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| Alexander Ineichen, Founder, Ineichen Research and Management, a speaker at the marcus evans Investment Consultants Summit 2012, discusses the value of rebalancing the portfolio regularly and gaining asymmetrical returns through risk management. |
London, July 26, 2012 - (ACN Newswire) - The investment industry is focused on the returns of a portfolio or an asset class, when it should be particularly careful of its losses, says Alexander Ineichen, Founder, Ineichen Research and Management. That would help investors achieve an asymmetrical return profile and a higher compounding rate over a longer period of time, he adds.
A speaker at the marcus evans Investment Consultants Summit 2012, in Noordwijk aan Zee, The Netherlands, 3 - 4 September, Ineichen discusses the value of embracing an asymmetric return model, risk management and the key concepts in his books.
- How can Asymmetric Returns strengthen the portfolio?
The philosophy I outlined in my books "Absolute Returns" and "Asymmetric Returns" is to set aside orthodox asset management that is centred on benchmarks, and to base investments on asymmetric returns. The industry is concerned with portfolio or asset class returns when it should be focusing on losses. It is losses, especially large ones, that kill the rate at which capital compounds. The purpose of risk management is to avoid and /or control losses, so if agreeable gains are earned in profitable times and negative returns are controlled on the down-side, then a strengthened asymmetric returns portfolio is created. The final result is a higher compounding rate over a longer period of time.
- What impact does having a different definition of risk have on the portfolio?
Risk cannot be quantified in the same way for both absolute and relative returns. If money is managed relative to a benchmark then risk is perceived as a deviation from it. If money is managed in absolute returns space, risk is defined as losses or the probability of compounding capital negatively. A different definition for risk results in a completely different risk management process.
- How can investors strategise when investing in absolute returns?
Analysis can determine large from small opportunities and as the dispersion of returns between managers in any category is quite large, I believe that bottom-up research is more important than a top-down investment strategy.
- What are the driving factors of diversification and how can these be controlled?
Many people have realised that risk management is really a thought process and not a quantitative exercise. The financial crisis was a cruel teacher. Many investors have learnt not to rely on models based on historical data.
As the future is so unpredictable there is a lot to gain from rebalancing the portfolio on a regular basis because it disciplines the investor to buy low and sell high.
- What advice can you offer investment consultants?
I believe that a major part of the financial theory that is still taught in business school is wrong, misleading and dangerous. My advice is to think out of the box as often as possible, learn from mistakes of others, and always be nimble and pragmatic.
About the Investment Consultants Summit 2012
This unique forum will take place at the Grand Hotel Huis ter Duin, Noordwijk aan Zee, The Netherlands, 3 - 4 September 2012. Offering much more than any conference, exhibition or trade show, this exclusive meeting will bring together esteemed industry thought leaders and solution providers to a highly focused and interactive networking event. The Summit includes presentations on optimum institutional portfolio construction, strategic risk management and asset allocation, global economic stability and reducing balance sheet risk. For more information please send an email to info@marcusevanscy.com or visit the event website at www.investmentconsultantseurope.com/AlexanderIneichenInterview
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Contact:
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Topic: Research / Industry Report
Source: marcus evans Summits
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