Asset Allocation with Shadow Assets

The wealth of most investors contains both financial assets as well as non-financial assets. The author defines shadow assets as (mostly) nonfinancial and non-tradable assets that are exogenous to ...

Author(s):

Bernd Scherer

Professor of Finance, EDHEC Business School

The wealth of most investors contains both financial assets as well as non-financial assets. The author defines shadow assets as (mostly) nonfinancial and non-tradable assets that are exogenous to the investor’s asset allocation decision. Examples for shadow assets are human capital, nonfinancial sovereign assets (e.g. underground oil reserves) the present value of future alumni contributions for university endowments or the non-listed family business for the client of a family office. Allocations to these shadow assets can hardly be changed and yet their existence will change the investor’s perspective on total wealth at risk.

Type: Working paper
Date: le 02/05/2011
Research Cluster : Finance

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