NEW YORK, Sept. 28, 2011 /PRNewswire/ -- Credit Suisse's Asset Management division today released a new white paper and brief video entitled, "Real Assets: Inflation Hedge Solutions Under a Modified Framework." Authored by Yogi Thambiah and Nicolo' Foscari from the Investment Strategies and Solutions (ISS) team, the paper tackles a key issue challenging institutional investors today: How to build an optimized real assets portfolio under a "new normal" environment of heightened volatility?
The "new normal" investing environment—characterized by sustained growth in emerging markets and continued sluggishness in developed economies—has created a "risk-on/risk-off" pattern defined by heightened levels of volatility. This environment has fostered many challenges for institutional investors, particularly how to quantify the impact of today's loose monetary policies and fiscal incentives in the developed world on tomorrow's inflation and interest rates.
In the white paper, the team makes the case that an optimized portfolio of real assets may be an effective way for institutional investors to address many of the challenges associated with this "new normal," while potentially providing protection across various inflation scenarios.
In the team's view, investors can build an optimal real assets portfolio by following a modified risk framework that involves the following steps:
- Assessing the intrinsic characteristics of the asset class, including its true drivers of return and degrees of inflation sensitivity;
- Analyzing the asset class' performance during different inflation scenarios, including phases of "unexpected" inflation;
- Addressing the challenges associated with illiquid strategies through a risk framework centered on "non-normal" distributions; and
- Tailoring the composition of the real assets portfolio to fit the liquidity needs of individual investors or plan sponsors.
The white paper also includes a case study that demonstrates how an optimized real assets allocation can help institutional investors' portfolios weather a potentially long period of high volatility, and enhance the portfolios' defenses against the duration risks embedded in their long-term liabilities. The paper is accompanied by a video featuring Yogi Thambiah presenting the paper's highlights.
For a copy of "Real Assets: Inflation Hedge Solutions Under a Modified Framework," or to view the video, please contact Katherine Herring at email@example.com or visit the Asset Management site at www.credit-suisse.com.
Credit Suisse AG
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