New Normal Investing

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

In this paper, we extend our hindrance 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 take 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 incr easingly important, as formulaic measures ! of risk based on mean-variance optimization have failed to to the well(p) characterize return behavior. Then, we propose alternative investment approaches that we conceptualise can minimize risk from fat tails, and are belike 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: OrderCustomPaper.com

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