Discussion Papers and Research Reports

By the Numbers: The Quest for Performance
The Fletcher School at Tufts University and State Street’s Center for Applied Research have jointly released timely new research on the investment behavior and performance of institutional investors as we pass the 5 year mark since the collapse of Lehman and the onset of the Global Financial Crisis.  The study - “By the Numbers: The Quest for Performance” - is the first in a series of joint publications to be released as part of a collaborative initiative, focusing on the most pressing issues of the global institutional investor community. Using empirical analysis, supplemented by survey reviews and manager interviews, the study isolates critical factors driving innovation in meeting the performance challenges of investors in the post-crisis world.  The research traces the investment patterns of large institutional investors across an extensive asset profile diversified by geography and distinguished by a broad use of alternative assets and strategies.  It finds that these patterns have expanded since the global financial crisis and are accompanied by heightened concerns about return volatility, a structural convergence of correlations between asset classes and the real risk of tail events.  The study’s prescriptive conclusions have broad applicability across variety of asset owners and will be of interest not only to large institutions, but also foundations, small endowments, family offices and even high net worth individuals.

The Digital Revolution and the Destruction of Second Tier Banks. Monitise (MONI LN) is the Future. Schulte-Research, 2013

The Fletcher School Leadership Program for Financial Inclusion: Participant Policy Memos
These policy memoranda were prepared by participants in the 2011 Fletcher School Leadership Program for Financial Inclusion, which is an innovative training initiative designed for banking regulators and policymakers from emerging and frontier markets to promote and further develop their work on policy and regulation in financial services for the poor. The three-part program is administered by CEME and includes: a two-week training session focused on key content issues in financial inclusion and the relevant skills needed by regulators to effectively promote their policy objectives; a remote period to research, write, and perfect original policy memos pertinent to a timely in-country issue in financial inclusion; and a final working session at an international conference hosted by the Alliance for Financial Inclusion. Program Fellows included nine regulators from eight countries: Ghana, Indonesia, Kenya, Mexico, Namibia, Peru, the Philippines, and Tanzania. Please contact CEME@tufts.edu if you would like to request a hard copy of this publication.


Inclusive Finance-Focused Issue of MIT’s Innovations Journal 
As an outcome of CEME’s Fletcher School Leadership Program for Financial Inclusion, a special issue of Innovations: Technology, Governance, Globalization (MIT Press) released in February 2012 features policy memos written by four of the central banker program participants and a lead article by CEME Senior Fellow Nicholas Sullivan. The issue, focused on key topics in the field of inclusive finance, explores the role of regulators as change agents, the consideration of mobile money as a utility, and the impact of mobile money on financial inclusion.

Portfolio Analytics and Risk Management Practices of MFIs: A Global Survey
This report, based on surveys conducted on more than 60 microfinance institutions (MFIs), seeks to gain better understanding of the portfolio analytics and portfolio risk management practices that these MFIs engage in. This report is meant to further the microRisk Alliance’s mission of engaging microfinance risk management practitioners in a collaborative learning process to document and share findings on the risks facing the microfinance industry and help identify effective and replicable risk management practices and innovations. The report was produced by TriLinc Global, LLC., in association with United States Agency for International Development (USAID) and in collaboration with the Center for Emerging Markets Enterprises (CEME) at the Fletcher School of Law and Diplomacy at Tufts University, under the aegis of the microRisk Alliance (MRA).

Frontier Markets: Punching Below their Weight? A Risk Parity Perspective on Asset Allocation
Jorge Antonio Chan-Lau, CEME Fellow and Senior Economist at the International Monetary Fund, explores how investors could benefit from a frontier markets allocation well in excess of the market weight of the asset class.

What Can UNICEF Teach Unilever About Succeeding in Emerging Markets?
Co-authored in November 2011 by Peter Uvin, Fletcher Academic Dean, Henry J. Leir Professor of International Humanitarian Studies and Director of the Institute for Human Security, and Bhaskar Chakravorti, Fletcher Senior Associate Dean for International Business and Finance, Executive Director of the Institute for Business in the Global Context and Professor of Practice in International Business, this discussion paper explores the degree to which the lessons that have been learned by the development community – which has been in emerging market regions for decades – can be transferred to the business community looking to expand in these locations. Also see the Master of International Business Program's 10 Questions that test your contextual intelligence for related interviews.

Sovereign Wealth Funds and the Privatization of State Assets: Toward a Life-Cycle Framework
SWFI Senior Fellow Patrick Schena, Fletcher School professor Jonathan Brookfield, and Fletcher MIB candidate Ravi Shankar Chaturvedi contributed this piece to the Monitor Group's 2011 report on sovereign wealth funds.

