Investment Management: Asset Allocation, Portfolio Construction and Dynamic Strategies

3 days
Prague, NH Hotel Prague
  • Overview of Asset Classes and Instruments
  • Asset Pricing Models: CAPM, APT and Multi-Factor Models
  • Diversification: Eggs, Baskets, Umbrellas and Ice Cream
  • Strategic Asset Allocation and Portfolio Construction
  • Quantitative Portfolio Management
  • Tactical Asset Allocation
  • Derivative Strategies for TAA
  • Risk Monitoring and Benchmarking
Course Description
This 3 day training event covers the techniques and methodologies widely deployed within the investment management industry by professionals managing strategic and tactical portfolios through a wide range of traditional and alternative asset classes, across a broad spectrum of securities and instruments. The course will also focus on some of the more practical challenges facing industry practitioners today with the emphasis on developing and deploying realistic solutions including applying alternative approaches to identifying potential returns compared to traditional valuation methods and addressing fat tail risk through active behavioural risk overlays.

Learning Objective
The Investment Management course will give participants a thorough understanding of investment instruments and products, construction of efficient strategic investment portfolios, operation of tactical asset allocation overlay strategies, tools to build active risk overlays and gain an appreciation of current issues faced by investment management professionals and how the industry is responding to these issues.

Although the Investment Management course was devised with professional investment managers, advisers and analysts in mind, its wide-ranging syllabus also offers an excellent guide to investment management generally. For this reason it can also be used as a knowledge-building introduction for those needing to better understand practical application of investment theory and current issues.

Knowledge Pre-requisites:
It is expected that participants will have familiarity with financial services, basic asset classes including equities and bonds and core investment/portfolio management theory.

Classroom style lectures featuring up-to-date and relevant case studies and example.

09.00 - 09.15 Welcome and Introduction

Session 1: The Investment Mandate

  • Investment Objective
  • Investment Strategy & Benchmark
  • Risk Tolerance, Correlations and Loss
  • Eligible Instrument Universe
  • Diversification Constraints
  • Example: Relative vs Absolute Return Mandates

Session 2: Overview of Asset Classes & Instruments

  • Cash: Deposits, CD, CP, Bills
  • Government Cash Bonds, Futures & Options
  • Stock/Common Equity & Stock Options
  • Preferred Stock
  • Corporate Bonds & Derivatives: Vanilla, Convertibles, CDS, CCDS
  • Stock Index EFTs: Index Positive & Negative Trackers, Leveraged Trackers
  • Private Equity GP/LP
  • Real Estate REIT & Investment Trusts
  • Mutual Funds & UCITS
  • Commodity ETFs, Indices & Futures
  • Hedge Fund Indices, Offshore/UCITS Funds & Managed Accounts
  • Managed Futures Funds, Indices & Managed Accounts

12.00 - 13.00 Lunch

Session 3: Asset Pricing Models: CAPM & APT

  • Opportunity Set & Efficient Frontier
  • CAPM, APT & Multi-Factor Models
  • Factor Analysis & Principal Component Analysis
  • Case Study: Factor Identification, Causality & Missing Factors

Session 4: Diversification: Eggs, Baskets, Umbrellas & Ice Cream

  • Diversifiable & Non-Diversifiable Risk
  • Effect of Asset Correlations & Volatility on Portfolio Volatility
  • Stability of the Variance-Covariance Matrix
  • Case Study: Diversification by Geography & Asset Class

Session 5: Forecasting Asset Class Returns

  • Valuation Ratios: Price/Earnings, Reverse Yield Ratio, Earnings Yield Ratio
  • Equity Risk Premium
  • Dividend Discount Model
  • Inter-Market & Feedback Models
  • Case Study: Utilising Stepwise Regression to Build Multi-Factor Forecasts

