As markets turn south, remaining solvent is the biggest challenge facing Bankpension, Denmark’s 1.6 billion (US$2.1 billion) pension fund. Chief investment officer Leif Hasager talks to Kristen Paech about the measures the fund has introduced to protect against downside risk.
After many years of extraordinary growth, China has clearly been adversely affected by the global economic recession. Its own economy is slowing rapidly, with declines in exports, property prices, and fixed investment. In response, the Chinese government. strongly motivated to maintain stability, is injecting large doses of fiscal stimulus and making other administrative efforts to revive economic activity.
Investors need to be aware that rare events with an extreme impact that, afterwards, we think we could have predicted – in short, black swans – happen in the markets. Those who are trying to measure risk in the financial markets need to carefully distinguish risk, with its probabilities, from uncertainty, which cannot be measured. We have become increasingly vulnerable to black swans because our financial
economy has come to play an ever-larger role in our productive economy.
One of Canada’s largest public pension plans has diverted its immediate attention away from investments, and in particular new risk management tools, to solve its funding deficit issues. Amanda White spoke to PSPP’s plan board manager about their concerns.
Some proponents of fundamental indexation claim that the strategy is based on a new theory in which market prices of stocks deviate from fair values. A key assumption in this approach is that fundamental weights are unbiased estimators of fair value weights that are statistically independent of market values. This article demonstrates that, except in trivial cases, this assumption is internally inconsistent because the sources of the ‘errors’ are also determinants of market values.
Investment managers in Europe fail to employ techniques that avoid generating overly-concentrated portfolios because of poor input estimation, and do not fully take into account extreme risks when constructing portfolios, according to research by the EDHEC Risk and Management Research Centre.