Head of Investment and client solutions
Risk parity : choosing a risk-based approach
22.04.2015 - Franck Nicolas
Natixis Asset Management’s Investment & Client Solutions investment division is pleased to announce its latest research publication (English version).
Written under the supervision of Franck Nicolas, by Financial Engineering & Quantitative Research (Olivier Roussel, Geoffrey Babiarz) and by Institutional Solutions & Networks (Jean-Christophe Brun) teams, this study explores both benefits and pitfalls associated with the choice of risk-based portfolio construction methods, as well as estimates and assumptions underlying models and risk measures considered.
« The risk parity approach offers investors solutions in constructing portfolios more resistant to crises and also able to capitalize on bullish markets. As its name suggests, this approach grants priority to risk budgeting, which is spread evenly between the different asset classes that make up the portfolio. This apparently simple process involves a number of potential difficulties, including:
- the method used to balance risks (…);
- the crucial choice of risk measure, which will determine any further portfolio construction in terms of risk parity. »
This research highlights several risk measures applied to the implementation of risk parity solutions within a globally diversified investment universe.
Franck Nicolas holds a PhD in Economics from the University of Aix–en-Provence, a PhD in Management from the University of Paris 1 Panthéon-Sorbonne, and an MBA from HEC Business School in Geneva.
Franck began his career in 1991 as equity portfolio manager at Compagnie Financière Benjamin & Edmond de Rothschild, a financial holding company, in Geneva, Switzerland. From 1994 to 1998, he was fixed income portfolio manager at HSBC Midland Bank. In 1999, he joined Ixis Asset Management as financial engineer, and was then appointed director of quantitative engineering & research in 2002. In 2005, he also took in charge of the economic research & strategy department.
In 2007, Franck Nicolas was appointed head of Global asset allocation & ALM at Natixis Asset management. He is currently Head of Investment & Client Solutions.