TITLE:
Risk Budgeting: A Tactical Asset Allocation Approach for Retirement Reserve Funds in Morocco
AUTHORS:
Moulay Slimane Kabiri, Cherif El Msiyah, Otheman Nouisser
KEYWORDS:
Risk Budgeting, Strategic Asset Allocation, Tactical Asset Allocation, Value at Risk, Expected Shortfall, Retirement Reserve Funds
JOURNAL NAME:
Journal of Financial Risk Management,
Vol.12 No.2,
June
29,
2023
ABSTRACT: This paper aims to suggest a risk budgeting approach that can enhance the asset
allocation process of retirement reserve funds. The approach takes into
consideration the importance of incorporating risk into tactical decisions to
improve fund performance. The significance of this study lies in the need to
adopt a strong approach that enables asset managers to outperform strategic
asset allocation while avoiding excessive risk. The article proposes a
methodology for measuring and allocating market risk in investment decisions,
through the computation and decomposition of Value at Risk and Expected
Shortfall. Additionally, it introduces a novel scientific method of using
Expected Shortfall and its decomposition into marginal units to guide short- term tactical decision-making.