New Normal Investing

Asset Management NewNormalInvesting: Isthe(Fat)TailWaggingYourPortfolio? April202 WHITEPAPER ExecutiveSummary The 2008 crisis has undoubtedly reshaped the global pecuniary landscape, compelling investors to adapt to a unexampled normal1 environment, characterized by anemic economic growth, rising unemployment and low reside rates in many developed countries. This aberrant federation has created many new(a) challenges for institutional investors, but two conduct out for their high degree of intricacy and complexity: the case for yield, and the need to better manageand account forfat-tail events. YogiThambiah Managing Director, Head of enthronisation Strategy Americas CIO Office, Credit Suisse Asset Management We have indite extensively about these issues in previous papers,2 and have accent that, in our view, there is no one-size-fits-all solution to these problems. Instead, we intrust that investors should cut into substitute(a) techniquessuch as increa sing exposure to real assets, re-designing transmit of their fixed income portfolio and modifying risk frameworksthat can potentially mitigate the destructive impacts of the new normal on their portfolios.

In this paper, we extend our treatment of how investors can modify their risk framework to adjust for the new normal by providing a deeper dive into fat-tail risk. First, we define what we quest are key drivers of the new-normal environment, and assess the market impact on different asset classes. Then, we discuss how incorporating higher moments3 (i.e., skew and kurtosis) of a return distribution has become increasingly important, as schematic measures of risk based on mean-var iance optimization have failed to to the b! lanket(a) characterize return behavior. Then, we propose alternative investment approaches that we consider can minimize risk from fat tails, and are plausibly to be more effective in todays environment, including: ? ? ? The selection of strategies that, when blended with traditional beta,...If you want to get a full essay, order it on our website: OrderEssay.net

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