Intro Flashcards
(45 cards)
Portfolio Management Process
Integrated set of steps
undertaken in a consistent manner
to create and maintain
a portfolio appropriate to meet clients’ stated goals
Investment Policy Statement
Written document that clearly sets out client’s:
- Return objective
- Risk tolerance
- Relevant time horizon
- Applicable constraints:
- Liquidity needs,
- Tax considerations,
- Regulatory Requirements,
- Unique circumstances
PortManProc Elements
- Planning
- Execution
- Feedback
Capital Markets Expectations concern…
Risk-Return Characteristics Of capital market instruments
Strategic Asset Allocation
Establish Acceptable exposures to InPoSt-permissible asset classes to achieve client’s long run Objectives & Constraints
Investment Management
The service of professionally investing money
An investment management firm’s size is judged by…
the amount of assets under management
An investment manager’s revenue…
is fee driven
Investment manager’s Fees are based on:
- A percentage of the average amount of assets under management
- The type of investment program run for the client
Types of investors
- Institutional
- Individual
Institutional Investors
- Pension funds
- Foundations and Endowments
- Insurance Companies
- Banks
Individual Investors
- Individuals
- Families
The Investment Policy Decisions of Institutional Investors
Are typically made by investment committees or trustees. They also bear a fiduciary relationship to the funds. Such a relationship imposes some legal standards regarding processes and decisions.
Institutional investors committees or trustees
Bear a fiduciary relationship to the funds. Such a relationship imposes some legal standards regarding processes and decisions.
Family Offices
Organized and owned by a family.
Are entities that assume responsibility for investment services: Financial planning, Estate planning, Asset management. Some family offices open access to their services to other families (multifamily offices)
Investment Management Companies employ
- Portfolio managers,
- analysts,
- traders
- Marketing and support personnel
Portfolio managers may use
- Outside research produced by sell-side analysts (employed by brokerages) and
- Research generated by buy-side (in-house) analysts
The staffing of in-house research departments depends on
- The size of the investment management firm.
- The variety of investment offerings.
- The investment disciplines employed.
The Portfolio Perspective focus is…
on the aggregate of all the investoris holdings: the portfolio
Modern Porfolio Theory
The analysis of rational portfolio choices based on the efficient use of risk
MPT revolutionized investment management
The importance of the portfolio perspective in achieving investment objectives is recognized. MPT helped spread the knowledge and use of quantitative methods in portfolio management
Three Developments in the Investment Community that Created Demand for the Portfolio Perspective
- Institutional investing plays a dominant role in financial markets so controlling the risk is imperative.
- The advance in technology and lower cost allows for implementing MPT portfolio concepts.
- The investment management field is professionalized
Portfolio Management As a Process
An integrated set of activities that combine in a logical, orderly manner to produce a desired product
Portfolio Management As a Process view applies to:
- To all types of portfolio investments
- bonds,
- stocks,
- real estate,
- gold,
- collectibles
- To various organizational types
- trust companies,
- investment counsel firms,
- insurance companies,
- mutual funds
- To a full range of investors
- individuals,
- pension plans,
- endowments, foundations,
- insurance companies, banks
