Pascal Gantenbein

Predicting uncertainty: the impact of risk measurement on value of real estate portfolios

Abstract This paper presents a theoretical framework for an assessment and valuation of real estate assets and funds, based on modern stochastic discounted cash flow (DCF) models, which accurately captures the nature of related risks. We show that an accurate risk-adjusted valuation is particularly difficult for real estate investments, due to practical limits to diversification and difficulties in approximating total risk with systematic risk. We develop a risk assessment framework that includes idiosyncratic risk but focuses on insolvency risk related to a specific cash flow profile. We also present a methodology of rating this risk, using forecasts and simulations. We conclude that simulation techniques are a valuable tool in property risk assessment. Further, we show that cost of capital and value of assets depend on diversification of specific risks, investors can achieve in their portfolios.

Corporate Social Responsibility and the Board's Role in Switzerland

Corporate social responsibility (CSR) is a way of conducting business that integrates the interests of all stakeholders, not only those of shareholders. Stakeholders include customers, employees, suppliers, distributors, regulators, politicians, the state, the ecology, and the community. Thereby, firms explicitly accept their responsibility to society as a whole. In consequence, CSR extends the spectrum of traditional corporate governance which aims to reduce wrong managerial behavior that counters shareholders’ interests arising from the principal-agent problem. In this agency context, shareholders have to be protected from managers who may use investor’s money for purposes other than maximizing shareholder return. For instance, managers may waste financial resources on unprofitable projects.

Volatility as an Asset Class - A Valuable Portfolio Diversifier in Volatile Times?

This article examines the feasibility of using volatility as an asset class to diversify equity portfolios. Especially exchange-traded volatility products targeted at retail investors promise convenient but effective equity hedging. This study looks under the surface of these seemingly simple products, and backtests them in extensive portfolio diversification studies. We apply a wide range of test settings, including different volatility weights, product maturities, time periods, rebalancing patterns, and dynamic allocation strategies while adopting the perspective of U.S. equity investors over the volatile period from 2006 to 2011. We find that volatility exposures of up to 10%, implemented through mid-term volatility products or with a straightforward dynamic allocation strategy based on detecting trends in implied volatility, would have benefited equity portfolios in most scenarios.

Equity markets and the performance of hedge funds: how stable is persistence?

We investigate the performance of hedge funds in bull and bear equity markets. Covering the period from January 1994 to December 2008, we find that each bull and bear market period has its dominant independent variables. Furthermore, the level of performance persistence is not significantly related to equity market conditions. The analyses show that hedge fund performance persistence is stronger in more recent sub-periods than in earlier sub-periods. In bullish as well as in bearish equity markets, performance persistence is driven by both constant winners and losers. Moreover, both live and dead funds exhibit statistically significant levels of performance persistence.

The role of investors for early-stage companies

Investors often contribute in many ways to the growth and profitability of early-stage companies. However, the benefit of different types of support beyond the provision of capital is largely unclear. Based on a dataset comprising information about 967 start-up companies in the Swiss market and a survey among these yielding 214 responses, this paper empirically examines the role of investors in the early-stage development of companies. We find that the provision of contacts and access to networks as well as coaching and consulting are the most important types of support provided by investors in addition to financing. Further, critical factors include the active participation of investors on the board of directors, investor input in shaping the corporate strategy and organisation, and the overall investor expertise and experience. Conversely, the provision of infrastructure is of lesser importance. Nevertheless, 15% of the entrepreneurs reported that they received no support in addition to funding.

Unternehmerisches Finanzmanagement - Meilensteine der Entwicklung

This article structures the core topics of what is known today as “Corporate Financial Management”. This key discipline of business has evolved from corporate financing, but today comprises a much richer spectrum of topics. Corporate valuation on the one hand and corporate financing on the other still represent the backbone of the field. However, a number of further topic areas has grown over the years such as risk management, corporate governance, and investor relations. The analysis at hand focuses on the milestones and key drivers of this discipline’s development since the early 20th century. Central milestones are identified as the inclusion of capital markets in research on investment and financing, the notion of replication for the purpose of valuation, and the consideration of different types of asymmetric information. All these findings and paradigms have contributed to a widening of further progress both in research and corporate practice. Examples include research on conglomerates and shareholder value as well as on announcement effects and contract theory. Future developments can be expected in the areas of corporate social responsibility, entrepreneurial finance, insurance risk and pension management as well as in financial disintermediation and crowd solutions. Further challenges may arise from the automation in valuation and financing services.

