has been used by the authors in professional practice and has proven to be useful.

Multi-Asset Investing is an authoritative guide to the most sought-after investment product today and in the future.

Inhalt

Preface xiii

About the Authors xv

1. An Introduction to the Multi-Asset Investment Problem 1

1.1 What is Multi-Asset Investing? 2

1.2 The Conventional Structure 4

1.3 Transitioning from Active Management to Exposure Allocation 4

1.4 Creating an Improved Allocation Structure 5

1.5 Constructing a Multi-Asset Portfolio to Manage Tail Risks 6

1.6 Multi-Asset Investing in Emerging Markets 6

1.7 From Multi-Asset Strategies to Multi-Asset Solutions 7

1.8 Structuring a Multi-Asset Business 7

2. The Traditional Allocation Structure 9

2.1 The Traditional Investment Process 10

2.2 The Asset Allocation Process 12

2.3 The Belief in Diversification 13

2.4 Harnessing Equity Risk Premium and the Investment Horizon 19

2.5 Asset Classes as Mutually Exclusive Silos 20

2.6 Organization Structure and Resource Allocation 20

2.7 Implications for Skill Required in Asset Allocation 21

2.8 Requirements for a Revised Allocation Solution 22

2.9 Parallel Debates Created in the Search for a Revised Allocation Solution 23

3. Transitioning from Active Management to Exposure Allocation 25

3.1 A Historic Rationalization of Alpha and Beta 26

3.2 Progression of Active Management 27

3.3 Generalizing the Beta Concept 27

3.4 The Demise of Asset Class Demarcated Allocation 28

3.5 Implications for the Active Investment Process 29

3.6 Investment Strategy Categorization 30

3.6.1 Fundamental, Quantitative and Technical 30

3.6.2 Top-down, Bottom-up and Relative Value 31

3.7 Positioning of Alternative Investments 31

3.8 Obsolescence of Portable Alpha 32

3.9 Positioning of Fundamental Indexation and Smart Beta 32

3.10 Risk in an Exposure-Based Framework 33

3.11 Horizon-Based Organizational Demarcation 34

3.12 Transition from an Asset-Based to an Exposure-Based Organization 34

3.13 Conclusion 37

4. Redefining Risk Premium for Multi-Asset Allocation Decisions 39

4.1 Incumbent Risk and Risk Premium Framewo…