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Jacques Lussier PhD,CFA,ICD.D

Author of books, educational material, research on investment processes and long-term financial planning. 

For investors, investment professionals and finance graduates. 

Winner of the CFA Institute 2018 C. Stewart Sheppard Award 

Topic : Long-Term Financial Planning

Secure Retirement - Connecting Financial Theory and Human Behavior

 

There are few challenges in life as daunting as planning towards and through retirement, a process that can extend six decades or more from beginning to end. Preparing for retirement is about intertemporal shift in consumption, appropriate financial planning, and managing fears and emotions. 

"Secure Retirement" is the result of two years of research, modeling and validating relevant literature. The book covers nearly all important aspects of retirement planning such as setting and measuring life goals, understanding and managing financial risks in accumulation as well as financial risks and longevity risk in decumulation, allocating savings and asset classes across types of accounts, avoiding inappropriate financial products, integrating Social Security, housing, understanding the relevance of annuities, life insurance policies and reverse mortgages, etc., and finally “optimizing” all of these aspects.

 

"Secure Retirement" illustrates, using an integrated financial model, the significant risk and return gains resulting from properly executing a lifetime savings and consumption plan. It shows that the retirement challenge can be solved if we support investors with well designed advisory tools that incorporate efficient allocation and risk management processes.

Investment Principles - Version I (Information Book for CFA Professionals) & Version II (Information Book for Investors)

 

“Investment Principles” has been developed for advisors and investors to help them understand the key elements of retirement planning and avoid making the most common types of investment errors. It also seeks to enrich the communication between investors and financial professionals. 

“Investment Principles” highlights two sets of fact sheets. The most comprehensive set is designed for investment professionals and addresses 17 relevant topics ranging from “Why Saving is Important” and “The Impact of Volatility” to “Building a Portfolio”, “How Much Must be Saved to Retire Well” and understanding “Financial Risks, Risk Mitigation, and Common Sense”. The investor version highlights 12 important topics and avoids the complexities best handled by financial advisors. 
 

 

Topics : Investment Processes, Asset Allocation and Factor Investing

Successful Investing is a Process - Structuring Efficient Portfolios for Outperformance (Wiley/Bloomberg Press)

Investors, be they high-net-worth individuals, institutional investors or other large entities, are often convinced to entrust their portfolio management to a team or individual with seemingly unique experience or expertise, and they then incur significant costs for the knowledge, analysis, and resources associated with that expertise. However, many successful portfolio managers improperly attribute their success in the long term to their ability to forecast which security, sector or asset class will outperform, when the successes may be explained by their risk structuring and risk management processes.

Understanding why some processes lead to outperformance allows investors to design portfolios whose excess performance will be statistically reliable. "Successful Investing is a Process" is all about investment processes and transparency of investment processes. It is about learning from more than half a century of theoretical and empirical literature and about learning from our experiences as practitioners.

Rational Investing - The Subtleties of Asset Management 

with Hugues Langlois (Columbia University Press)

Many investors believe that success in investing is either luck or clairvoyance. In Rational Investing, finance professor Hugues Langlois and asset manager Jacques Lussier present the current state of asset management and clarify the conundrum of luck versus skill. The core of Rational Investing is a framework for smart investing built around three performance drivers: balancing exposure to risk factors, efficiently diversifying bad luck, and taking advantage of relative mispricing in financial markets. 

With clear examples from model multi-asset-class portfolios, Rational Investing shows how to implement performance drivers like institutional investors with access to extensive resources, as well as nonprofessional investors who are constrained to small-scale transactions. There are few investment products, whether traditional or alternative, discretionary or systematic, fundamental or quantitative, whose performance cannot be analyzed through this framework. Rational Investing illuminates the structure of financial markets and the mechanics of sustainable investing so any investor can become a rational player, from the nonprofessional investor with a basic knowledge of statistics all the way to seasoned investment professionals wishing to challenge their understanding of the asset management industry.
 

Portfolio Structuring and the Value of Forecasting

with Andrew Ang, Mark Carhart, Craig Bodenstab, Phil E. Tetlock, Warren Hatch and David Rapach (CFA Institute Research Foundation) 

There are two competing approaches to asset management: 
 

  • The traditional approach relies on explicit forecasts of security  or industry-specific expected returns made by asset managers;

  • The factor investing approach relies on common factors in security returns, determining which factors represent compensated risks, and then extracting returns from a larger and more balanced set of compensated risks.

Traditional asset management has sustained much criticism in recent years. Few active managers outperform their benchmark after fees over long horizons such as 5 or 10 years. There has been much empirical evidence supporting the view that professional forecasters cannot predict or that their predictions explain a very small part of the variability of returns. Hence, many investors are starting to embrace factor investing, which is becoming more commoditized and often accessible at a lower cost.

 

However, even the factor investing approach relies on forecasts, although the forecasts are implicit. Accepting that a factor will be compensated in the long-run is also a forecast. The objective of this document is to shed light on the factor investing approach while discussing recent developments on forecasting capabilities that may spur renewed interest in traditional asset management approaches. Both approaches are being incorporated by many asset managers. 
 

Active Equity Investing - Portfolio Construction 

With Marc Reinganum (CFA Institute Level III Material - Access on CFA Institute Website for members) 

Active managers rely on a wide array of investment strategies and methodologies to build portfolios of securities that are expected to outperform the benchmark. The challenges faced by active managers are similar, whether they manage long-only traditional strategies, systematic/quantitative strategies, or long/short opportunistic strategies. Managers may differ in their investment style, operational complexity, flexibility of investment policy, ability to use leverage and short positions and implementation methodologies, but predictions about return and risk are essential to most active equity management styles. "Active Equity Investing" addresses the following topics:

  • Influence of investment philosophy on the portfolio management process;

  • Building blocks of portfolio construction; 

  • Risk budgeting concepts relevant to portfolio construction and measures to evaluate portfolio risk; 

  • Application of risk budgeting in portfolio construction;

  • Attributes of a well designed portfolio;

  • Specialized equity strategies using leverage and/or short positions.   

    
Although written for the CFA Institute Level III Curriculum,  its content is also appropriate to investment professionals.  

 

Currency Exposure & Hedging - Not All Currencies are Created Equal 

with Hugues Langlois 

Investment professionals often believed that hedging 50% of their foreign equity exposure was a neutral risk position. However, the optimal strategic currency hedging decision is not independent of the pro or counter-cyclicality of a currency and of the relative importance of asset volatility and currency volatility. Although the principles of an efficient currency hedging strategy were first introduced in “Successful Investing Is a Process”, this research essay provides a more detailed analyses of its implementation in different contexts. 
 

Other Documents to be Periodically Added

 

 


 

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