Concern over Germans’ lack of correlation forecasting

Fewer than half of German institutional investors in a survey use risk modeling to detect correlations between asset classes, a finding described as concerning.

The vast majority of investors (90%) state that risk models play a key role in mapping the effects of diversification. However, only 38% of those polled use risk models to forecast correlations.

Alexander Schindler, a managing director at asset manager Union Investment, says he is concerned that just one-third of investors use risk models in correlation forecasts.

“The current capital market climate makes it more essential than ever for investors to diversify their portfolios. This means that the systematic evaluation of correlation effects has become more important,” he says.

Union Investment’s risk management study was carried out by Professor Daniel Rösch and Professor Philipp Sibbertsen from the University of Hannover and covered 106 institutional investors.

The asset management firms says the vast majority of institutional investors in Germany have no doubts about the importance of risk models despite widespread criticism of the methods used to measure capital market risks in the wake of the financial crisis.

On the other hand, mathematical models are most frequently used by institutional clients to predict key risk indicators (61%), followed by volatility (59%) and investment returns (57%).

©2012 funds europe

HAVE YOU READ?

THOUGHT LEADERSHIP

Innovative US companies are providing some of the solutions to the climate crisis and transition to a more sustainable economy. We see potential opportunities in areas including renewable energy and…
FIND OUT MORE
This white paper outlines key challenges impeding the growth of private markets and explores how technological innovation can provide solutions to unlock access to private market funds for a growing…
DOWNLOAD NOW

IRELAND SPOTLIGHT

Visit our dedicated Ireland channel for all the latest news and analysis on the country's investment industry.
READ MORE

PRIVATE MARKETS FUND ADMIN REPORT

Private_Markets_Fund_Admin_Report

LATEST PODCAST