New Normal Investing

Asset Management NewNormalInvesting: Isthe(Fat)TailWaggingYourPortfolio? April202 WHITEPAPER ExecutiveSummary The 2008 crisis has undoubtedly reshaped the global fiscal landscape, compelling investors to adapt to a unexampled normal1 environment, characterized by anemic economic growth, rising unemployment and low run over rates in many developed countries. This aberrant southward has created many brand-new challenges for institutional investors, but two suffer out for their high degree of intricacy and complexity: the confront 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 indite extensively about these issues in previous papers,2 and have disquieted that, in our view, there is no one-size-fits-all solution to these problems. Instead, we intrust that investors should cope substitute(a) techniquessuch as increas ing exposure to real assets, re-designing assume of their fixed income portfolio and modifying risk frameworksthat can potentially mitigate the mischievous impacts of the new normal on their portfolios.

In this paper, we extend our interjection 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 record 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 beco me increasingly important, as formulaic me! asures of risk based on mean-variance optimization have failed to to the all-inclusive characterize return behavior. Then, we propose alternative investment approaches that we mean can minimize risk from fat tails, and are probably 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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