2010: A happy new year?

I know I’m not the only one glad to see the back end of 2009. Nearly everyone has been hit this year by one disaster or another, and that’s not even taking into account the recession, the financial scandals and public rows over pay bonuses that have been the staples of the headlines. But what is predicted for the new year? Well, as our cover story we feature an extract from a new report (page 24) by CREATE-Research [sponsored by Citi and by Principal Global Investors]. Having surveyed the industry they take a look at what asset management has learned and what its professionals counsel for its long-term future: we have to change.
Build trust, be ethical and transparent. This view is upheld by our other contributors this issue. Proposed legislation in the US on carbon emissions trading is expected to have a knock-on effect on all derivatives (page 16) says NRDC finance advisor, Andy Stevenson; while in London, Niaz Alam (page 12) emphasises the importance of upholding responsible investment practices and the challenges this poses for pension trustees — and in effect, performance analysts and client reporters — everywhere. Handling clients has presented its own challenges and Philip Lawton (page 8) says when you educate them on reporting, well, it can only do you good, because then they understand your true value... and things can only get better. Alexander Cabot (page 20) underlines this point by showing how in identifying the composition of a client portfolio, jaggled nerves can be put in harmony. Tim Ryan (page 41) offers some sound advice on the tricky reporting and analysis that comes with performance when it falls outside expectations — both above and below — and in such a topsy turvy climate, who could better illustrate this than... Alice in Wonderland. Nick Rogers’ training exercise (page 48) this issue again teaches us how to ‘smooth 
those algorithms’ while Charles Glah (page 56) says it is time to rethink risk management altogether.
But, by the by, ’tis the season and there’s always room for a little jollity. Our regular columns Delo’s World and JOGLE-ing along seek to provide that much-needed chuckle, tongues placed firmly in cheek.
In the Chinese New Year, 2010 begins on 14 February. Let’s all hope there’s a little more to be in love with than in 2009...

Deborah Valentine, Managing editor








I know I’m not the only one glad to see the back end of 2009. Nearly everyone has been hit this year by one disaster or another, and that’s not even taking into account the recession, the financial scandals and public rows over pay bonuses that have been the staples of the headlines. But what is predicted for the new year? Well, as our cover story we feature an extract from a new report (page 24) by CREATE-Research [sponsored by Citi and by Principal Global Investors]. Having surveyed the industry they take a look at what asset management has learned and what its professionals counsel for its long-term future: we have to change.





Special report: The future of investment
Professor Amin Rajan — After two bear markets within the same decade, CREATE-Research interviewed hundreds of asset managers and pension funds to see what they thought would be the future of asset management. Here is an extract from their findings




thoughts on client reporting
Education, education, education — How educating your clients on what reporting actually is, serves the dual purpose of educating your clients on your true value by Philip Lawton




thoughts on governance
The principle of the thing — Trustees and investment managers face a real challenge in upholding long term responsible investment practices on those all-important environmental, social and governance issues by Niaz Alam




thoughts on derivatives
The greenhouse effect on derivatives legislation — Carbon emission issues are not just a matter for climate change, but are also having a knock-on effect for the overall governance of derivative investment 
by Andy Stevenson




ETF reporting
Knowing your composition — In reporting complex ETFs the best method for a harmonious client relationship is in knowing the underlying composition of the fund and keeping it transparent 
by Alexander Cabot





benchmark analysis and reporting
Target practice — Reporting performance that falls outside expectations sets up some curious circumstances. Even more curious is how the financial theory found in Alice’s Adventures in Wonderland can be applied to it by Tim Ryan





training
Smoothing algorithms: part 2 — Following on from last issue’s arithmetic attributions effects, we now go through some of the geometric differences it is possible to encounter by Nick Rogers





risk management
Correlation unhedged: Is it time to rethink risk management? — Black swans, Black-Scholes, whatever line of thought, whatever model you use, it’s time to revisit the time-varying dynamics of correlation and revolutionise concepts of risk management by Charles Glah





Delo’s world
Enter the showman — Business presenting can be a challenge even for the most experienced in the field. Here Delo recalls the ghosts of professional presentations past, and shows us both the comic and the cringeworthy by Steve Delo




Nick’s blog
JOGLE-ing along — In the penultimate leg of his charity walk across Britain, it all takes a sinister turn for our training editor as he meets a mystery woman, wrestles with his cheating heart and has an epiphany
by Nick Rogers