current investment issues florent salmon, vp portfolio engineering november 20 th, 2009 2009 general...

Download Current Investment Issues Florent Salmon, VP Portfolio Engineering November 20 th, 2009 2009 General Meeting ● Assemblée générale 2009 Canadian Institute

Post on 04-Jan-2016

222 views

Category:

Documents

8 download

Embed Size (px)

TRANSCRIPT

  • Current Investment Issues

    Florent Salmon, VP Portfolio EngineeringNovember 20th, 20092009 General Meeting Assemble gnrale 2009Canadian Institute of Actuaries LInstitut canadien desactuaires Ottawa, Ontario Ottawa (Ontario)

    *

    Executive SummaryGeneral FrameworkRelative weights of money management functions Portfolio InsuranceEntry barriers and common issues

    Alternative BetaConcepts and characteristics

    *

    ALM(interest rate)Risk Budget(long term objective)Asset Allocation(Sharpe ratio)Risk Budget, InsuranceImmunisation,Passive hedging60/40Relative Market ViewsMoney management functions (pension funds)Only one management tool to achieve three distinct and often conflicting objectives

    *

    Liability Driven Investing (LDI) & LeverageLeverage allows to decouple asset selection and risk managementManagers can focus on relative value and liquidity profile (Sharpe ratio)Immunisation (interest rate hedging) is a simple passive protocol. It defines the benchmark.Immunisation Asset(with/without overlay)LiabilitiesAsset Allocation(Returnprofile)Risk Budget(sizing)Maximization of Sharpe ratioInvestment objectivesNot a focus

    *

    Importance of asset allocationToo much emphasis on asset mix and not enough on risk management Asset mix only goal is to maximize Sharpe ratio. Risk budgeting and Insurance will rescale the return pattern so that it fits investor requirementThis is just CAPM

    Chart1

    00

    00

    00

    2147

    115138

    321363

    784760

    17581735

    17701736

    19382326

    18231526

    11081071

    318298

    410

    30

    00

    00

    00

    00

    00

    00

    Random Selection (vol. 60/40)

    60/40

    Annual Return

    # of Scenarios

    Asset Allocation SelectionRandom 1.5 year Periods since 1985SPX,TSX, Global Bonds

    Input

    date debut1/1/85RECALC ZONE

    vol cible5%

    poids portCASHnumber of values2983

    date fin9/24/091234start1966

    champPX_LASTSPx Indexsptsx Indexlbustruu Indexus0001m Indexend2341375

    rand27.21%92.29%57.84%1.773448652geomeanstdev

    =115.35%52.04%32.61%0.00%111.57%4.92%

    indiceSPx Indexsptsx Indexlbustruu Indexus0001m Index1.0914.03%47.59%29.83%8.55%10.85%4.50%

    Return23.193%16.126%19.878%8.22%30.00%30.00%40.00%0.00%10.15%4.50%

    Vol10.432%8.769%7.794%0.0%

    12/31/99167.2412/31/992400.3312/31/99222.2812/31/998.5

    1/2/85165.37-1.118%1/2/852394.88-0.227%1/2/85222.280.000%1/2/858.440.03242%-1.1182%-0.2271%0.0000%0.0324%

    1/3/85164.57-0.484%1/3/852377.04-0.745%1/3/85222.280.000%1/3/858.3750.03218%-0.4838%-0.7449%0.0000%0.0322%

    1/4/85163.68-0.541%1/4/852353.71-0.981%1/4/85222.280.000%1/4/858.440.03242%-0.5408%-0.9815%0.0000%0.0324%

    1/7/85164.240.342%1/7/852355.310.068%1/7/85222.280.000%1/7/858.310.03194%0.3421%0.0680%0.0000%0.0319%

    1/8/85163.99-0.152%1/8/852348.55-0.287%1/8/85222.280.000%1/8/858.190.03149%-0.1522%-0.2870%0.0000%0.0315%

    1/9/85165.180.726%1/9/852359.060.448%1/9/85222.280.000%1/9/858.190.03149%0.7257%0.4475%0.0000%0.0315%

    1/10/85168.311.895%1/10/852381.190.938%1/10/85222.280.000%1/10/858.250.03171%1.8949%0.9381%0.0000%0.0317%

    1/11/85167.91-0.238%1/11/852375.7-0.231%1/11/85222.280.000%1/11/858.310.03194%-0.2377%-0.2306%0.0000%0.0319%

    1/14/85170.511.548%1/14/852388.030.519%1/14/85222.280.000%1/14/858.310.03194%1.5484%0.5190%0.0000%0.0319%

    1/15/85170.810.176%1/15/852394.120.255%1/15/85222.280.000%1/15/858.250.03171%0.1759%0.2550%0.0000%0.0317%

    1/16/85171.190.222%1/16/852406.30.509%1/16/85222.280.000%1/16/858.310.03194%0.2225%0.5087%0.0000%0.0319%