Day Two

Session 6: Strategic Asset Allocation & Portfolio Construction

  • Investment Universe: Equities, Bonds, Credit, Real Estate, Private Equity, Commodities, Hedge Funds, Managed Futures
  • Projected Long Term Returns: Asset Classes, Factors & Tilts
  • Projecting the Variance-Covariance Matrix
  • Portfolio Optimisation: Markowitz
  • Incorporating Higher Moments: CVaR, Drawdown
  • Identifying the Optimal Portfolio
  • Examples: Balanced, Endowment Models & Core-Satellite

Session 7: Stock Indexation Strategies

  • The Case for Indexation vs Active Management
  • Indexing the Core Strategic OECD Strategic Equity Exposure
  • Using Stock Index Futures & ETFs
  • Indexation Strategies: Full Replication, Optimisation, Factor Optimisation, Stratified Sampling

Session 8: Equity Investment Strategies & Quantitative Portfolio Management

  • Building Multi-Factor Models
  • Identifying Potential Factors
  • Expert Rule Based Systems

12.00 - 13.00 Lunch

Session 9: Tactical Asset Allocation

  • Augmenting Strategic Returns with Tactical Alpha
  • Tactical Investment Horizon Equilibrium Breakdown & Crowd Behaviour
  • Variety of Approaches: Long/Short Gamma, Fundamental/Technical, Systematic/Discretionary
  • Instruments Employed: Futures, Options, SWAPs
  • Tactical Investment Strategies: Trend following, Pattern Recognition, Global Macro, CPPI, Behavioural Investment Systems
  • Case Study: Building a Behavioural S&P500 Futures TAA Programme using an Expert Rule Based Approach

Session 10: Emerging & Frontier Markets

  • Diversification Benefit of Lower Correlations
  • Higher Growth Potential
  • Key Considerations: Liquidity & Capacity
  • Geopolitical Risk
  • Implementation: Active Management, Index Tilts or Passive Indexation
  • Manager Selection & Monitoring

Session 11: Derivative Strategies for TAA

  • Instruments: Listed Futures & Options
  • Asset Classes: Global Stock Indices, Fixed Income, FX, Commodities
  • Using Futures to Implement Directional TAA
  • Using Options Implied Volatility as Another Source of Return
  • Refining Implementation of TAA through Options Strategies
  • Optimising Collateral Management: Single Vehicle Margining & Minimising Counterparty Risks

Day Three

Session 12: Corporate Credit Strategies

  • Investment Grade: Yield Surfaces & Comparables
  • High Yield Fixed Income: Bond/Equity Hybrids
  • Using CDS for Tactical Credit Exposure & Hedging
  • Yield Enhancement & Tail Risk Strategies using CCDS

Session 13: Government Bond Strategies

  • Directional Strategies: Duration
  • Relative Value Sovereign Yields
  • Exploiting Yield Curve Strategies with Futures & Options: Shifts & Twists
  • Vega-theta Plays Using Options

Session 14: Risk Measurement: Building a Universal Risk Model

  • VaR, CVar, Drawdown
  • Scenario Analysis
  • Stress test
  • Greeks
  • Case Study: Universal Risk Model

12.00 - 13.00 Lunch

Session 15: Active Risk Management Strategies vs Hedging

  • Fungible Hedging Strategies using Futures, Options, CDS & CCDS
  • Inter-Market Proxy Hedging: Risk On/Risk Off Strategies
  • CPPI & Contingent Immunisation
  • Case Study: Building Active Risk Overlays using a Behavioural Expert Rule Based Approach

Session 16: Implementation

  • Liability Driven Investments
  • Alpha Transport
  • Active Surplus Management

Session 17: Monitoring & Benchmarking

  • Identifying Suitable Benchmarks
  • Peer Group Analysis
  • Sources of Returns: Stock Selection, Asset Allocation, Market Timing
  • Monitoring Investment Guidelines, Constraints and Limits
  • Style Drift
  • The Role of the Independent Consultant

Evaluation and Termination of the Course

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