Impact of Advance Notice Periods on the Performance Persistence of Hedge Funds

This paper examines the impact of the advance notice period on hedge fund performance persistence in investors’ portfolios. As investors in hedge funds face several trading restrictions related to the funds’ common investment terms and conditions, it is hypothesized that the advance notice period generates illiquidity for investors and impairs their ability to benefit from performance persistence in hedge funds. Using a sample of 4,788 hedge funds over a period from 1994 to 2008 and contingency table based standard methodology for returns and Sharpe ratios, the results suggest that accounting for individual funds’ advance notice periods has a negative impact on the performance persistence of hedge funds. The proportion of significantly persistent funds declines when incorporating the advance notice period, especially for short time horizons. Furthermore, a considerable part of hedge fund performance persistence is related to asset class-specific terms and conditions, reducing the amount of short-term performance persistence in practice.

Venture Capital Investments for Life Sciences Start-ups in Switzerland.

Despite its economic and technological importance, the Swiss life sciences sector faces severe challenges in attracting enough venture capital for its own development. Although biotechnology and medical technology have been the most important areas of venture financing from 1999 through 2012 according to our own data, average investment volumes nevertheless remain on a low level of only 0.05 percent of Swiss GDP. After 2008, there was a pronounced shift away from early-stage financing. While business angels still play an important role at the early stage, venture capitalists are the most important investor type by volumes having their main focus on expansion financing. The industry faces predominant challenges in securing capital availability for entrepreneurs, in transforming the highly skewed and back-loaded payoff profile of investments into a more stable return stream, and in defining appropriate business and collaboration models.

Optimale Immobilieninvestments für Versicherungen

Versicherungsseitige Investitionen in Immobilien zeichnen sich durch drei Besonderheiten aus: Erstens fuhrt die Berucksichtigung der spezifischen langfristigen Verpflichtungen im Rahmen einer Surplus-Optimierung zu bedeutend kleineren Immobilienanteilen als eine rein aktivseitige Betrachtung. Je nach Einsatz derivativer Instrumente zur Absicherung der passivseitigen Zinsanderungsrisiken verandert sich auch der aktivseitige optimale Immobilienanteil. Zweitens bieten Immobilien keinen perfekten Inflationsschutz, was bei Versicherungsleistungen mit Teuerungsanpassung bedeutsam ist. Und drittens konnen Immobilien auch betrieblich genutzt werden. Obwohl gewichtige Argumente fur eine Auslagerung selbst genutzter Immobilienbestande sprechen, erweist sich diese nicht in allen Fallen als die optimale Losung.

Protection-Management bei variabler Korrelation

Innerhalb des Asset-Managements haben die Asset-Klassen Aktien und Bonds grose Bedeutung. Die Korrelation der Renditen dieser beider Asset-Klassen ist jedoch weder im Verlauf der Zeit konstant, noch stimmen die Semi-Korrelationen in Marktentwicklungen nach oben beziehungsweise nach unten uberein. Diese neueren empirischen Befunde konnen fur eine auf Schutz bedachte Asset-Allokation genutzt werden. Folgende vier Punkte sind fur ein solches Protection-Management verwendbar: Die Risikopramien verandern sich zusammen mit den Korrelationen. In fallenden Aktienmarkten kommt es zu einem fur den Investor vorteilhaften Decoupling. Der Beitrag der internationalen Diversifikation ist bei Bonds groser als bei Aktien. International diversifizierte Bonds bieten auf Grund der tieferen Korrelationen untereinander in Barenmarkten einen starkeren Schutz als Aktien. Fur die Asset-Allokation hat die Inflationsrate auf die Korrelation der Renditen zwischen Aktien und Bonds einen signifikanten Einfluss.