    1/17/85170.73-0.269%1/17/852412.080.240%1/17/85222.280.000%1/17/858.250.03171%-0.2687%0.2402%0.0000%0.0317%

    1/18/85171.320.346%1/18/852419.60.312%1/18/85222.280.000%1/18/858.250.03171%0.3456%0.3118%0.0000%0.0317%

    1/21/85175.232.282%1/21/852464.451.854%1/21/85222.280.000%1/21/858.250.03171%2.2823%1.8536%0.0000%0.0317%

    1/22/85175.480.143%1/22/852491.821.111%1/22/85222.280.000%1/22/858.190.03149%0.1427%1.1106%0.0000%0.0315%

    1/23/85177.31.037%1/23/852509.920.726%1/23/85222.280.000%1/23/858.1250.03125%1.0372%0.7264%0.0000%0.0313%

    1/24/85176.71-0.333%1/24/852525.950.639%1/24/85222.280.000%1/24/858.250.03171%-0.3328%0.6387%0.0000%0.0317%

    1/25/85177.350.362%1/25/852547.870.868%1/25/85222.280.000%1/25/858.310.03194%0.3622%0.8678%0.0000%0.0319%

    1/28/85177.40.028%1/28/8525660.712%1/28/85222.280.000%1/28/858.440.03242%0.0282%0.7116%0.0000%0.0324%

    1/29/85179.181.003%1/29/852580.060.548%1/29/85222.280.000%1/29/858.440.03242%1.0034%0.5479%0.0000%0.0324%

    1/30/85179.390.117%1/30/852604.020.929%1/30/85222.280.000%1/30/858.50.03264%0.1172%0.9287%0.0000%0.0326%

    1/31/85179.630.134%1/31/852595.05-0.344%1/31/85227.342.276%1/31/858.630.03312%0.1338%-0.3445%2.2764%0.0331%

    2/1/85178.63-0.557%2/1/852575.45-0.755%2/1/85227.340.000%2/1/858.68750.03333%-0.5567%-0.7553%0.0000%0.0333%

    2/4/85180.350.963%2/4/852588.880.521%2/4/85227.340.000%2/4/858.750.03356%0.9629%0.5215%0.0000%0.0336%

    2/5/85180.610.144%2/5/852605.280.633%2/5/85227.340.000%2/5/858.630.03312%0.1442%0.6335%0.0000%0.0331%

    2/6/85180.43-0.100%2/6/852614.480.353%2/6/85227.340.000%2/6/858.630.03312%-0.0997%0.3531%0.0000%0.0331%

    2/7/85181.820.770%2/7/852620.690.238%2/7/85227.340.000%2/7/858.690.03334%0.7704%0.2375%0.0000%0.0333%

    2/8/85182.190.203%2/8/852612.92-0.296%2/8/85227.340.000%2/8/858.68750.03333%0.2035%-0.2965%0.0000%0.0333%

    2/11/85180.51-0.922%2/11/852602.78-0.388%2/11/85227.340.000%2/11/858.750.03356%-0.9221%-0.3881%0.0000%0.0336%

    2/12/85180.560.028%2/12/852602.15-0.024%2/12/85227.340.000%2/12/858.750.03356%0.0277%-0.0242%0.0000%0.0336%

    2/13/85183.351.545%2/13/852628.311.005%2/13/85227.340.000%2/13/858.6250.03310%1.5452%1.0053%0.0000%0.0331%

    2/14/85182.41-0.513%2/14/852623.17-0.196%2/14/85227.340.000%2/14/858.690.03334%-0.5127%-0.1956%0.0000%0.0333%

    2/15/85181.6-0.444%2/15/852614.43-0.333%2/15/85227.340.000%2/15/858.750.03356%-0.4441%-0.3332%0.0000%0.0336%

    2/18/85181.60.000%2/18/852608.16-0.240%2/18/85227.340.000%2/18/858.750.03356%0.0000%-0.2398%0.0000%0.0336%

    2/19/85181.33-0.149%2/19/852609.70.059%2/19/85227.340.000%2/19/858.750.03356%-0.1487%0.0590%0.0000%0.0336%

    2/20/85181.18-0.083%2/20/852614.720.192%2/20/85227.340.000%2/20/858.750.03356%-0.0827%0.1924%0.0000%0.0336%

    2/21/85180.19-0.546%2/21/852605.76-0.343%2/21/85227.340.000%2/21/858.880.03404%-0.5464%-0.3427%0.0000%0.0340%

    2/22/85179.36-0.461%2/22/852591.21-0.558%2/22/85227.340.000%2/22/858.81250.03379%-0.4606%-0.5584%0.0000%0.0338%

    2/25/85179.23-0.072%2/25/852570.93-0.783%2/25/85227.340.000%2/25/858.880.03404%-0.0725%-0.7826%0.0000%0.0340%

