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The New Science of Asset Allocation: Risk Management in a Multi-Asset World / Edition 1

The New Science of Asset Allocation: Risk Management in a Multi-Asset World / Edition 1

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Product Details

ISBN-13: 9780470537404
Publisher: Wiley
Publication date: 03/08/2010
Series: Wiley Finance Series , #551
Pages: 320
Product dimensions: 5.90(w) x 9.10(h) x 1.30(d)

About the Author

Thomas Schneeweis, PhD, is the Michael and Cheryl PhilippProfessor of Finance at the University of Massachusetts, Amherstand is the founding director of the Center for InternationalSecurities and Derivatives Markets. He is also the founding editorof the Journal of Alternative Investments, cofounder of theChartered Alternative Investment Analyst Association, and afounding Director of the Institute for Global Asset andRisk Management. During his almost forty years ofinvestment management experience, he has been associated with thedevelopment of alpha transfer and fund replication products,the creation and development of the Zurich Hedge Fund Indices andthe Dow Jones Hedge Fund Benchmark Series, as well as beinginstrumental in the creation of the Bache Commodity Index.Schneeweis publishes widely in the area of investment managementand is often quoted in the financial press.

 Garry B. Crowder, JD, MBA, is a noted expert in thedevelopment and creation of multi-asset portfolio solutions andproducts. He has designed and implemented asset allocationsolutions for leading multinational banks, insurance companies, andfamily offices. Crowder created and was managing partner of one ofthe first and largest hedge fund platforms based on managedaccounts. In this capacity, he formed and led the team that createdthe Zurich Hedge Fund Indices and the Dow Jones Hedge FundBenchmark Series. With over twenty years of investment experience,he is a founding Director of the Institute for Global Asset andRisk Management and has also served in managing director positionsat Morgan Stanley Asset Management and Tiger Management LLC.

Hossein Kazemi, PhD, CFA, is regarded as a leader in thearea of asset allocation, and has published over thirty academicand practitioner articles in the area of asset pricing and assetallocation. He is a founding partner of Alternative InvestmentAnalytics, LLC, and White Bear Partners, LLC. Kazemi is a professorof finance at the University of Massachusetts, Amherst and is theAssociate Director of the Center for International Securities andDerivatives Markets. He is the current Program Director of theChartered Alternative Analyst Investment Association.

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Table of Contents



Chapter 1 A Brief History of Asset Allocation.

In the Beginning.

A Review of the Capital Asset Pricing Model.

Asset Pricing in Cash and Derivative Markets.

Models of Return and Risk Post-1980.

Asset Allocation in the Modern World.

Product Development: Yesterday, Today, and Tomorrow.


Chapter 2 Measuring Risk.

What Is Risk?

Traditional Approaches to Risk Measurement.

Classic Sharpe Ratio.

Other Measures of Risk Assessment.

Portfolio Risk Measures.

Other Measures of Portfolio Risk Measurement.

Value at Risk.


Chapter 3 Alpha and Beta, and the Search for a True Measureof Manager Value.

What Is Alpha?

Issues in Alpha and Beta Determination.

Problems in Alpha and Beta Determination.

Multi-Factor Return Estimation: An Example.

Tracking Alternatives in Alpha Determination.


Chapter 4 Asset Classes: What They Are And Where To PutThem.

Overview and Limitations of the Existing Asset AllocationProcess.

Asset Allocation in Traditional and Alternative Investments: ARoad Map.

Historical Return and Risk Attributes and StrategyAllocation.

Traditional Stock/Bond Allocation versus Multi-AssetAllocation.

Risk and Return Comparisons Under Differing Historical TimePeriods.

Extreme Market Sensitivity.

Market Segment or Market Sensitivity: Does It Matter?

How New Is New?


Chapter 5 Strategic, Tactical, and Dynamic AssetAllocation.

Asset Allocation Optimization Models.

Strategic Asset Allocation.

Tactical Asset Allocation.

Dynamic Asset Allocation.


Chapter 6 Core and Satellite Investment: Market/Manager BasedAlternatives.

Determining the Appropriate Benchmarks and Groupings.

Sample Allocations.

Core Allocation.

Satellite Investment.

Algorithmic and Discretionary Aspects of Core/SatelliteExposure.

Replication Based Indices.

Peer Group Creation – Style Purity.


Chapter 7 Sources of Risk and Return in AlternativeInvestments.

Asset Class Performance.

Hedge Funds.

Managed Futures (Commodity Trading Advisors).

Private Equity.

Real Estate.



Chapter 8 Return and Risk Differences among Similar AssetClass Benchmarks.

Making Sense Out of Traditional Stock and Bond Indices.

Private Equity.

Real Estate.

Alternative REIT Investments Indices.

Commodity Investment.

Hedge Funds.

Investable Manager Based Hedge Fund Indices.

CTA Investment.

Index versus Fund Investment: A Hedge Fund Example.


Chapter 9 Risk Budgeting and Asset Allocation.

Process of Risk Management: Multi-Factor Approach.

Process of Risk Management: Volatility Target.

Risk Decomposition of Portfolio.

Risk Management Using Futures.

Risk Management Using Options.

Covered Call.

Long Collar.


Chapter 10 Myths of Asset Allocation.

Investor Attitudes, not Economic Information, Drive AssetValues.

Diversification Across Domestic or International EquitySecurities is Sufficient.

Historical Security and Index Performance Provides a SimpleMeans to Forecast Future Excess Risk-Adjusted Returns.

Recent Manager Fund Return Performance Provides the BestForecast of Future Return.

Superior Managers or Superior Investment Ideas Do Not Exist.

Performance Analytics Provide a Complete Means to DetermineBetter Performing Managers.

Traditional Assets Reflect “Actual Values” BetterThan Alternative Investments.

Stock and Bond Investment Means Investors Have No DerivativesExposure.

Stock and Bond Investment Removes Investor Concerns as toLeverage.

Given the Efficiency of the Stock and Bond Markets, ManagersProvide No Useful Service.

Investors Can Rely on Academics and InvestmentProfessionals to Provide Current Investment Models andTheories.

Alternative Assets Are Riskier Than Equity and Fixed IncomeSecurities.

Alternative Assets Such as Hedge Funds Are Absolute ReturnVehicles.

Alternative Investments Such as Hedge Funds Are Unique in TheirInvestment Strategies.

Hedge Funds Are Black Box Trading Systems Unintelligible toInvestors.

Hedge Funds Are Traders, Not Investment Managers.

Alternative Investment Strategies Are So Unique That They Cannotbe Replicated.

It Makes Little Difference Which Traditional or AlternativeIndices Are Used in an Asset Allocation Model.

Modern Portfolio Theory Is Too Simplistic to Deal with PrivateEquity, Real Estate, and Hedge Funds.


Chapter 11 The Importance of Discretion in Asset AllocationDecisions.

The Why and Wherefore of Asset Allocation Models.

Value of Manager Discretion.

Manager Evaluation and Review: The Due Diligence Process.

Madoff: Due Diligence Gone Wrong or Never Conducted.


Chapter 12 Asset Allocation: Where Is It Headed?

An Uncertain Future.

What Is the Definition of Order?

Costs and Benefits.

Today's Issue.

Possible Governmental and Private Fund Responses to CurrentMarket Concerns.


Appendix: Risk and Return of Asset Classes and Risk FactorsThrough Business Cycles. 

Glossary: Asset Class Benchmarks.


About the Authors.


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