Optimizing the manager structure in a downside risk framework

研究成果: Article

抜粋

To decide the investment policy of a pension fund, a plan sponsor first conducts an asset allocation study and then he/she hires active managers to add active return to the portfolio. In order to seek active return, a plan sponsor must necessarily accept risk. But how much risk does the plan sponsor have to take, and how many managers does he/she have to hire? This problem that a plan sponsor often faced with is a manager selection problem. A lot of methods to decide the manager structure have been proposed, however, in the most cases the returns of the active funds are assumed to be normally distributed. In this, study I empirically show that the returns of actively managed funds are not normally distributed and a plan sponsor is impossible to optimize the. manager structure by using the standard mean variance model. To accurately capture the risk of the funds, I use the target semi-deviation as a measure of risk. In my framework, shortfall below the return of policy asset mix is recognized as risk, and manager's active alpha is adjusted by the target semi-deviation. I also propose a method to decompose a portfolio's target semi-deviation for converting the optimal manager structure into the optimal risk allocation.

元の言語English
ページ(範囲)525-528
ページ数4
ジャーナルJournal of the Operations Research Society of Japan
45
発行部数4
出版物ステータスPublished - 2002 12 1
外部発表Yes

ASJC Scopus subject areas

  • Decision Sciences(all)
  • Management Science and Operations Research

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