Abstract
This chapter deals with the reaction of the investors to the recent crises and answers the question how they have changed their way of measuring and managing risk. Today, investors pay much more attention to tail risk management, and central banks put a stronger focus on drawdown risk. The key results which are based on surveys and field studies are presented broken down by EMEA regions and investor types, i.e., institutional investors, retail investors, sovereign wealth funds and central banks.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
The abbreviation EMEA stands for the region covering Europe, Middle East and Africa.
- 2.
State Street Global Advisors (SSgA) is, as of December 31, 2013, the second largest institutional asset manager worldwide with roughly &2 tn. as asset under management spanning almost all asset classes.
- 3.
Economist Intelligence Unit (2012, p. 5).
- 4.
Economist Intelligence Unit (2012, p. 2).
- 5.
Economist Intelligence Unit (2012, pp. 4–5).
- 6.
Economist Intelligence Unit (2012, p. 5).
- 7.
- 8.
For a general introduction to hedge funds see Schulmerich (2014b).
- 9.
For more information see, for example, Schulmerich (2010b).
- 10.
Jordan, Rüther, and Winkelhaus (2013).
- 11.
Jordan et al. (2013, p. 2).
- 12.
Conditional value at risk, also known as expected shortfall , is an aggregated risk measure to evaluate the overall risk of a portfolio. Compared to VaR, the c-VaR takes into account the shape of the loss distribution and measures the expected loss in case a loss takes place (on a certain confidence level).
- 13.
As already explained on p. 427, CPPI stands for constant proportion portfolio insurance, a dynamic portfolio hedging strategy that allocates the assets between a risky component and a risk-free component. If fear dominates the market (a so-called risk-off environment ), CPPI allocates a greater portion of the portfolio to risk-free assets. If investors are risk-seeking (a so-called risk-on environment ), CPPI changes the allocation to risky assets.
- 14.
An interesting snapshot of the application of asymmetrical, i.e., downside risk measures can be found in the German Börsenzeitung from November 13, 2010, see Schulmerich (2010a).
- 15.
DC stands for defined contribution which refers to a pension plan where only the regular contributions are determined. The future pension outcome is not determined, but depends on the future returns of the invested pension contributions. The opposite of DC is DB which stands for defined benefit . In a DB pension scheme, the amount of the future pension payments is guaranteed by the pension provider who needs to make sure that the investment of the regular pension contributions yields the desired return.
- 16.
German association for investment funds and asset management.
- 17.
GTAA stands for global tactical asset allocation.
- 18.
ACWI indices are all-country-weighted indices in equities which include developed and emerging markets.
- 19.
For more information about 130∕30 strategies see Schulmerich (2007a).
- 20.
- 21.
As already explained on p. 227, an ADR (American Depository Receipts) is a registered security issued by a U.S. bank representing shares of a foreign stock. ADRs trade on U.S. stock exchanges and on the OTC market. A GDR (Global Depositary Receipt) is a bank certificate issued in more than one country for shares in a foreign company. The shares are held by a foreign branch of an international bank. The shares trade as domestic shares, but are offered for sale globally through the various bank branches. GDRs and ADRs are very similar.
- 22.
The financial assessment framework (FTK) is the part of the Pension Act (Pensioenwet) in the Netherlands that states the statutory financial requirements for pension funds. It is built around the principles of market valuation, risk-based financial requirements and transparency.
- 23.
In equity asset management, enhanced strategies, also called index plus strategies , are actively managed portfolios with low alpha and tracking error targets. Often, alpha and tracking error targets of such strategies are 1 % p.a. or less. This is considerably less than active strategies in active equity portfolio management normally aim at. For the application of the index plus approach on emerging markets equity see, for example, Schulmerich (2009a).
- 24.
A fundamental equity index is an index that is not constructed using the firms’ capitalizations but other fundamental data like sales or cash flow figures which better represent the healthiness and growth opportunities of a firm than its capitalization.
- 25.
The same also holds true for Monaco, Spain and Portugal.
- 26.
The same holds true for Spain.
- 27.
State Street (2009).
- 28.
State Street (2009, p. 15).
- 29.
This discussion is often referred to as the great rotation .
- 30.
Inflation-linked products are fixed income products whose future payoff is linked to inflation. In case of, for example, rising inflation, the payoff is adjusted upwards such that for the buyer of such products the purchasing-power-adjusted payoff does not change in the future.
- 31.
John Nugée was Senior Managing Director and Head of the Official Institutions Group at SSgA until his retirement end of 2013.
- 32.
One fund manager commented to John Nugée that “diversification was a disappointment and an illusion, and when you see how all correlations moved to 1 in the worst of the crisis, I do not think more of the same would have helped us very much.”
- 33.
Nugée (2010, p. 4–5).
- 34.
Common tools in Asia are Libor-OIS and basis swaps. A Libor-OIS is a Libor over-night index swap.
- 35.
The same holds true for sovereign wealth funds in general.
References
Economist Intelligence Unit (2012). Managing investments in volatile markets. State Street Global Advisors. http://www.ssgainsight.com/reports/Economist_Managing_Tail_Risk_Report_pr.pdf. Accessed 8 Feb 2014.
Jordan, M., Rüther, M., & Winkelhaus, N. (2013, September). Vermögensverwaltung heute. Isarvest & Ketchum Pleon.
Nugée, J. (2010, December 22). Current issues in official sector asset management. State Street Global Advisors.
Schulmerich, M. (2007a, September 10). Neues Werkzeug fürs Portfolio - Innovative Strategie ermöglicht überdurchschnittliche Renditechancen. Handelsblatt.
Schulmerich, M. (2007b, September 16). Die marktunabhängigen Rendite. Euro am Sonntag.
Schulmerich, M. (2009a, August). Emerging markets enhanced: Die attraktive Alternative für Investitionen in Schwellenländern. DPN.
Schulmerich, M. (2009b, March). Equity market neutral and 130/30 strategies. State Street Global Advisors.
Schulmerich, M. (2010a, November 13). Asymmetrische Risikomasse finden immer häufiger Anwendung. Börsenzeitung. https://www.boersen-zeitung.de/index.php?li=1&artid=2010220345. Accessed 9 Feb 2014.
Schulmerich, M. (2010b, November). Active success with SSgA’s managed volatility strategies. Citywire.
Schulmerich, M. (2011). How the recent crisis has changed EMEA investors’ view of risk. State Street Global Advisors. SSgA Capital Insights.
Schulmerich, M. (2014a). How the recent crisis has changed EMEA investors’ view of risk: An update for 2014. State Street Global Advisors. SSgA Capital Insights.
Schulmerich, M. (2014b). The role of hedge funds in investment portfolios. State Street Global Advisors. SSgA Capital Insights.
State Street (2009). Sovereign wealth funds: Emerging from the financial crisis. State Street Vision, IV(1)
Author information
Authors and Affiliations
Rights and permissions
Copyright information
© 2015 Springer-Verlag Berlin Heidelberg
About this chapter
Cite this chapter
Schulmerich, M., Leporcher, YM., Eu, CH. (2015). Investor Risk Perceptions and Investments: Recent Developments. In: Applied Asset and Risk Management. Management for Professionals. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-55444-5_6
Download citation
DOI: https://doi.org/10.1007/978-3-642-55444-5_6
Published:
Publisher Name: Springer, Berlin, Heidelberg
Print ISBN: 978-3-642-55443-8
Online ISBN: 978-3-642-55444-5
eBook Packages: Business and EconomicsEconomics and Finance (R0)