A feasible asset allocation framework for the post 2008
financial world

Asset allocation has long been a cornerstone of prudent
investment management; however, traditional allocation plans failed
investors miserably in 2008. Asset allocation still remains an
essential part of the investment arena, and through a new approach,
you'll discover how to make it work.

In The New Science of Asset Allocation, authors Thomas
Schneeweis, Garry Crowder, and Hossein Kazemi first explore the
myths that plague this field then quickly move on to examine how
the practice of asset allocation has failed in recent years. They
then propose new allocation models that employ liquidity,
transparency, and real risk controls across multiple asset
classes.

* Outlines a new approach to asset allocation in a post-2008
world, where risk seems hidden

* The "great manager" problem is examined with solutions on how
to capture manager alpha while limiting downside risk

* A complete case study is presented that allocates for beta and
alpha

Written by an experienced team of industry leaders and academic
experts, The New Science of Asset Allocation explains how
you can effectively apply this approach to a financial world that
continues to change.

THOMAS SCHNEEWEIS, PHD, is the Michael and Cheryl Philipp Professor of Finance at the University of Massachusetts, Amherst and is the founding director of the Center for International Securities and Derivatives Markets. He is also the founding editor of the Journal of Alternative Investments, cofounder of the Chartered Alternative Investment Analyst Association, and a founding Director of the Institute for Global Asset and Risk Management. During his almost forty years of investment management experience, he has been associated with the development of alpha transfer and fund replication products, the creation and development of the Zurich Hedge Fund Indices and the Dow Jones Hedge Fund Benchmark Series, as well as being instrumental in the creation of the Bache Commodity Index. Schneeweis publishes widely in the area of investment management and is often quoted in the financial press.

GARRY B. CROWDER, JD, MBA, is a noted expert in the development and creation of multi-asset portfolio solutions and products. He has designed and implemented asset allocation solutions for leading multinational banks, insurance companies, and family offices. Crowder created and was managing partner of one of the first and largest hedge fund platforms based on managed accounts. In this capacity, he formed and led the team that created the Zurich Hedge Fund Indices and the Dow Jones Hedge Fund Benchmark Series. With over twenty years of investment experience, he is a founding Director of the Institute for Global Asset and Risk Management and has also served in managing director positions at Morgan Stanley Asset Management and Tiger Management LLC.

HOSSEIN KAZEMI, PHD, CFA, is regarded as a leader in the area of asset allocation, and has published over thirty academic and practitioner articles in the area of asset pricing and asset allocation. He is a founding partner of Alternative Investment Analytics, LLC, and White Bear Partners, LLC. Kazemi is a professor of finance at the University of Massachusetts, Amherst and is the Associate Director of the Center for International Securities and Derivatives Markets. He is the current Program Director of the Chartered Alternative Analyst Investment Association.

While in most instances asset allocation failed to protect investors from devastating losses in 2007 and 2008, it remains an essential element of the investment decision. Asset allocation is not solely about maximizing expected return. Much of asset allocation is based on the tradeoffs between the costs and returns that are consistent with an investor's risk tolerance or investment goals. Today the challenge is greater than ever, not only because we are working in a more dynamic market but because the number of investment vehicles available to investors has increased as well. The New Science of Asset Allocation provides expert guidance with a fresh approach designed to meet this challenge.

The authors, each a prominent industry leader, first focus on risk, examining the principal tools associated with quantitative and qualitative analysis in determining fundamental asset and portfolio risk, as well as the ability of money managers to create value. While pointing out the importance of manager discretion in the asset allocation process, they also present solutions, which emphasize systematic approaches to capturing expected returns while limiting downside risk. They provide illustrative examples of an investor's decision-making process in moving between and among core and satellite portfolios and offer an overview of sample allocations and expected risk/return scenarios.

While most books on asset allocation continue to emphasize the return and risk characteristics of traditional stock and bond investments, The New Science of Asset Allocation details major forms of alternative investments—their source of returns, their inherent risks, and their recent performance—including hedge funds, managed futures, private equity, real estate, and commodities. The book focuses on several practical techniques that can be used to measure, monitor, and manage the risk of a portfolio, stressing throughout that the road to a balanced portfolio through time comes from actively monitoring and managing risk. In addition, the expert authors identify investment myths that have become working beliefs in asset allocation—such as that diversification across equity issues or countries is sufficient, or that superior managers do not exist—and debunk each one with solid research.

Asset allocation remains a cornerstone of prudent investment management, and through the new approach presented in The New Science of Asset Allocation, you'll discover how to make it work.

Zusammenfassung

A feasible asset allocation framework for the post 2008 financial world

Asset allocation has long been a cornerstone of prudent investment management; however, traditional allocation plans failed investors miserably in 2008. Asset allocation still remains an essential part of the investment arena, and through a new approach, you'll discover how to make it work.

In The New Science of Asset Allocation, authors Thomas Schneeweis, Garry Crowder, and Hossein Kazemi first explore the myths that plague this field then quickly move on to examine how the practice of asset allocation has failed in recent years. They then propose new allocation models that employ liquidity, transparency, and real risk controls across multiple asset classes.

• Outlines a new approach to asset allocation in a post-2008 world, where risk seems hidden
• The "great manager" problem is examined with solutions on how to capture manager alpha while limiting downside risk
• A complete case study is presented that allocates for beta and alpha

Written by an experienced team of industry leaders and academic experts, The New Science of Asset Allocation explains how you can effectively apply this approach to a financial world that continues to change.

Preface xi

Acknowledgments xix

Chapter 1 A Brief History of Asset Allocation 1

In the Beginning 3

A Review of the Capital Asset Pricing Model 4

Asset Pricing in Cash and Derivative Markets 6

Models of Return and Risk Post-1980 11

Asset Allocation in the Modern World 14

Product Development: Yesterday, Today, and Tomorrow 15

N…