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About the course
Learn best practices on asset allocation, portfolio construction & style management strategies.
This 4-day course is designed to enable delegates to:
- Understand how to design robust asset allocation models for all market conditions
- Build and maintain optimal portfolio’s based on investor needs
- Analyse the key features, advantages and risks of a broad range of asset classes and their performance in different market conditions
- Recognise different approaches to identifying and capturing alpha
- Gain competitive advantage from understanding behavioural biases and how to manage them
- Understand the theoretical and practical issues in connection with multi asset class investing
The programme objective is to review developments and best practices within the industry focusing on asset allocation, portfolio construction, style management strategies, performance measurement and popular thematic trends.
The program is designed for delegates with a knowledge of the fundamentals of modern portfolio theory, asset allocation theory, equity analysis and portfolio construction techniques.
The workshop is designed to be interactive drawing on the knowledge and experiences of the trainer and participants. The trainer will explore best practices across the industry using current industry research, reports, analysis and case studies. Participants will be encouraged to apply the best practices to their own markets and businesses.
Introductions and welcome
An overview of trends within the industry
- Global trends in the asset management industry
- Profit dynamics
- Developments in product design and development (ETF’s, Smart Beta & outcome orientated funds)
- The passive vs. active debate – 'redefining active management'
- Separation of alpha and beta
- The benefits of a structured wealth management approach
- Open architecture and multi manager approaches
- Changes in investor behaviour & preferences
- A review of current “thematic” approaches
The 'theoretical' backdrop – tools and concepts
- Modern portfolio theory and the efficient market hypothesis revisited
- Portfolio diversification and performance
- Flaws in the 'efficient frontier' framework
- Asset and portfolio risk and returns
- Exploring risk – the investment professionals perspective
- Exploring risk – the investors perspective(s)
- Utility and the minimum acceptable return (MAR)
- The impact of economic cycles
Case study: The case for dynamic asset allocation
Understanding asset allocation
- Overview of the process
- Different approaches to asset allocation
- The risks and rewards of asset allocation in different market cycles
- Principal protection and principal growth assets
- The effects of inflation on purchasing power
- The Investment policy statement
Constructing an Analytical Framework - Market cycle – defining the capital market opportunity - Investor satisfaction - Phases and cycles - Strategy implementation
Estimating expected returns
Matching asset classes with wealth levels and income needs
Asset and portfolio risk
Understanding and explaining risk adjusted returns
A comparison of the different approaches to asset allocation - Strategic - Tactical - Dynamic - Integrated
Core / Satellite approaches
Tactical asset allocation using derivatives
Case study: the ‘road to optimality’ and the cost of getting there. Building and maintaining portfolio solutions for clients.
Rebalancing and reallocation
- Principles and Scope
- Approaches to rebalancing
- Advantages and disadvantages
- Managing ‘drift’ in the portfolio and ‘maverick’ risk
- Relative performance
- Critical success factors
- Special considerations when dealing with concentrated positions
Building the equity allocation
- Characteristics of a successful investment process
- Equity analysis
- Valuation approaches
- Market segmentation and weighting decisions
- Manager and style selection
- Style diversification - an impossible challenge?
- Selecting the benchmark
- Sources of alpha in equity portfolios
- Technical analysis - tools and techniques
Asset allocation and other portfolio construction disciplines
- Strategic principles
- Style and sector selection
- Region and country selection
- Industry and Security selection
- Manager selection
- Information ratios for different investment styles
- Currency selection and currency overlay
- Market timing
- Decision points in implementation strategy
Case study: Large Cap Growth Alpha thesis
The search for 'alpha' and the importance of information ratios
- Defining alpha
- Sources of alpha
- Portable alpha
- Alpha generation and manager skill
- The information ratio and coefficient
- The fundamental law of active management
- The emergence of SMART Beta
Performance Measurement and Attribution
Individual investor behaviour
- Introduction - What is behavioural finance?
- Decision theory
- Factors impacting individual asset allocation decisions
- The significance of 'asset locations'
- Goal based asset allocation
- Comparison of expected utility, prospect theory and mean variance analysis
- Individual investor behaviour characteristics
- What can we learn from 'market history'?
- The cycle of 'emotion'
- Identifying patterns of irrationality
- Risk profiling – dealing with behavioural bias
- Reacting to client irrationality
- Moderate or adapt the asset allocation?
- Summary of implications for portfolio design
- Case study: examining patterns of irrationality and the impact on portfolio construction
Asset class characteristics
- Asset class descriptions and distinguishing qualities
- Evaluating Asset Classes
- Rates of return
- Forecasting expected returns
Integrating alternative assets with 'traditional' asset classes
- Overview of skill-based investing
- The growth in alternative strategies
- Creating a need for alternative investments among traditional investors
- Performance characteristics of alternative investments
- Performance benchmarks for alternative investments
- Potential problems in moving to a multi asset class approach
Case study: The Yale model.
Building the Fixed Income Allocation
- Type of bond
- Type of issuer
- Risks associated with fixed income
- Emerging Market Fixed income
- Hedge ratio
- Asset SWAP’s
- Yield components
- Duration hedging
- Fixed income attribution
Case Study: Protecting investors in a rising rate environment. The end of a 30 year “bull” run?
- The key attributes of hedge funds
- The case for investing in hedge funds
- An overview of the trading techniques and tactics - understanding short selling, leverage and derivatives
Hedge fund styles and strategies - Event driven – opportunistic situations - Relative value / arbitrage – exploit small pricing anomalies and market inefficiencies - Directional / trading / global macro – trends and directional bets - Long / short strategies - Hybrid funds – a blend of strategies, styles and technique
Evaluating Hedge Funds – risk and performance
The future of Hedge Funds
Case study: long / short and market neutral strategies.
- Measuring risk
- Types of risk
- The key ratios and measures
- Skewness and Kurtosis
Case Study: The role of ETF’s in Portfolio Construction and Asset Allocation
- Definition of Private Equity
- The main sources of Private Equity
- The case for Private Equity
- Constructing the Private Equity portfolio
- Monitoring the portfolio and measuring performance
- Measuring correlation with public markets
- Current trends in the market place
Case study: the practical difficulties in building a private equity allocation.
- Gaining exposure to the asset class
- Performance measurement and benchmarks
Including commodities in the portfolio
- What are structured products?
- Foreign exchange products
Certificates - Index - Basket - Comparison with mutual funds - Covered warrants
Capital guarantee and protection products
- Vanilla products - Portfolio insurance
Maximum return products - Discount certificates - Reverse convertibles
Exchange Traded Funds – tools for tactical asset allocation
Ad hoc solutions or part of portfolio construction?
Case study: designing specific 'structured' solutions for clients.
Trust the experts
Bernard Duffy began his investment management career with Abbey Life in Dublin before moving to London in 1985 to work for Irish Life Assurance Plc. At Irish Life, he was responsible for investment product marketing and new fund launches and was responsible for the company’s successful entry into...