    2/26/85181.171.082%2/26/852584.750.538%2/26/85227.340.000%2/26/858.750.03356%1.0824%0.5375%0.0000%0.0336%

    2/27/85180.71-0.254%2/27/852585.40.025%2/27/85227.340.000%2/27/8590.03448%-0.2539%0.0251%0.0000%0.0345%

    2/28/85181.180.260%2/28/852594.980.371%2/28/85222.69-2.045%2/28/8590.03448%0.2601%0.3705%-2.0454%0.0345%

    3/1/85183.231.131%3/1/852625.211.165%3/1/85222.690.000%3/1/859.130.03495%1.1315%1.1649%0.0000%0.0350%

    3/4/85182.06-0.639%3/4/852628.540.127%3/4/85222.690.000%3/4/859.250.03539%-0.6385%0.1268%0.0000%0.0354%

    3/5/85182.230.093%3/5/852647.020.703%3/5/85222.690.000%3/5/859.190.03517%0.0934%0.7031%0.0000%0.0352%

    3/6/85180.65-0.867%3/6/852643.01-0.151%3/6/85222.690.000%3/6/8590.03448%-0.8670%-0.1515%0.0000%0.0345%

    3/7/85179.51-0.631%3/7/852618.25-0.937%3/7/85222.690.000%3/7/859.190.03517%-0.6311%-0.9368%0.0000%0.0352%

    3/8/85179.1-0.228%3/8/852613.84-0.168%3/8/85222.690.000%3/8/858.8750.03402%-0.2284%-0.1684%0.0000%0.0340%

    3/11/85178.79-0.173%3/11/852602.19-0.446%3/11/85222.690.000%3/11/858.81250.03379%-0.1731%-0.4457%0.0000%0.0338%

    3/12/85179.660.487%3/12/852607.30.196%3/12/85222.690.000%3/12/858.880.03404%0.4866%0.1964%0.0000%0.0340%

    3/13/85178.19-0.818%3/13/852588.91-0.705%3/13/85222.690.000%3/13/8590.03448%-0.8182%-0.7053%0.0000%0.0345%

    3/14/85177.84-0.196%3/14/852587.78-0.044%3/14/85222.690.000%3/14/8590.03448%-0.1964%-0.0436%0.0000%0.0345%

    3/15/85176.53-0.737%3/15/852584.68-0.120%3/15/85222.690.000%3/15/858.93750.03425%-0.7366%-0.1198%0.0000%0.0342%

    3/18/85176.880.198%3/18/852577.5-0.278%3/18/85222.690.000%3/18/859.060.03470%0.1983%-0.2778%0.0000%0.0347%

    3/19/85179.541.504%3/19/852621.881.722%3/19/85222.690.000%3/19/8590.03448%1.5038%1.7218%0.0000%0.0345%

    3/20/85179.08-0.256%3/20/852606.69-0.579%3/20/85222.690.000%3/20/858.81250.03379%-0.2562%-0.5794%0.0000%0.0338%

    3/21/85179.350.151%3/21/852601.23-0.209%3/21/85222.690.000%3/21/858.81250.03379%0.1508%-0.2095%0.0000%0.0338%

    3/22/85179.04-0.173%3/22/852605.560.166%3/22/85222.690.000%3/22/858.8750.03402%-0.1728%0.1665%0.0000%0.0340%

    3/25/85177.97-0.598%3/25/852595.42-0.389%3/25/85222.690.000%3/25/8590.03448%-0.5976%-0.3892%0.0000%0.0345%

    3/26/85178.430.258%3/26/852594.62-0.031%3/26/85222.690.000%3/26/858.870.03400%0.2585%-0.0308%0.0000%0.0340%

    3/27/85179.540.622%3/27/852601.380.261%3/27/85222.690.000%3/27/858.810.03378%0.6221%0.2605%0.0000%0.0338%

    3/28/85179.540.000%3/28/852608.420.271%3/28/85222.690.000%3/28/858.870.03400%0.0000%0.2706%0.0000%0.0340%

    3/29/85180.660.624%3/29/852612.810.168%3/29/85227.232.039%3/29/858.880.03404%0.6238%0.1683%2.0387%0.0340%

    4/1/85181.270.338%4/1/852615.650.109%4/1/85227.230.000%4/1/858.870.03400%0.3377%0.1087%0.0000%0.0340%

    4/2/85180.53-0.408%4/2/852614.95-0.027%4/2/85227.230.000%4/2/858.940.03426%-0.4082%-0.0268%0.0000%0.0343%

    4/3/85179.11-0.787%4/3/852600.3-0.560%4/3/85227.230.000%4/3/858.880.03404%-0.7866%-0.5602%0.0000%0.0340%

    4/4/85179.03-0.045%4/4/852604.380.157%4/4/85227.230.000%4/4/858.810.03378%-0.0447%0.1569%0.0000%0.0338%

    4/5/