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Inhaltsverzeichnis

Frontmatter

1. Introduction

In recent decades in finance and particularly in asset allocation quantitative methods gained considerably in importance. This trend is fostered by the rising processing power of computers. The impact of those quantitative approaches on investment decisions is controversial. Irrespective of numerous exceptionally successful applications for example in portfolio theory, misleading quantitative models also inspired the securitization of debt obligations and the underestimation of risks. The blind reliance on quantitative models has turned out to be inadequate.
Philipp M. Becker

2. Asset Allocation Framework

Asset allocation is the decision process of allocating a portfolio to several considered asset classes. Furthermore, it also labels the resulting weighting. Hence, asset allocation is a decision-making process leading to a customised portfolio.
Philipp M. Becker

3. Scenario Approach in Asset Allocation

Strategic decisions in private, public and non-profit sectors are based on expectations regarding future developments. Therefore, the creation of strategic concepts depends on certain assumptions. Scenario planning is a powerful tool that can improve the quality of such strategic long-term decision making.
Philipp M. Becker

4. Microfinance

Microfinance has been a success story over past decades. Nevertheless, core elements of today’s microfinance framework have been used for centuries. In Ireland, the author Dean Jonathan Swift initiated entities called “loan funds”. These funds accommodated microcredits to entrepreneurs starting in 1720. About one hundred years later, the government established a statutory basis resulting in a boom of “loan funds”. A second example is the German “Sparkassen” and cooperative banking system. The first “Sparkasse” was established 1778 in Hamburg. In addition to saving deposits, services included loans for businesses and farmers. In 1846, Friedrich Wilhelm Raiffeisen and Hermann Schulze-Delitzsch founded cooperatives focusing on saving and lending deposits for small businesses and farmers. All three mentioned German banking institutions are major retail banks today: “Sparkassen”, “Raiffeisen” and “Volksbanken”.
Philipp M. Becker

5. Scenario Process Microfinance

In this chapter the scenario process microfinance is outlined. This process was set up to analyse the methodology in general and the effects of microfinance in asset allocation specifically for this study. The author organised this scenario analysis with experts from scenario analysis, microfinance, asset allocation and emerging markets. The process was generously backed by the Asset Allocation and Research department of LGT Capital Management.
Philipp M. Becker

6. Asset Allocation Model

In this chapter, an asset allocation model is derived. Firstly, an optimization including several asset classes is performed. Secondly, microfinance debt is introduced into the asset allocation framework with input parameters derived from a quantitative analysis of the past. Thirdly, the qualitative assessment of the scenario process microfinance provides forward-looking return, risk and correlation estimates for the asset allocation framework. Finally, the results are compared and microfinance investment advices for different investor types proposed.
Philipp M. Becker

7. Conclusion

Microfinance is an interesting asset class with a double bottom line. Social as well as financial returns can be generated and therefore fit in today’s time as many institutional and private investors seek for sustainable investments. Up to now, a single digit billion market size indicates that the market is not mature. However, firstly it is growing tremendously. Secondly, for strategic asset allocation purposes also small asset categories can be considered and emerge with investors’ money. A perfect example for this is the cat bond market with about USD 16 billion currently outstanding.
Philipp M. Becker

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