The Investment Consulting service is oriented towards professional institutional investors: mutual funds, hedge funds, asset managers, pension plans, endowments, depositary institutions, private banks, family offices, insurance companies (life, property, casualty and health) and treasury departments of corporations, municipalities and government agencies. It delivers performance improvements in the areas of investment policy, asset allocation (strategic and tactical), securities selection and activity (shift to more active strategies)
Recent advances in finance, information technology and data management have transformed the investment management process and lead to the proliferation of investment strategies, styles, instruments, electronic front-to-back platforms, and more international diversification, and global investments. The current zero interest rate environment is characterized by decreasing fixed income returns and factor premiums, increased uncertainty (volatility of volatility), where many traditional passive and index strategies are generating low or even negative returns. In this environment, our service helps institutional investors with cross-functional engagements in the areas of: (1) asset allocations and securities selection processes to improve diversification, returns and their consistencies – to identify, explore and select opportunities in traditional (fixed income, equities, derivatives) and alternative investments (hedge funds, liquid alternatives, derivatives, real estate) in both developed – US, EU (Core and Peripheries), and selected emerging markets – Central and Eastern Europe, Russia, LatAm and GCC; (2) technological and methodological improvements by enhancing data-processing, electronic trading and portfolio management processes to reflect strategic multi-asset views and improving the abilities to express these views efficiently (e.g., designing factor investing strategies with positive cross-asset carry); and (3) automated portfolio factor analysis and risk management solutions are also offered.
Our service focuses on factor-based portfolio construction and insurance to reflect bespoke investment strategies (passive, active, alternative, and liquidity solutions) with exposures to specific investment factors as well as tail-risk hedging strategies. Factor exposure can be obtained and managed efficiently with ETFs, notes, certificates, warrants or derivatives. It entails portfolio management improvement – optimizing the usage of datasets, performance attribution, developing and managing exposure to risk factors, optimizing the usage of enterprise datasets. We also help in creating, backtesting and optimizing bespoke investment strategies, focusing on multi-asset solutions and usage of derivative overlays for both active and passive portfolio management. In the passive space, the low costs, transparency and consistency of index investing are enhanced by moving from traditional market-capitalization based weighting to smart and alternative beta strategies and portable alpha strategies. We help with analysis and implementation of new equity and fixed income smart beta strategies, enhancing return and decreasing the risk of indexed portfolios.
For life insurance companies and pension funds distributing retirement savings products, the Investment Consulting service helps with the design and development of new products (selection of index benchmarks, term sheets), and improvements of marketing and distribution processes. We also consult our clients on hedging strategies and solutions for mainstream products for both defined contribution and defined benefits schemes such as variable annuities, index annuities, indexed universal life and target date funds in the US market as well as unit-linked life insurance products in the EU.
Our Investment Consulting service entails quantitative, structuring and risk advisory for portfolio management and investment strategies (single asset or multi-asset). We develop and implement quantitative model/product libraries for evaluation of assets in the portfolios and the derivatives overlays using standard software packages – Matlab, VBA, Bloomberg, Numerix. Investment strategies are also evaluated and tested with these packages, but occasionally the MetaQuotes Language 4 is used. We provide quantitative advisory with software systems of vendors such as Murex, Calypso and BISAM. We help on measuring and evaluating performance and on risk measurement. Solutions on managing the risk profile by using delta one, leverage or protection overlays are also provided. The execution of strategies with futures and options depends on the clients’ access to organized exchanges and their clearing services.
The Investment Consulting service offers cutting-edge technologies and methodologies for exposure management, breaking down exposure of a portfolio to systematic factors and idiosyncratic components. It introduces sophisticated Monte Carlo-based economic scenario generation hybrid cross-asset framework based on factor analysis and featuring co-dependence of risk factors and tail-risk. This allows for overlays and for expressing optimally specific views by using liquid alternative investments, derivatives, indices, trading strategy indices, ETFs, Delta-one certificates and funds. It includes creation, back-testing and optimization of multi-asset investment strategies and tail-risk hedging solutions. The investment management process is enhanced by extensive use of derivatives as stand-alone strategies or overlays to existing portfolios. Having a clear view on performance attribution allows for reducing (eliminating) undesirable exposures. Capital protection overlays are implemented by using specific rules and the models can be integrated with clients existing IT infrastructure.
Companies can elect whether they just require Appleton Greene for advice and support with the Bronze Client Service, for research and performance analysis with the Silver Client Service, for facilitating departmental workshops with the Gold Client Service, or for complete process planning, development, implementation, management and review, with the Platinum Client Service. Ultimately, there is a service to suit every situation and every budget and clients can elect to either upgrade or downgrade from one service to another as and when required, providing complete flexibility in order to ensure that the right level of support is available over a sustainable period of time, enabling the organization to compensate for any prescriptive or emergent changes relating to: Customer Service; E-business; Finance; Globalization; Human Resources; Information Technology; Legal; Management; Marketing; or Production.
The primary mission of the Investment Consulting service is to produce efficient investment portfolios by aligning investments with institutional investor’s business strategy in order to fulfil the corporate vision for optimum success. This mission is accomplished through collaborative efforts of the investment consultant (Dr. Valchev) and client personnel (portfolio, investment and risk managers, fundamental researchers, technologists and traders). Core emphasis is placed on realizing enterprise benefits through investment management alignment and integration within the broader enterprise business strategy (expanding the investment portfolios to include exposure to new investment opportunities – investments in new geographies, new instrument classes and strategies, all done in an efficient and transparent way). Potential benefits include (but are not limited to) business value, returns on investments and assets (ROI, ROA), improved risk management, total cost of ownership (TCO), top and bottom line financial results, change management, investment management process improvement, customer, investor and employee satisfaction (CSAT, ESAT) and retention.