Is Grandma Ready for This? Mexico Kills Cash-based Pensions and Welfare by 2012
Co-authored by The Fletcher School and Bankable Frontier Associates, researchers explore both the promise and the challenges posed by the Mexican Government’s decision to make all government to person disbursements electronic by December 2012. This case study was presented as part of the April 2011 Fletcher conference Killing Cash: Pros and Cons of Mobile Money for the World's Poor – a Look at Both Sides of the Coin
. Please contact CEME@tufts.edu if you would like to request a hard copy of this publication.

Food-Fuel Price Dynamics: Developing a Framework for Strategic Investments
Jointly produced with Oliver Wyman’s Corporate Risk practice, this report investigates potential causes for the changing relationships among commodity group prices driven (or perceived to be driven) by the emergence of biofuels. Based on a rigorous data analysis and interviews with key industry practitioners, the report aims to develop a thorough understanding of commodities pricing, with the goal of enabling companies with different positions along the value chain to develop perspectives on how to manage risks or take advantage of this dynamic environment.

Savings and Chance: Inclusive Finance and the Haitian Lottery
The inspiration for the “Savings and Chance” study was the very visible and widespread use of the Haitian lottery system. A team from the Center for Emerging Market Enterprises (CEME) explored several theories connecting the presence of savings groups to gambling practices. The CEME team members analyzed social and financial gains or losses from these connections, largely in rural Haiti. The study also explored young people, their perceptions of money and their opportunities for financial education. Members of the team reviewed literature beginning in June 2009, interviewed Haitian immigrants in June 2009, and visited Haiti in July 2009 and January 2010 to conduct personal interviews. The results of the team’s findings are accessible via the above link. CEME encourages study reviewers to forward any comments and/or observations to ceme@tufts.edu.

Key International Issues for Sovereign Wealth Funds
This report, a product of CEME’s Sovereign Wealth Fund Initiative (SWFI), is based on discussions with SWF senior decision makers and country authorities from the Gulf Cooperation Countries, Latin America, Singapore, and several industrial countries. From these discussions, SWFI researchers identified and analyzed key international issues from the SWF point of view.

The Sovereign Wealth Fund Initiative in the Context of the International Working Group of Sovereign Wealth Funds
This note describes the role of the CEME’s Sovereign Wealth Fund Initiative (SWFI) in the context of the International Forum and the Santiago Principles from which both take their roots. SWFI provides senior decision-makers with a value-neutral venue and world-class resources to identify key international issues and approaches for better management of external relationships.

FX-Adjusted Local Currency Spreads (March 2009, CEME FELLOW RESEARCH PAPER VOLUME 1.2)  
By Jorge A. Chan-Lau, CEME Fellow 
Changes in domestic and international economic conditions affect partly the trend and volatility of the exchange rate as well as the operating conditions of firms and corporations. Therefore, the common practice of adding up the default risk and currency risk premia could overstate the risk compensation received by investors. Modern approaches to model default risk that incorporate foreign exchange effects while promising may be difficult to implement due to data limitations. This paper addresses the needs of practitioners by presenting a simple rule of thumb, based on the joint dynamics of exchange rate changes and the spreads of credit default swaps, to convert foreign-currency denominated spreads to local currency-denominated spreads adjusting for currency risk. The rule of thumb, while simple, captures the nonlinear dependence between default risk and currency risk, and could be very useful for investors in local currency instruments.

Assessing the Risk of Compound Debt Schemes: An Asset-Liability Compound Option Approach (March 2009, CEME FELLOW RESEARCH PAPER VOLUME 1.1) 

By Jorge A. Chan-Lau, CEME Fellow and André O. Santos 
This paper describes a novel approach to asset-liability management of public debt schemes, the asset-liability compound option approach. This approach integrates standard asset-liability analysis with the option approach to model contingent liabilities. Furthermore, the paper also introduces a new measure for debt repayment capacity that is consistent with the definitions of the government balance sheet and net worth as presented in the 2001 IMF Government Finance Statistics.

The Future of Risk Management in Microfinance: Perspectives from Practitioners in the U.S. Financial Markets”—a monograph by Oliver Wyman and CEME (Summer 2008)

Oliver Wyman – with the support of CEME – has tracked microfinance along the trajectory of the U.S. mortgage market. Although the microcredit industry operates in an environment with different products and customers, it could evolve to mirror the U.S. mortgage market in many ways. This potential evolution will introduce greater complexity, more dependence on capital markets, a broader range of products and more balance-sheet intricacy. With critical safeguards in place and preservation of its unique risk management paradigms, microfinance need not transform into today’s subprime crisis; rather, its transformations can align with the sector’s original promise.

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