Long-Term Investing Strategies in Private Wealth Management

Noël Amenc, Romain Deguest, Lionel Martellini, Vincent Milhau: The authors argue in this paper that improved long-term investing strategies can be designed for private wealth management.

Author(s):

Noel Amenc

Professor of Finance, Edhec Business School and Director, EDHEC-Risk Institute

Romain Deguest

Senior Research Engineer, EDHEC-Risk Institute

Lionel Martellini

Professor of Finance, EDHEC Business School and Scientific Director, EDHEC-Risk Institute

Vincent Milhau

Deputy Scientific Director, EDHEC-Risk Institute

These dynamic allocation strategies exploit the presence of mean-reversion in interest rates, equity Sharpe ratio and equity volatility. The resulting asset allocation strategy is based on an industrialization of three key paradigms that have recently emerged in institutional money management: liability-driven investing (LDI), for taking into account private clients’ consumption objectives, life-cycle investing (LCI), for taking into account private clients’ horizon, and risk-control investing (RCI), for taking into account private clients’ risk budgets. Our Monte Carlo experiments reveal a substantial benefit in terms of utility gains from using improved longterm investing strategies over existing industry standards.

Type: Working paper
Date: le 03/10/2012
Research Cluster : Finance

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