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Risk Management and Portfolio Optimization in 2019

Top papers on portfolio risk management and portfolio optimization

Risk management within the investment industry can take on a wide variety of forms, from diversification efforts, to the mitigation of specific risks (such as the utilisation of downside protection strategies or the hedging of particular currency exposures).

The below list of papers also gives the subject of risk management a wide berth, as it contains surveys of global risks present in 2019, overviews of optimization practices, quantitative methods of budgeting risk within portfolios, and other related topics.

risk management

Portfolio Optimization Podcast: What Every Investor Needs to Know (State Street)

This podcast contains an interview with Kishore Karunakaran, a portfolio strategist within State Street Global Advisors' quantitative equity team, about portfolio optimization.

Can Strategic Asset Allocations Adapt to Markets? (Intech, 2019)

For compliance reasons, this paper is only accessible in the EMEA region

Can Strategic Asset Allocations Adapt to Markets? Investors in strategic asset allocation models aren’t immune to market drawdowns. This paper shows a path for potentially changing this experience. By using variable beta strategies, portfolio managers can make their allocation models more dynamic without changing their long-term risk and return assumptions.

Can Strategic Asset Allocations Adapt to Markets? (Intech, 2019)

For compliance reasons, this paper is only accessible in certain geographies

Can Strategic Asset Allocations Adapt to Markets? Investors in strategic asset allocation models aren’t immune to market drawdowns. This paper shows a path for potentially changing this experience. By using variable beta strategies, portfolio managers can make their allocation models more dynamic without changing their long-term risk and return assumptions.

Sector Effects in the S&P 500® (S&P Dow Jones Indices, 2019)

Sometimes, the sector composition of an equity portfolio is of primary importance. At other times, single-stock risks are more prominent. Among other things, this paper by S&P Dow Jones Indices assesses the relative importance of sectors in determining the performance of the S&P 500 and its constituents.

Effective Risk Modeling for Private Markets (Invesco blog, 2019)

For compliance reasons, this paper is only accessible in the United States

The risk modelling challenge for private market investments is extremely complex, yet also critical to effective asset allocation. Neil Blundell, Global Head of Client Solutions at Invesco, explores further.

Diversification: High Dispersion Beats Low Correlation (Enterprising Investor blog, 2019)

This blog post explains why dispersion is potentially more important than correlation, when looking at portfolio diversification.

Smarter Beta via Optimization and Custom Risk Modelling (Axioma, Oct 2018)

An optimizer and a custom risk model can be used together to create a portfolio of precise factor exposures with a high information ratio and an intuitive profile of return attribution.

Constrained Risk Budgeting Portfolios (Amundi AM, 2019)

In this quant-heavy, 44-page paper, Amundi Asset Management proposes solutions to risk budgeting problems within portfolios.

Global risk management survey, 11th edition (Deloitte)

Deloitte's 11th risk management survey looks at risk management practices in the financial services industry. 94 financial institutions responded to their global survey, representing over USD 29 trillion in assets.

Balancing Act: Managing Risk across Multiple Time Horizons (FCLT, 2018)

This FCLT paper covers the topic of managing multiple-horizon portfolios - it considers the barriers and hurdles to doing so, then proposes a range of tools that funds could use, depending upon their particular situation.

Step Optimization and Portfolio Design (Jacobi, 2018)

Step optimization practices allow portfolio managers to visualize and execute asset allocation changes in incremental steps, leading to a potentially more robust optimization process. 

Optimizing Currency Exposures under Solvency II (Neuberger Berman, 2018)

For compliance reasons, this paper is only accessible in certain geographies

Solvency regulations tend to drive insurers towards currency hedging, but this doesn't necessarily mean that insurers should hedge 100% of their currency exposures. In this paper, Neuberger Berman examines the multiple issues that insurers should take into consideration.

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