The Risk Management Conference series will highlight the new strategies and new approaches to managing risk in a changing world, including:
- Considering the issues raised by benchmark-driven mandates and how to use the opportunistic mandate
- Finding an investment manager that is a risk management partner
- Learning about investment strategies that minimize volatility
- Matching liabilities and assets: How LDI can be a significant risk management tool for both pension and perpetual investors
- Ensuring that the portfolio is prepared for both inflation and/or deflation
- What your investment committee needs to know about risk
Preliminary Agenda (as of 5/17/2012)
Subject to change
8:00 am - 9:00 am
Registration and Networking Breakfast
9:00 am – 9:15 am
San Diego & Dallas
Speaker: Michael A. Hall, ASA, CFA, EA [CONFERENCE MODERATOR]
West Division Practice Lead
Chicago & NewYork
Speaker: Carl Hess [CONFERENCE MODERATOR]
Global Head of Investment
9:15 am – 9:45 am
PRESENTATION: The Wrong Type of Snow
In an increasingly inter-connected and complex world, asset owners need better risk management. This relatively young discipline has witnessed advances in the last fifty years, driven more by the harnessing of technology for risk measurement than by a deeper understanding leading to better decisions. It is time to redress the imbalance and promote better management over more measurement, as better risk management can give competitive advantage. This advantage can accrue to asset owners who shift their thinking to align risk with mission, who modify practices to adopt a better risk framework, and who bring this together through stronger risk governance.
9:45 am – 10:25 am
WORKSHOP: Achieving Better Pension Outcomes through Integrated Asset Allocation and Downside Risk Management
Even though we are three years from the depths of the financial crisis, serious questions remain about the ability of pension plans to meet their obligations using conventional asset allocation and pension risk management strategies. Implementing a more holistic, integrated asset/liability management program in the current environment may be challenging, but it is likely the only path back to full funding for both corporate and public pension plans. For corporate sponsors, what are the best means by which to assess the viability of matching assets to liabilities and for the public sponsor, what is the best way to earn high single digit total returns with lower volatility and reduced risk of severe drawdowns? This presentation will aim to answer these questions as well as address how plan sponsors can protect theirportfolios from extreme tail risk scenarios by implementing a more risk-aware, objectives-basedasset allocation process.
10:25 am – 10:45 am
10:45 am – 11:30 am
PANEL DISCUSSION: Managing for Growth and Yield in Volatile Times
With interest rates low and many plans hesitating when it comes to de-risking using strategies such as LDI, the pension portfolio can have a significant allocation to equities and alternatives. Whatever the long-term plan, this can be the reality in today’s market environment. So how are pension plans approaching the need for growth and yield, while still acknowledging the risk implications for the total portfolio?.
11:30 am – 12:10 pm
WORKSHOP: LDI – Your Risk Management Tool
Liability driven investing is often viewed as an investment strategy that considers the liabilities in the light of asset allocation decisions. For others, LDI is a risk management exercise, with each LDI situation requiring a customized analysis and solution. This workshop will present a case study of a defined benefit pension plan’s path to de-risking. The case study will demonstrate that, when combined with a deterministic process and the use of sophisticated quantitative models, a customized approach can minimize funded status volatility, meet liability payments, and reduce contribution amounts.
12:10 pm – 1:20 pm
1:20 pm – 2:10 pm
SAN DIEGO PRESENTATION: Seeking High Investment Performance in a Changing World
We live in an age of ominous economic and political uncertainty, but also opportunity. Innovation flourishes in the high-tech sector, and, through applications of information technology, throughout the global economy. Are these times too dangerous to try to beat performance benchmarks? Despite uncertainty about high-flying tech firms, can funds construct prudent trading strategies focused on economic innovation? How can the risks of such strategies be managed?
This presentation will discuss how psychological biases of investors cause market inefficiencies, and the opportunities this creates for sophisticated investors. Psychological evidence suggests that investors will be especially prone to mispricing innovation. It will present notable recent evidence about the risk and return of investment strategies designed to exploit this.
Speaker: David Hirshleifer | Merage Chair in Business GrowthProfessor of Finance| Paul Merage School of Business University of California - Irvine
DALLAS PRESENTATION: Rational deliberation and emotional reaction: What have we learned?
