Financial Analysts Journal May/June 2014 Volume 70 Issue 3
Asset Allocation: Risk Models for Alternative Investments
Often, the lack of mark-to-market data lures investors into the misconception that alternative asset classes and strategies represent somewhat of a “free lunch.” This article proposes solutions to measuring mark-to-market risk in alternative and illiquid investments. The authors describe how to estimate risk factor exposures when the available asset return series may be smoothed (owing to the difficulty of obtaining market-based valuations). They show that alternative investments are exposed to many of the same risk factors that drive stock and bond returns.
About the Author(s)
Sébastien Page, CFA, is senior managing director and head of the Portfolio and Risk Management Group at State Street Associates/State Street Global Markets. Previously, Mr. Page worked at CDP Capital. In 2000, he won first prize in the Montreal CFA Society–August Hagedorn Contest for his research on value at risk. In 2002, he won the Quebec Financial Industry honorable mention in the Young Professional of the Year category, and in 2003, he won the Bernstein Fabozzi/Jacobs Levy Award for Best Article in the "Journal of Portfolio Management". He has also published articles in the "Journal of Asset Management", the "Journal of Investing, and the "Canadian Investment Review". Mr. Page is a frequent speaker at various academic and practitioner conferences. He holds an MSc in finance from Sherbrooke University in Canada.