Active Portfolio Management & Asset Allocation

Euromoney Learning Solutions

How long?

  • 3 — 4 days
  • online, in person

What are the topics?

Euromoney Learning Solutions

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Who should attend

  • Private Bankers and Wealth Managers
  • Portfolio and Asset Managers
  • Heads of Investment
  • Investment Analysts and Advisors
  • Pension Fund Managers and Trustees
  • Accountants and Finance Managers
  • Regulators and Auditors
  • Compliance Officers

About the course

Learn best practices on asset allocation, portfolio construction & style management strategies.

This 3 day virtual 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

Course Objectives

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.

Methodology

This virtual 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.

Agenda

Day 1: Introductions and welcome

Morning : 2 x 1.5 Hour Sessions

Session 1 : Inputs to the Asset Allocation Decision * Key inputs to the asset allocation decision * Return and volatility assumptions * Correlations and the covariance matrix * Efficient frontiers and optimal portfolios * Utility functions, indifference curves and risk aversion factors * Static approaches to asset allocation – strategic asset allocation * Dynamic approaches to asset allocation – integrated, tactical and insured

Case Study : Asset Allocation Theory

Session 2 : Moving beyond Mean-Variance Optimisation

  • General problems with mean-variance optimization and models
  • Alternative mean-variance based models
  • Models with alternative risk definitions – mean semi-variance and conditional VaR models
  • The Black-Litterman model
  • Lee’s optimal risk budgeting model

Case Study : Improving the Asset Allocation Decision via Alternative Frameworks

Afternoon : 2 x 1.5 Hour Sessions

Session 3 : Asset Allocation and Risk/Return Methodologies

  • Selecting an appropriate benchmark
  • Defining and quantifying the client’s return expectation
  • The move towards more dynamic portfolio management
  • Relative, absolute and unconstrained approaches
  • Asymmetric investment returns and how to achieve them
  • Active risk budgets, VaR and volatility management
  • Portable alpha and alpha transportation
  • Asset mix rebalancing approaches

Case Study : Portfolio Structuring and Design

Session 4 : Asset Allocation in the presence of Liabilities

  • How the asset allocation challenge changes when you introduce liabilities
  • Factors to consider when forecasting liabilities
  • Volatility and correlation considerations
  • Theory of surplus optimization
  • The liability matching asset portfolio (LMAP) and the risky asset portfolio (RAP)
  • Asset allocation and Liability Driven Investing (LDI)

Case Study : Pension Fund Asset-Liability Study

Day 2: Risk Management and Performance Attribution and Measurement

Morning : 2 x 1.5 Hour Sessions

Session 1 : Measuring Portfolio Risk

  • Market risk (Systematic) Vs Specific risk (Residual)
  • Beta risk and it’s measurement and meaning
  • Portfolio market risk and portfolio specific risk
  • Portfolio total risk
  • Tracking error – calculation and interpretation

Case Study : Measuring the Risk of a Concentrated Equity Portfolio

Session 2 : Risk Budgeting in Theory and Practice

  • What is a risk budget ?
  • VaR and risk budgeting
  • Asset allocation and risk budgeting
  • Risk budgeting approaches based on
  • Total risk per alpha source
  • Marginal contribution to total portfolio risk
  • Risk budgeting and active risk
  • Allocating and spending the risk budget
  • Implied returns
  • Views, implied confidence levels and investment policy

Case Study : Risk Budgeting for a Pension Fund

Afternoon : 2 x 1.5 Hour Sessions

Session 3 : Information Ratios and Active Risk Budgeting

  • Ex-post risk and ex-ante risk
  • The information ratio and information coefficient
  • The residual frontier
  • Value-added and the optimal tracking error for a fund manager to take
  • Skill, breadth and risk-taking
  • Target IRs and target risk budgets

Case Study : Skill, Breadth and Optimal Tracking Errors ** Session 4 : Risk-Adjusted Performance Measurement and Attribution Analysis**

  • Overview of performance attribution analysis
  • The Brinson framework for return attribution
  • Separating the asset allocation decision from the stock selection decision
  • The interaction term
  • The allocated portfolio return Vs the benchmark portfolio return
  • Skill Vs luck
  • Measuring the statistical significance of the outperformance

Case Study : Performance Attribution Calculations

Day 3: Special Themes in Investment Management – Smart Beta, Factor Investing and ESG

Morning : 2 x 1.5 Hour Sessions

Session 1 : Defining Smart Beta

  • What is smart beta ?
  • An overview of smart beta’s history
  • The objectives of smart beta investing
  • How smart beta works
  • Rationale for today’s strong interest in smart beta
  • Why investors should explore smart beta
  • The risk and return characteristics of smart beta
  • Why factor exposure matters
  • Active fund management through a factor-based lens
  • Differences between smart beta and factor investing
  • Factor exposures, factor premiums and factor returns
  • Factor behavior in changing economic environments
  • Behavioural, risk and structural factor categories
  • Macro risk factors, style risk factors and alpha

Case Study : Factor Investing through the Economic Cycle

Session 2 : Portfolio Applications of Smart Beta Strategies

  • How smart beta can fit in a portfolio
  • Tactical and strategic applications
  • Risk management applications
  • Implementing investment views
  • Replicating active exposures with smart beta ETFs
  • Extracting more out of beta
  • Replacing and/or complimenting active strategies
  • Managing factor exposures
  • Outcome oriented approaches using smart beta
  • Mapping factor exposures to the economic cycle

Case Study : Minimum-Variance Strategy for a Pension Fund

Afternoon : 2 x 1.5 Hour Sessions

Session 3 – History and Background to ESG and Responsible Investing

  • An historical overview of socially responsible investing
  • Social purpose, sustainability and purposeful capitalism
  • Differentiating between socially focused investing, governance focused investing and environment focused investing
  • The size and growth of the ESG and SRI marketplace
  • Global ESG assets by type of exposure
  • Stimulants and catalysts behind the growth of ESG and SRI investing
  • Why the ESG market is poised for further growth

Case Study : The Growth of ESG and Socially Responsible Investing

Session 4 – Integration-Based ESG Investing

  • What is integration-based ESG investing
  • What added-value do integration-based approaches offer
  • Incorporating alpha insights into an integration-based approach
  • Common ESG factors that are targeted
  • Fundamental ESG integration – evaluating ESG factors
  • Systematic ESG integration – quantitative criteria Vs qualitative insights
  • ESG as part of a multi-factor analysis
  • ESG ratings improvement momentum

Case Study : Integration-Based ESG Investing

Experts

Bernard Duffy

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...

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Active Portfolio Management & Asset Allocation at Euromoney Learning Solutions

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