Behavioral Finance is a new and rapidly growing field that uses insights provided by psychologyto better understand the decisions of individual and professional investors, as well as marketoutcomes. The traditional approach in finance is to assume that people are rational maximizers, but observations of actual behavior are at odds with this view. Behavioral finance research has improved our understanding of the roles of our rational and emotional sides. Perhaps even more importantly, awareness of tendencies that have been ingrained in the human psyche through evolution will allow people to adopt strategies that counteract negative influences and promote better outcomes.
Speaker: Lucy Ackert | Professor of Finance | Michael J. Coles College of BusinessKennesaw State University
CHICAGO PRESENTATION: Approximately Rational: Recent Insights Into Judgement and Decision Making from the Behavioral Sciences
What are some of the fundamental judgment habits of investors and asset managers in an increasingly volatile financial world. Which habits should we adhere to, and which are likely to lead us into decision traps? This talk will report on three or four essential insights from cognitive psychology, behavioral economics, and neuroeconomics that will help managers make smarter investment decisions in today's complex, globalized world.
Speaker: Reid Hastie | Robert S. Hamada Professor of Behavioral Science Center for Decision Research | Booth School of Business, University of Chicago
NEW YORK PRESENTATION: Long-Term Opportunities and Challenges for Global Investors
In recent years, investors have seen their universe of investment opportunities expand more rapidly than ever before. The globalization of national economies and capital markets has been unprecedented since the end of the Cold War. At the same time, this brave new world comes with new risks that may be far more systematic than in the past. Since 2008, central banks repeatedly flooded the global financial system with liquidity to avert such a contagion. Have they succeeded, or have they simply delayed an inevitable calamity? Dr. Yardeni will provide a balanced view of the systematic "macro" risks that investors will continue to face in coming years, including geopolitical uncertainties in the Middle East, the impact of aging demographics on fiscal balances, the financial stability of Europe and whether the Chinese will have a smooth transition from export-led to consumer-led growth.
Speaker: Dr. Ed Yardeni | President| Yardeni Reesearch
2:10 pm - 2:50 pm
WORKSHOP: De-risking Risk
Institutional investors are worried. They are worried about the impact external factors such as risk, market volatility, interest rates and regulatory changes will have on their investment portfolios and consequently, their ability to grow their organizations. They are also worried about their capacity to address these risks within the staffing, reporting, and decision making systems they currently have in place. At some point, changes need to be made, the question is which changes? What do investors tackle first? Institutional investors have more tools at their disposal to address these worries than ever before. This workshop will provide a framework for evaluating and prioritizing changes you might consider to manage your investment program for long-term success.
2:50 pm - 3:35 pm
PANEL DISCUSSION: Steering in the Face of Oncoming Traffic
As if risks couldn’t become more complicated, the past twelve months have seen rising levels of sovereign and political risk. Volatility has entered a new phase, with fear driving markets up and down in swiftly gyrating patterns. For pension plan sponsors, by definition long-term investors, how are they managing to cope with the noise levels coming from the market, managing to balance the long view with the need for tactical flexibility in investment decisions.
3:35 pm – 3:55 pm
3:55 pm - 4:35 pm
WORKSHOP: Pension Management in the Low-Rate Environment: Balancing Risk Reduction and Valuation
There are many factors that can stand in the way of dramatically reducing the asset/liability risk in a defined benefit pension plan. A glide path approach can help determine when additional risk reduction is merited, but hedging decisions are often complicated by valuation concerns. Purchasing high quality, long-maturity bonds may be the right thing to do, but some CIOs hesitate because yields are at historical lows. This begs the question: Will such bonds cheapen meaningfully when the cycle turns? To determine this, one must consider how the shape of the yield curve might change when rates rise, how credit spreads might behave, future issuance patterns, and the latent demand for these assets from pension fiduciaries waiting in the wings, among other factors.
4:35 pm - 5:20 pm
PANEL DISCUSSION: Looking into the Crystal Ball
What challenges will the next year throw up for pension investors? What developments – market, regulatory, accounting, behavioral, political – will make life difficult for plan sponsors? Conversely, what developments will provide a following wind? Where would you be spending your risk budget? When your board asks what to expect as 2012 turns into 2013 what would be your answer?
5:20 pm – 6:30 pm
Closing Cocktail Reception