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...

The present study assesses the rationality of investors who pay large sums to hedge fund managers for their services. For my analysis I use a sample of closed-end funds which invest their capital in one or more open-ended hedge funds. The results imply that investors rationally exploit the...

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 the 2008 financial crisis, private financial institutions such as hedge funds and private equity funds have been faced with multiple calls for their regulation, both for consumer protection and systemic reasons. Various proposals for a new regulation have been made and are currently...

This paper considers how asset management firms seek to develop sustainable advantage in a fragmented industry that has few obvious economies of scale and scope. It shows that the generic competitive strategies of cost leadership and differentiation are both applicable but lead to very different...

Who are mutual fund investors? The answer is critical to regulatory policy. The mutual fund industry portrays fund investors as diligent, fairly sophisticated, and guided by professional financial advisors. The SEC paints a more cautious portrait of fund investors, though touts improved...

This short piece discusses the risks currently inherent within both European and U.S. pension markets and provides prescriptive suggestions as to how they could be alleviated. It further highlights the potential opportunities the solutions currently being considered to solve this problem could...