We help our clients to comply with new regulations like MiFID, the upcoming European Commission initiatives on Packaged Retail Investment Products and on UCITS IV 
To deliver first-class value to our clients, we rely on advanced scientific research and development orchestrated around our partnership with leading academics in Finance 
White Papers
White Papers
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Individual Portfolio Therapy
Market environment and regulatory pressures have given a simultaneous impulse to the adequate recognition of investor financial profiles as a major challenge. Instead of viewing it as a cost center, we consider the profiling exercise as a precious source of information regarding the investor's investment horizon, risk perception and risk tolerance. The approach advocated here performs a rigorous evaluation of the personal characteristics of the investor to provide a fully individualized portfolio recommendation. Importantly, the adequacy of the portfolio with the profile can be dynamically monitored with an allocation framework that focuses on the strategic risk-return characteristics rather than a target asset allocation. This approach can be massively implemented while still keeping track of each individual's characteristics.
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Strategic Asset versus Risk-Return Allocation Strategies
The Strategic/Tactical Asset Allocation Paradigm is naturally related to Modern Portfolio Theory. The recent global financial crisis has emphasized the instability and severity of risks during turbulent market times. As investors care about extreme risks, it is necessary to re-think portfolio management systems in accordance with their risk perception and risk aversion. We propose a new paradigm in which the manager sets a long term strategic risk-return target trade-off with tight risk limits, but very flexible asset allocation constraints. The implementation of this new system, called the strategic global risk-return allocation, is tested live with the Optimized Dynamic Portfolio (ODP), run by Smart Private Managers with the use of the FolioMaster optimization software of Gambit Financial Solutions. The portfolio backtesting shows that the objective of controlling the portfolio risk level is fully achieved. Tactical moves to seize favorable risk-return opportunities are made possible through aggressive portfolio rebalancing. As a result, ODP captures the increase of financial markets but limits its downside risk exposure at times of crises, thereby keeping risk lower than the one of equity markets.
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Synthetic Risk and Reward Indicator
With the KID, the new UCITS IV framework brings a useful standardized and simplified scheme to explain the risk of mutual funds to non-professional investors. The Synthetic Risk and Reward Indicator (SRRI) methodology defines how to assess a volatility equivalent for each type of funds, and recognizes the specificities of various types of investment vehicles in the process. But the SRRI methodology does not replace a proper investment profiling system. By forcing any type of risk to be translated into a volatility estimate, the approach overlooks investor's heterogeneity in the definition of risk. The SRRI synthetic approach is powerless to adequately reflect the trade-off between normal and extreme risks the way it is perceived by individual investors. It also misleadingly posits that fund returns are not necessarily related to volatility. We show that the analysis of investor profiles is a necessary complement to the KID in order to provide adequate advice to investors.