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9780470635339

Managing Investment Portfolios: A Dynamic Process, 3rd Edition

by ; ; ;
  • ISBN13:

    9780470635339

  • ISBN10:

    0470635339

  • Format: eBook
  • Copyright: 2010-03-01
  • Publisher: Wiley
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Summary

"A rare blend of a well-organized, comprehensive guide to portfolio management and a deep, cutting-edge treatment of the key topics by distinguished authors who have all practiced what they preach. The subtitle, A Dynamic Process, points to the fresh, modern ideas that sparkle throughout this new edition. Just reading Peter Bernstein's thoughtful Foreword can move you forward in your thinking about this critical subject." -Martin L. Leibowitz, Morgan Stanley "Managing Investment Portfolios remains the definitive volume in explaining investment management as a process, providing organization and structure to a complex, multipart set of concepts and procedures. Anyone involved in the management of portfolios will benefit from a careful reading of this new edition." -Charles P. Jones, CFA, Edwin Gill Professor of Finance, College of Management, North Carolina State University

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 Allocation for Individual Investors
Strategic Asset Allocation for Institutional Investors
Defined-Benefit Plans
Foundations and Endowments
Insurance Companies
Banks
Tactical Asset Allocation
Fixed-Income Portfolio Management
Introduction
A Framework for Fixed-Income Portfolio Management
Managing Funds Against a Bond Market Index
Classification of Strategies
Indexing (Pure and Enhanced)
Active Strategies
Monitoring/Adjusting the Portfolio and Performance Evaluation
Managing Funds Against Liabilities
Dedication Strategies
Cash-Flow Matching Strategies
Other Fixed-Income Strategies
Combination Strategies
Leverage
Derivatives-Enabled Strategies
International Bond Investing
Active versus Passive Management
Currency Risk
Breakeven Spread Analysis
Emerging Market Debt
Selecting a Fixed-Income Manager
Historical Performance as a Predictor of Future Performance
Developing Criteria for the Selection
Comparison with Selection of Equity Managers
Equity Portfolio Management
Introduction
The Role of the Equity Portfolio
Approaches to Equity Investment
Passive Equity Investing
Equity Indices
Passive Investment Vehicles
Active Equity Investing
Equity Styles
Socially Responsible Investing
Long-Short Investing
Sell Disciplines/Trading
Semiactive Equity Investing
Managing a Portfolio of Managers
Core Satellite
Completeness Fund
Other Approaches: Alpha and Beta Separation
Identifying, Selecting, and Contracting with Equity Portfolio Managers
Developing a Universe of Suitable Manager Candidates
The Predictive Power of Past Performance
Fee Structures
The Equity Manager Questionnaire
Structuring Equity Research and Security Selection
Top-Down versus Bottom-Up Approaches
Buy-Side versus Sell-Side Research
Industry Classification
Alternative Investments Portfolio Management
Introduction
Alternative Investments: Definitions, Similarities, and Contrasts
Real Estate
The Real Estate Market
Benchmarks and Historical Performance
Real Estate: Investment Characteristics and Roles
Private Equity/Venture Capital
The Private Equity Market
Benchmarks and Historical Performance
Private Equity: Investment Characteristics and Roles
Commodity Investments
The Commodity Market
Benchmarks and Historical Performance
Commodities: Investment Characteristics and Roles
Hedge Funds
The Hedge Fund Market
Benchmarks and Historical Performance
Hedge Funds: Investment Characteristics and Roles
Performance Evaluation Concerns
Managed Futures
The Managed Futures Market
Benchmarks and Historical Performance
Managed Futures: Investment Characteristics and Roles
Distressed Securities
The Distressed Securities Market
Benchmarks and Historical Performance
Distressed Securities: Investment Characteristics and Roles
Risk Management
Introduction
Risk Management as a Process
Risk Governance
Identifying Risks
Market Risk
Credit Risk
