Investment Management Master Class
Duration:
3 days
3 days
Location:
Prague, Mövenpick Hotel
Prague, Mövenpick Hotel
- Strategic and Dynamic Asset Allocation
- Constructing Optimal Portfolios
- Indexation and Core-Satellite Investing
- Managing Surplus Risk
- Liability Driven Investing
- Risk Budgeting and Portable Alpha
- Absolute Return Strategies
- Measuring Risk-Adjusted Performance
The purpose of this seminar is to give you a good understanding of the state-of-the-art methods and tools for managing investment portfolios.
First we discuss how the overall investment objectives and policies should be formulated within a general asset liability framework and how these policies should be reflected in the choice of benchmarks and in the delegation of relative or absolute return mandates.
We then take a closer look at the various traditional and alternative asset classes and explain how funds can be allocated to these asset classes using the optimization techniques of modern and post-modern portfolio theories. We also explain how dynamic asset allocation strategies such as “constant mix”, “constant proportion portfolio insurance”, “contingent immunization” and “option-based portfolio insurance” can be implemented to obtain the optimal risk-return profile, or to manage surplus risk, under various market conditions.
Further, we explain how “indexation” used for “passive” management and how this strategy can be enhanced through a core/satellite approach that leaves room for active management strategies to add returns beyond the benchmark indices.
After that, we explain how to manage “surplus risk” and how the increasingly popular “Risk Budgeting” technique can be used to allocate “risk units” to optimize the risk-adjusted returns across managers and asset classes. We also explain the concept of “liability driven investing” and how derivates like futures, swaps and options are used to implement overlay programs to separately manage currency risk and other risks, to “port” alphas between markets, or to pursue “market-neutral”, “relative value” and other absolute return investment strategies.
Finally, we present and discuss methods for calculating, interpreting and evaluating portfolio performance on an absolute and on a risk-adjusted basis. We explain measures such as “Time-Weighted Return”, “Sharpe Ratio”, “Information Ratio”, and “Sortino Ratio”, and we discuss their suitability in measuring the performance of investments with different risk-return characteristics.
First we discuss how the overall investment objectives and policies should be formulated within a general asset liability framework and how these policies should be reflected in the choice of benchmarks and in the delegation of relative or absolute return mandates.
We then take a closer look at the various traditional and alternative asset classes and explain how funds can be allocated to these asset classes using the optimization techniques of modern and post-modern portfolio theories. We also explain how dynamic asset allocation strategies such as “constant mix”, “constant proportion portfolio insurance”, “contingent immunization” and “option-based portfolio insurance” can be implemented to obtain the optimal risk-return profile, or to manage surplus risk, under various market conditions.
Further, we explain how “indexation” used for “passive” management and how this strategy can be enhanced through a core/satellite approach that leaves room for active management strategies to add returns beyond the benchmark indices.
After that, we explain how to manage “surplus risk” and how the increasingly popular “Risk Budgeting” technique can be used to allocate “risk units” to optimize the risk-adjusted returns across managers and asset classes. We also explain the concept of “liability driven investing” and how derivates like futures, swaps and options are used to implement overlay programs to separately manage currency risk and other risks, to “port” alphas between markets, or to pursue “market-neutral”, “relative value” and other absolute return investment strategies.
Finally, we present and discuss methods for calculating, interpreting and evaluating portfolio performance on an absolute and on a risk-adjusted basis. We explain measures such as “Time-Weighted Return”, “Sharpe Ratio”, “Information Ratio”, and “Sortino Ratio”, and we discuss their suitability in measuring the performance of investments with different risk-return characteristics.
13.00 - 16.30 Strategic Asset Allocation and Portfolio Construction
- ”Classic” Mean/Variance Optimization
- Risk/return forecasting
- Shortfall-optimization
- Lower Partial Moments optimization
- Dealing with the Problems in the Classic Optimization Approach
- Time-varying volatility
- Illiquid investments
- Life cycle investing
- Portfolio resampling
- Bayesian Analysis and Portfolio Choice
- Resampling the Efficient Frontier
- Scenario Optimization
- Exercises
Day Two
09.00 - 09.15 Recap
09.15 - 12.00 Dynamic Asset Allocation Strategies
- Objectives of Dynamic Asset Allocation
- Presentation and Evaluation of Dynamic Strategies
- Buy-and-hold
- Constant mix
- Constant proportion
- Option-based portfolio insurance
- Exercises
Indexation and Core-Satellite Investing
- Traditional Benchmark-relative Optimization
- Multiple Benchmark Optimization
- Tracking Error Efficiency vs. Mean-Variance Efficiency
- The Core-Satellite Approach to Investing
- Building a low-risk, low-cost core
- Pursuing higher returns with active funds and individual positions
- Exercises
12.00 - 13.00 Lunch
13.00 - 16.30 Risk Budgeting, Surplus Risk Management and Liability Driven Investing
- Risk Allocation vs. Asset Allocation
- Active Risk vs. Passive Risk
- The Concept of “Portable Alpha”
- Constructing Optimal Portfolios under Risk Budgeting Constraints
- Defining objective function and constraints
- Maximizing the Information Ratio
- Surplus Risk Management
- Defining the Surplus in an ALM Framework
- Managing “Surplus-at-Risk”
- Liability Driven Investing
- Exercises
Day Three
09.00 - 09.15 Recap
09.15 - 12.00 Using Derivatives for Asset Management
- Derivatives and their Usefulness in Asset Management
- Portfolio Management with Financial Futures
- Minimizing cash drag through synthetic indexation strategies
- Exploiting pricing inefficiencies in the cash/futures relationship
- “Tactical allocation” with futures
- “Sector-switching” with futures
- Portfolio Management with Options
- Securing minimum portfolio value
- Enhancing portfolio return/reducing risk through covered call strategies
- Management of shortfall-risk
- Using Swaps and “Structured Products”
- Using Derivatives to Create “Overlays” and “Absolute Return” Investments
- Exercises
12.00 - 13.00 Lunch
13.00 - 16.00 Performance Measurement and Attribution Analysis
- Why Measure Performance?
- Global Performance Reporting Standards
- Measuring return
- IRR, MWR, TWR
- Risk-Adjusted Performance Measures
- “Classic” (Jensen, Treynor, Sharpe)
- Measures of “shortfall” risk (LPM)
- Tracking error, information ratio
- Problems in Comparing Performance for between Absolute and Relative Investment Strategies
- Performance Attribution & Performance Reporting
- Exercises
Evaluation and Termination of the Seminar
