Alternative investments and hedge funds in particular are now an integral part of the asset allocation process of Swiss asset managers and institutional investors. The existing legal and regulatory frameworks, as well as the practice of the Swiss supervisory authority, have allowed that...

In the past decade significant progress has been made in achieving a single European market for investment funds. The ratio of cross-border fund flows has reached an estimated level of more than 20%, and in some European countries the number of registered non-domestic investment funds exceeds...

Hedge fund regulation in the U.K. may be viewed as three distinct issues: (1) Systemic risk issues, following the near-collapse of LTCM; (2) The regulation of hedge fund managers – many managers are established in the U.K.; and (3) Retail marketing. The position is complicated by the fact that...

On 5 June 2003 the President of the European Parliament announced that the Committee on Economic and Monetary Affairs had been authorized to draw up an own-initiative report under Rule 163 on the future of hedge funds and derivatives. The committee considered the draft report at its meetings of...

The current financial crisis has strongly affected the financial status (expressed by the funding ratio) of the pension funds and their ability to grant full indexation of the liabilities to inflation rate. The indexation benefits represent a priority for a participant of a pension fund bearing...

Historically, the practice of trustees of defined benefit programs has been to make the asset allocation decision based on prevailing risk-return relationship for asset classes without regard to the plan’s economic funded ratio, liability structure, and liability economic growth rate. Once the...

Assuming a client’s goals, resources, and constraints have been clearly identified, when constructing an asset allocation instead of using a generic efficient frontier a client should have his or her own efficient frontier. What is efficient for one person may not be efficient for another. In...

In this, the fourth article in the economists’ hubris paper series, we look at the contributions of academic thought to the field of asset management. We find that while the theoretical aspects of the modern portfolio theory are valuable, they offer little insight into how the asset management...

Asset allocation advisers usually use the mean-variance framework to show the benefits of investing in hedge funds. The authors prove that this is not optimal when the assets are not normally distributed and develop a method based on a modified Value-at-Risk for non-normally distributed assets....

Following every major financial debacle (of which we now have had three in the span of a decade – the Asian crisis, the dot-com bubble, and the subprime crisis), all the parties that bear some responsibility for the soundness of financial institutions come under scrutiny – the managers (and...