Liquidity Risk
Operational Risk
Model Risk
Settlement (Herstatt) Risk
Regulatory Risk
Legal/Contract Risk
Tax Risk
Accounting Risk
Sovereign and Political Risks
Other Risks
Measuring Risk
Measuring Market Risk
Value at Risk
The Advantages and Limitations of VaR
Extensions and Supplements to VaR
Stress Testing
Measuring Credit Risk
Liquidity Risk
Measuring Nonfinancial Risks
Managing Risk
Managing Market Risk
Managing Credit Risk
Performance Evaluation
Capital Allocation
Psychological and Behavioral Considerations
Execution of Portfolio Decisions
Introduction
The Context of Trading: Market Microstructure
Order Types
Types of Markets
The Roles of Brokers and Dealers
Evaluating Market Quality
The Costs of Trading
Transaction Cost Components
Pretrade Analysis: Econometric Models for Costs
Types of Traders and Their Preferred Order Types
The Types of Traders
Traders' Selection of Order Types
Trade Execution Decisions and Tactics
Decisions Related to the Handling of a Trade
Objectives in Trading and Trading Tactics
Automated Trading
Serving the Client's Interests
CFA Institute Trade Management Guidelines
The Importance of an Ethical Focus
Concluding Remarks
Monitoring And Rebalancing
Introduction
Monitoring
Monitoring Changes in Investor Circumstances and Constraints
Monitoring Market and Economic Changes
Monitoring the Portfolio
Rebalancing the Portfolio
The Benefits and Costs of Rebalancing
Rebalancing Disciplines
The Perold-Sharpe Analysis of Rebalancing Strategies
Execution Choices in Rebalancing
Concluding Remarks
Evaluating Portfolio Performance
Introduction
The Importance of Performance Evaluation
The Fund Sponsor's Perspective
The Investment Manager's Perspective
The Three Components of Performance Evaluation
Performance Measurement
Performance Measurement without Intraperiod External Cash Flows
Total Rate of Return
The Time-Weighted Rate of Return
The Money-Weighted Rate of Return
TWR versus MWR
The Linked Internal Rate of Return
Annualized Return
Data Quality Issues
Benchmarks
Concept of a Benchmark
Properties of a Valid Benchmark
Types of Benchmarks
Building Custom Security-Based Benchmarks
Critique of Manager Universes as Benchmarks
Tests of Benchmark Quality
Hedge Funds and Hedge Fund Benchmarks
Performance Attribution
Impact Equals Weight Times Return
Macro Attribution Overview
Macro Attribution Inputs
Conducting a Macro Attribution Analysis
Micro Attribution Overview
Sector Weighting/Stock Selection Micro Attribution
Fundamental Factor Model Micro Attribution
Fixed-Income Attribution
Performance Appraisal
Risk-Adjusted Performance Appraisal Measures
Quality Control Charts
Interpreting the Quality Control Chart
The Practice of Performance Evaluation
Noisiness of Performance Data
Manager Continuation Policy
Manager Continuation Policy as a Filter
Global Investment Performance Standards
Introduction
Background of the GIPS Standards
The Need for Global Investment Performance Standards
The Development of Performance Presentation Standards
Governance of the GIPS Standards
Overview of the GIPS Standards
Provisions of the GIPS Standards
Fundamentals of Compliance
Input Data
Calculation Methodology: Time-Weighted Total Return
Return Calculations: External Cash Flows
Additional Portfolio Return Calculation Standards
Composite Return Calculation Standards
Constructing Composites I-Defining Discretion
Constructing Composites II-Defining Investment Strategies
Constructing Composites III-Including and Excluding Portfolios
Constructing Composites IV-Carve-Out Segments
Disclosure Standards
Presentation and Reporting Requirements
Presentation and Reporting Recommendations
Introduction to the Real Estate and Private Equity Provisions
Real Estate Standards
Private Equity Standards
Verification
GIPS Advertising Guidelines
Other Issues
After-Tax Return Calculation Methodology
Keeping Current with the GIPS Standards
Appendix: GIPS Glossary
Glossary
References
About the CFA Program
About the Authors
Index
Table of Contents provided by Publisher. All Rights Reserved.

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