The vision of the Investment Consulting service is to see clients improving risk and return, attracting more capital and leveraging technology investments for maximum business value returns through optimum service performance. Specifically, our aim is to improve the investment process, by expanding the investment universe and delivering exposure to the desired risk factors in a direct way and enhancing returns. It offers increasing transparency and clear view on return attribution, improving the abilities to express optimally specific investment views and optimizing the risk-management process. The Investment Consulting service allows for implementing portfolio insurance at times of market uncertainties, thus, reducing volatilities of portfolio returns. This insurance can be overlaid against an existing portfolio or a new portfolio can be constructed which may have embedded insurance. One end result is improved monitoring and managing the exposures to risk factors.
Bank Al Jazira
Dr. Valchev was my colleague, working on the Trading and Structuring desk, where he created many structured solutions to support the cross-border businesses of our clients: new structured deposit types, new interest rate derivatives, CDS RAS and improved the design of TARNs (TARFs) with exotic features such as new underlyings, auto-callable, barrier and range-dependent payoffs. In addition, he had a hawk eye on the chance and detected and designed many profitable relative-value derivative trading strategies between the GCC yield curves and the USD yield curve.
It was a great pleasure to work with Dr. Valchev at Emirates NBD. According to my experience with him, Dr. Valchev was the most knowledgeable and experienced quantitative expert in our banks risk department. Thanks to his great technical skills and due to his pro-active management style my team was able to develop a highly efficient work relationship with him and his team. Dr. Valchev validated a series of pricing models and market data models for us in the most professional manner which reduced the time for the model development/implementation process by more than 50%. I wished he would have stayed longer with us instead of moving on with his own company. I can only recommend him – a very valuable man.
Dr. Valchev has an excellent understanding and expertise of financial simulation and valuation models along with a thorough mathematical and analytical foundation. He is also very good in working across teams. When it comes to building risk models, Dr. Valchev has clearly designed cutting edge models to compute exposures of path dependent trades across all asset classes. Dr. Valchev has distinguishing ability to design models and methodologies in credit risk space. I had the pleasure to work with Dr. Valchev as part of the Credit Risk Methodology Group at Deutsche Bank in 2006/2007. Dr. Valchev is a very dedicated professional with a strong theoretical and practical background in Risk Management. These skills, coupled with his strong sense of ethics and professional conduct, make him a very strong candidate and I highly recommend him. Dr. Valchev is a strong risk management professional with deep knowledge of counterparty credit risk specifics and derivatives modelling. He is always looking to the solution without losing the big picture of his sight.
Dr. Valchev has implemented front-office valuation and hedging libraries for fixed income, commodities, interest rate, FX, credit derivatives. These were used both for pre-deal evaluations and post-trade transaction management and, in some special cases, for financial reporting. For many of the large deals, the credit valuation model was an integral part of the development and was used for credit risk hedging by the CVA desk. He implemented complex multi-factor models for valuation of exotic interest rate and commodity options to evaluate them consistently with the yield and commodity curves and volatility surfaces as well as with the assumptions on their future evolutions. These model captured products’ smile/skew risk, forward volatility risk and their exposure to multi-factorness, mean-reversion and correlation. Dr. Valchev also proposed advisory platforms and business development frameworks for private banking and structured retail products, notes and certificates.
More detailed achievements, references and testimonials are confidentially available to clients upon request.
This service is primarily available to the following industry sectors:
Banking & Financial Service
Increasing regulation and competition are decreasing the profit margins in both investment and retail banking. With recent advances in information technologies, processing of information increased and the processes have become more automated and digitalized. It is important to have a clear view on the key drivers of performance and on the exposure to the main risk factors. Financial markets are becoming increasingly globalized, the transaction costs are decreasing and the restrictions to cross-border flows are eliminated. All these trends call for increasingly automated solutions for dataset management and measuring risks and rewards. Investment managers are making decisions very fast and the speed of execution became a major issue. Many complex derivative products are moving to organized exchanges where they are traded more transparently and are cleared and settled. Electronic trading is now becoming dominant and the share of retail traders is increasing. There is a new trend towards using more sophisticated products in the derivatives space. New generation of exotic option products on dividends, volatilities and correlations is emerging.
Insurance companies are divided among several sectors – life, property, casualty, health, and financial. One of the mainstreams in life insurance business is the distribution of retirement savings solutions such as IRAs, mutual funds and brokerage as well as annuities. Annuity retirement products are fast fast-growing areas in the developed markets, where, in the US, insurance companies offer fixed, index-lined, variable- and income annuities, while in the EU are popular unit-linked life insurance products. There is a growing demand for such products, but hedging of investment risks remains a major challenge for the issuers and some companies stopped issuing variable annuities. Life insurance is liability-driven as the insurers take on lapse, longevity, and biometric risks and new regulations are implemented to assure that insurance companies’ assets are sufficient to cover their liabilities. To comply with Solvency II, insurance companies implement complex Monte Carlo simulation engines such as these used previously