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The Lyxor White Paper Series Latest Research on Investment Strategies, Asset Allocation Methodologies and Risk Management Techniques
Publishing Directors

Alain Dubois, Chairman of the Board
Laurent Seyer, Chief Executive Officer

Editorial Board

Nicolas Gaussel, PhD, Managing Editor
Thierry Roncalli, PhD, Associate Editor
Benjamin Bruder, PhD, Associate Editor


The Lyxor White Paper series is a quarterly publication providing our clients access to intellectual capital, risk analytics and quantitative research developed within Lyxor Asset Management.

The series covers in depth studies of investment strategies, asset allocation methodologies and risk management techniques.


This publication is both dedicated to academics and professionals of the asset management and hedge fund industry.


Strategic Asset Allocation - An Upd...#9
Trend Filtering Methods For Momentu...#8
Risk-Return Analysis of Dynamic Inv...#7
Strategic Asset Allocation#6
Portfolio Allocation of Hedge Funds#5
Time Varying Risk Premiums & Busine...#4
Mutual Fund Ratings#3
Liability-Driven Investment#2
Risk-Based Indexation#1
December 2011
Strategic Asset Allocation - An Update Following The Sovereign Debt Crisis
Authors
Karl Eychenne
Research & Development
Lyxor Asset Management

Thierry Roncalli
Research & Development
Lyxor Asset Management

Foreword

This short paper is an update of Lyxor White Paper #6 – Strategic Asset Allocation – published in March 2011. This white paper was written with a view to helping investors understand the goal of strategic asset allocation (SAA), which is part of any long-term investment policy with tactical asset allocation (TAA). SAA requires long-term assumptions of asset risk/return characteristics as a key input.

Acknowledging the occurrence of key dramatic events since the beginning of 2011, we have decided to update the results of our strategic asset allocation model. We discuss the long-lasting adverse effects of the ongoing crisis on the long-term path of the economy and long-run asset returns, notably as a consequence of large fiscal imbalances and continuing financial fragilities. In particular, we focus on plausible risk scenarios that could alter asset return forecasts.

Nicolas Gaussel
Global Head of Quantitative Asset Management
Lyxor Asset Management