The aim of the initiative is to enable all small- or medium-sized European insurance companies with no full internal risk mitigation model to be able to avail of an objective academic reference in order to manage the risk of their equity investments.
EDHEC-Risk Institute has announced that it will conduct research in cooperation with Russell Investments in order to design new benchmarks for European insurance companies that are representative of a dynamic allocation strategy between bonds and equities.
The benchmarks, based on dynamic core-satellite and life-cycle investing techniques, will allow investors to respect a maximum drawdown or maximum loss limit for specific horizons.
According to Professor Noël Amenc, Director of EDHEC-Risk Institute, “The Solvency II Directive is severe for investment in equities. Our goal in this project, supported by Russell Investments, is to design a new form of asset allocation that will enable the risk of maximum loss of equity investments to be managed, while avoiding an excessively pro-cyclical approach such as that advocated by portfolio insurance techniques. By integrating concepts proposed by research on the life cycle of assets, this allocation can serve as a reference for a partial internal model.”
Pascal Duval, executive managing director EMEA of Russell Investments said: “Russell Investments has a history of strong relationships with academic institutions and we’re excited to partner with EDHEC-Risk Institute, the leading risk and asset management research centre in Europe, on this important initiative. Russell intends to play a leading role in providing solutions for the insurance industry in the face of the challenges represented by the Solvency II Directive. We can think of no better way of doing this than by engaging in a mutually productive dialogue with EDHEC-Risk Institute.
Peter Gunning, Global Chief Investment Officer of Russell Investments, added: “Our aim is to assist our clients in better mitigating and managing risk as part of the investment process. We believe that this relationship with EDHEC-Risk Institute will allow us to offer cutting-edge risk budgeting techniques for our clients in the insurance industry in Europe.”
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