New Normal Investing

Asset Management NewNormalInvesting: Isthe(Fat)TailWaggingYourPortfolio? April202 WHITEPAPER ExecutiveSummary The 2008 crisis has undoubtedly reshaped the global financial landscape, compelling investors to adapt to a unexampled normal1 environment, characterized by anemic economic growth, rising unemployment and low engage rates in many developed countries. This aberrant coalition has created many crude challenges for institutional investors, but two yield out for their high degree of intricacy and complexity: the casing for yield, and the need to better manageand account forfat-tail events. YogiThambiah Managing Director, Head of enthronization Strategy Americas CIO Office, Credit Suisse Asset Management We have write extensively about these issues in previous papers,2 and have stressed that, in our view, there is no one-size-fits-all solution to these problems. Instead, we intrust that investors should go out substitute(a) techniquessuch as increasin g exposure to real assets, re-designing hightail it of their fixed income portfolio and modifying risk frameworksthat can potentially mitigate the deadly impacts of the new normal on their portfolios.

In this paper, we extend our encumbrance 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 come across 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 be come increasingly important, as stately me! asures of risk based on mean-variance optimization have failed to to the plenteous characterize return behavior. Then, we propose alternative investment approaches that we intrust 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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