We Protect, You Perform

Transcription

1 Copyright Active Asset Allocation 2013 We Protect, You Perform Copyright Active Asset Allocation 2013

2 Our vision Our values Active Asset Allocation puts in practice a responsible approach to preserve the financial ressources managed for the long term, such as pensions of future generations By applying the state-of-the-art of the academic research to the investment world, Active Asset Allocation brings financial engineering to the service of institutional investors. The rare combination of academic expertise and investment experience allows Active Asset Allocation to help investors define and understand better their risks in order to manage them in a sustainable way For those who trust us and those who will Innovation Anticipation Sustainability Security Responsibility Trust Team rely on academic research and put into practice the state-of-the-art of academia, design solutions to respond to specific client needs portfolio insurance, long term guarantee, preservation of assets (ex: pensions) protect value, avoid excess of risk (in a downward or upward trend) Active Asset Allocation s philosophy relies on portfolio insurance techniques that allow to better preserve capital and maximize performances within the constraints decided by each investor. Active Asset Allocation is in favor of an investment management strategy where risk is really under control and not only defined by tracking errors that cannot preserve investors from losses. Changes in assset allocation are not the result of a view on markets but are linked to the investor capacity to take risk at a specific time Dynamism Equilibrium Capability Diversity Each of us High Standards adaptation to the environment and p e r m a n e n t r e c o n s i d e r a t i o n... w i t h enthusiasm individual reliablility to serve the team, personal stability software know-hows, mathematical calculus and modelling are internal expertises c u l t u r e s, m e n - w o m e n, v a r i e t y o f backgrounds and horizons maintain the highest standards for the results, for ourselves by passion Conciliate security and performance comes with a perfect control of risk Excellence Respect Integrity attempt to do always better for our clients, colleagues and partners respect clients, colleagues, partners prove to the client he can trust us on a complex subject

3 The founders Our expertise Adina Grigoriu CEO Actuary by training 15 years of experience in finance, including quantitative modelling. Recognised asset allocation expert Member of the French Institute of Actuaries Innovate thanks to our academic research and its application to the investment world Help asset managers design diversified funds capable of respecting risk parameters Help the investor define the set of risks and thresholds that should not be exceeded - Derivatives trader - BNP Paribas Asset Management (product management, head of ALM) - Spin-off of the EDHEC-Risk Institute research centre (development of the Dynamic Core Satellite approach) Study and find in a stochastic environment an asset allocation between a «core» and «satellites» capturing the performance, which will be based only on the risk limits that we have established with investors and that takes into account their particular needs and constraints, including regulation. Our decisions do not depend on mathematical forecasts of gains and losses Olivier Hiezely Chairman Engineer, MBA at EDHEC, major in finance 20 years experience in the field of organisation and information systems within L Oréal - Understanding of the challenges and the strategies involved in a multinational company, extensive experience in both people and projects management - Entrepreneur with a strong personality focused on results - Solid culture of excellence and performance, along with good interpersonal skills Add value by creating a customised solution for the investor by adapting the asset allocation to his constraints and not to return forecasts Adapt the allocation at least monthly, in order to allow each investor to take advantage of market opportunities, while respecting the risk limits agreed on

4 Our expertise DARM Solution Dynamic Asset & Risk Management Give the opportunity to the investor to react and be rapidly protected, in case of a sudden and unexpected event, in order to avoid or minimise an unfavorable impact on the managed assets Associate risk management with asset management to leverage structural perfomance Active portfolio protection, vector of performance : The DARM solution allows to manage in a dyssimetric way tracking errors (i) by dividing the portfolio between a protective «core» and satellites capturing the performance and (ii) by dynamically allocating capital given the margin for error allowed by the investor DARM meets the requirement of capital preservation for retirement products (including corporate pension funds) and fits with the general willingness of investors to obtain absolute returns Research and Innovation We upgrade on an on-going basis our models thanks to our internal research Protection in case of a sudden and unexpected event We identify your constraints and the asset classes you would like to invest in We monitor daily your portfolio and the level of risk Client Input We advise you on the asset allocation, you keep control of your investments Dynamic Allocation 3 2 We design a customized model and test it in a stochastic environment Customization of solutions and stress test Monthly we propose a rebalancing of your asset allocation Added value : Definition and management of a risk budget Design of an optimal solution Daily automated monitoring of the portfolios and their risks Monthly rebalancing of the portfolio (at least) Outputs : Study in a stochastic environment for the definition of a global risk budget Risk budgets by asset classes Protection levels, alert levels (on NAVs and underlying investments) Performance of the model portfolio and its components Monthly recommendations of asset allocation and monthly reporting Fixed diversification DARM -0,5 1 2,5 4 5,5 7 8, , ,5 Number of simulated scenarios 10-year annualised returns

