Managing Investment Portfolios : A Dynamic Process

by Maginn, John L.; Tuttle, Donald L.; McLeavey, Dennis W.; Pinto, Jerald E.

• ISBN13: 9780470080146
• ISBN10: 0470080140
• Edition: 3rd
• Format: Hardcover
• Copyright: 2007-03-09
• Publisher: Wiley

Summary

Managing Investment Portfolios: A Dynamic Process, Third Edition is organized to follow the flow of the portfolio management process from formulating an investment policy statement to portfolio construction, trade execution, and monitoring and rebalancing the portfolio. John L. Maginn, CFA (Omaha, NE), is President of Maginn Associates, Inc., a financial consulting firm. He is also an adjunct professor in the MBA program at Creighton University. Donald L. Tuttle, CFA (Charlottesville, VA), was vice president of CFA Institute in its Curriculum and Examinations Department from 1992 until his retirement in 2004. Dennis W. McLeavey, CFA (Charlottesville, VA), is Head, Professional Development Products at CFA Institute. Jerald E. Pinto, CFA (Charlottesville, VA), is Director in the CFA Program Division at CFA Institute.

Author Biography

JOHN L. MAGINN, CFA, is President of Maginn Associates, Inc., a financial consulting firm. He is also an adjunct professor in the MBA program at Creighton University. He is retired from Mutual of Omaha, where he was the chief investment officer and treasurer, and is also a past chairman of the board of trustees of AIMR, the predecessor to CFA Institute.

DONALD L. TUTTLE, CFA, was vice president of CFA Institute in its Curriculum and Examinations Department from 1992 until his retirement in 2004. He received a BSBA and MBA from the University of Florida and a PhD from the University of North Carolina at Chapel Hill. Dr. Tuttle taught for 21 years at Indiana University, where he chaired the Finance Department from 1970 to 1980. He was Associate Professor of Finance at the University of North Carolina and was a visiting professor at the European Institute of Business Administration (INSEAD), the University Florida, Georgetown University, and the University of Virginia. He has authored numerous articles in leading finance journals and five books on security analysis and portfolio management. He is a member of the Advisory Board of The Journal of Portfolio Management and was a trustee of over 100 mutual funds from 1982 to mandatory retirement age in 2005.

JERALD E. PINTO, PHD, CFA, is Director in of Curriculum Development   at CFA Institute. Before coming to CFA Institute in 2002, he was a consultant to corporations, foundations, and partnerships in investment planning, portfolio analysis, and quantitative analysis. He has also worked in the investment and banking industries in New York City and taught finance at New York University's Stern School of Business. He holds an MBA from Baruch College and a PhD in finance from the Stern School. Pinto obtained his CFA charter in 1992.

DENNIS W. McLEAVEY, CFA, is Head of Professional Development Products at CFA Institute. During his twenty-five-year academic career, he taught at the University of Western Ontario, the University of Connecticut, the University of Rhode Island (where he founded a student-managed fund), and Babson College. McLeavey completed a doctorate in production management and industrial engineering at Indiana University in 1972, and earned his CFA charter in 1990.

Table of Contents

Foreword

Preface

Acknowledgments

Introduction

The Portfolio Management Process and the Investment Policy Statement

Introduction

Investment Management

The Portfolio Perspective

Portfolio Management as a Process

The Portfolio Management Process Logic

The Planning Step

The Execution Step

The Feedback Step

A Definition of Portfolio Management

Investment Objectives and Constraints

Objectives

Constraints

The Dynamics of the Process

The Future of Portfolio Management

The Ethical Responsibilities of Portfolio Managers

Managing Individual Investor Portfolios

Introduction

CaseStudy

The Inger Family

Inger Family Data

Jourdan's Findings and Personal Observations

Investor Characteristics

Situational Profiling

Psychological Profiling

Investment Policy Statement

Setting Return and Risk Objectives

Constraints

An Introduction to Asset Allocation

Asset Allocation Concepts

Monte Carlo Simulation in Personal Retirement Planning

Managing Institutional Investor Portfolios

Overview

PensionFunds

Defined-Benefit Plans: Background and Investment Setting

Defined-Contribution Plans: Background and Investment Setting

Hybrid and Other Plans

Foundations and Endowments

Foundations: Background and Investment Setting

Endowments: Background and Investment Setting

The Insurance Industry

Life Insurance Companies: Background and Investment Setting

Non-Life Insurance Companies: Background and Investment Setting

Banks and Other Institutional Investors

Banks: Background and Investment Setting

Other Institutional Investors: Investment Intermediaries

Capital Market Expectations

Introduction

Organizing the Task: Framework and Challenges

A Framework for Developing Capital Market Expectations

Challenges in Forecasting

Tools for Formulating Capital Market Expectations

Formal Tools

Survey and Panel Methods

Judgment

Economic Analysis

Business Cycle Analysis

Economic Growth Trends

Exogenous Shocks

International Interactions

Economic Forecasting

Using Economic Information in Forecasting Asset Class Returns

Information Sources for Economic Data and Forecasts

Asset Allocation

Introduction

What is Asset Allocation?

The Role of Strategic Asset Allocation in Relation to Systematic Risk

Strategic versus Tactical Asset Allocation

The Empirical Debate on the Importance of Asset Allocation

Asset Allocation and the Investor's Risk and Return Objectives

Asset-Only and Asset/LiabilityManagement Approaches to Strategic Asset Allocation

Return Objectives and Strategic Asset Allocation

Risk Objectives and Strategic Asset Allocation

Behavioral Influences on Asset Allocation

The Selection of Asset Classes

Criteria for Specifying Asset Classes

The Inclusion of International Assets (Developed and Emerging Markets)

Alternative Investments

The Steps in Asset Allocation

Optimization

The Mean-Variance Approach

The Resampled Efficient Frontier

The Black-Litterman Approach

Monte Carlo Simulation

Asset/Liability Management

Experience-Based Approaches

Implementing the Strategic Asset Allocation

Implementation Choices

Currency Risk Management Decisions

Rebalancing to the Strategic Asset Allocation

Strategic Asset Allocation for Individual Investors

Human Capital

Other Considerations in Asset Allo

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