5 DALM Solution Dynamic Asset & Liability Management A certified structure Active Protection with funding ratio preservation The DALM solution is an extension of the DARM solution which allows to take into account the liabilities of the investor and therefore control the funding ratio volatility and minimise required contributions DALM meets the needs of DB pension funds, foundations or insurance companies in terms of risk management. Added values : DARM + additional functions Inclusion of the liabilities of the investor Integration of regulation and internal policy and rules of the fund Integration of the rate effect and the impact of cash outflows (pension payments) Outputs : DARM + supplementary elements Studies in a stochastic environment of the liabilities and the interest rate curve Monitoring and preservation of the funding ratio (Assets/Liabilities) Strategic partnership with the Centre for Complexity and Interdisciplinary Studies in Finance (CCIF), a research centre of Nice Sophia Antipolis university with the support of the CNRS (French National Research Centre for Science) the INRIA (French National Research Institute in Computer Science) Accreditation JEI (Jeune Entreprise Innovante/ Young Innovative Company) Finance Innovation label (Paris Europlace) Integration to Paris Incubateurs Finance Innovation label from Réseau Entreprendre Member of the French Institute of Actuaries 1,4 1,2 1,0 Funding ratio achieved by DALM 60 % Dynamic Asset & Liability Management 45 % 30 % Member B of the ACIFTE (Association of Financial Advisers and Analysts authorised by the AMF, the French market regulator) At your service... 0,8 15 % 0, % DALM Fix-Mix LDI De-risking Protection level Allocation to satellite

6 Our difference References & Results We qualify risk management parameters by adapting them to the strategy of each single investor and in accordance with regulation We dertermine a risk budget that will be used precisely to protect capital and capture performance. We communicate to the investment comittee an action plan for unexpected situations We determine ex-ante the signals (for instances the alert thresholds or the opportunity levels) that allow to take relevant and efficient asset allocation decisions between a «core» and «satellites» We capture, register and calculate the very numerous data needed for the simulations and studies that will indicate the best asset allocation options after a qualitative analysis of the results. Our strong investment experience is a major advantage while interprating the results of our models We design and implement complex models in accordance with the state-of-the-art of asset allocation techniques. Such models are created in the best possible conditions of reliability, solidity and efficiency. They are improved constantly thanks to our internal research, which provides clients with continuous progress Examples of past missions and ongoing work: Creation of a dynamic risk management approach (DARM) for a DC pension scheme with different risk profiles Determination of the optimal strategic allocation of a Dutch pension fund Creation and implementation of a dynamic ALM (DALM) for the US pension fund of a FTSE 100 company Creation and implementation of a dynamic risk management approach (DARM) -two French foundations (among which one public RFP won in June 2011) -one SRI fund manager specialised in funds of funds -one SRI fund -one diversified bond fund Design of a credit bond fund with a dynamic risk management approach (DARM) Creation and implementation of a Dynamic Core Satellite solution for: -the reserve fund of a state -two French pension funds -three mutual funds in France, Luxembourg and Germany Our experience with US pension funds demonstrates significant improvement in the funding ratio level and reduced contributions (up to 50% over 10 years) compared to other widespread appproaches (traditional LDI, fixed allocation, de-risking)

7 Publications Key figures At the in-efficiency frontier - Active Asset Allocation publication : Risk Letter, October 2012 In defense of pro-cyclicality - IPE Investment & Pensions Europe publication, April 2012 La gestion des risques, centre de coût ou source inexploitée de performance? - Direction Retraite Hors Série N 1, December 2011 Volatility as a risk measure - Active Asset Allocation publication : Risk Letter, August 2011 Risk Control through Dynamic Core-Satellite Portfolios of ETFs: Applications to Absolute Return Funds and Tactical Asset Allocation An EDHEC-Risk Institute Publication, January 2010, Fall 2010 Noel Amenc, Felix Goltz, Adina Grigoriu Constructing Absolute Return Funds with ETFs A Dynamic Risk Budgeting Approach Institutional Investor Journal, Fall 2008, Vol. 2008, No. 1: pp , Noel Amenc, Felix Goltz, Adina Grigoriu Conferences 420 Million Euros advised and monitored daily 35% of ressources affected to research, development and innovation Added Value capital preservation increased performance June 2013, Factset EMEA Symposium, Monaco June 2013, Infiniti Conference, Aix en Provence April 2013, AssurFinance 2013, Paris February 2013, AFFO (French Family offices) event, Paris January 2013, EIFR seminar, Paris October 2012, APG Academic Advisory Board, Amsterdam October 2012, Investment & Pensions Europe, IPE 360, Windsor June 2012, Investment & Pensions Europe, IPE 360, Paris May 2012, Pitmans Trustees, London March 2012, Infopro Group, Forum Gi, Paris June 2011,Opal Financial Group, European Family Office Forum, Geneva Asset manager revenues protection: due to capital preservation due to the reduction of clients turnover : reassured by risk management, investors are less inclined to redeem their shares during a crisis period reduction of the sponsors contributions needed to improve and protect funding ratios of pension funds April 2011, Opal Financial Group, Investment Consultants Forum Europe, De-Risking Solutions : Liability Driven Investments, London Mai 2009, EDHEC-Risk Institutional Days, Paris We Protect, You Perform