Whether you are involved in investing in domestic markets internationally, for institutions, pension-holders or private clients, this Euromoney Training course offers the opportunity for you to advance your real-world investing skills through structured study, group exercises and investment simulations. This programme will ensure that upon completion of the course you will be able to apply your new practical skills to real-world investing activities, with the ultimate objective of enhancing returns, reducing risks, as well as attracting and retaining investors.

How will this course will assist you? On Completion of this 9-day course, you will be able to:

• Devise asset allocation strategies for a post-credit crunch environment.
• Alpha analysis and information ratios in theory and practice.
• Learn and apply the principles of Post-modern portfolio theory.
• Construct superior equity portfolios using behavioural finance theory.
• Reassess hedge fund investing in light of recent events.
• Learn how to implement portable alpha strategies via practical applications.
• Assess the opportunities offered by emerging alternative assets.
• Develop frameworks to accommodate real and tangible assets in portfolios.

Who Should Attend

• Portfolio / Fund/ Asset Managers
• Investment Analysts / Advisors / Strategists
• Private Bankers / Investors
• Heads of Investment
• Pension Fund / Trustee Managers
• Regulators, Auditors and Actuaries
• Securities Salespersons
  

Day 1

Quantitative background and tools to enhance the investment process

Post-modern portfolio theory

• Recap of capital asset pricing model and arbitrage pricing theory.
• First and second order stochastic dominance.
• Problems with standard deviation as a measure of rise.
• Foundations of post-modern portfolio theory.
• Downside deviation and the minimum acceptable return (MAR).
• The target rate of return and upside potential.
• Practical applications of Post-Modern Portfolio Theory.

Case study: applying the principles of Post-Modern Portfolio Theory. Delegates will assess how new measures of risk compare with more traditional measures and how they can be used in discussing and formulating investment strategy with trustees and plan sponsors.

Information ratios and opportunity sets

• The information co-efficient and manager skill.
• The information ratio.
• The fundamental law of active management.
• Inside the information ratio.
• Residual risk and residual return.
• The opportunity set and residual frontier.

Case study: applying Information Ratios Delegates will apply a number of quantitative techniques in a series of practical exercises to test their understanding of information ratios.

In search of alpha

• Defining alpha.
• Ex-ante and ex-post-alpha.
• Sources of alpha.
• Techniques for forecasting alpha.
• Alpha analysis.
• Alpha and portfolio construction.
• Refined alpha.
• Alpha and residual risk.
• T-statistics, information ratios and information co-efficients.

Case study: develop a framework for deriving alpha forecasts that can be applied.

Global Asset Allocation Simulation

Day 2

Asset allocation in a post credit-crunch environment

Asset allocation theory

• Components of expected return.
• Forecasting asset class expected returns.
• The covariance and correlation matrix.
• How useful is correlation in today’s environment?
• Building optimal portfolios.
• Importance of the Benchmark and policy portfolio.
• Historical equity and bond risk premia.
• Where has the equity rate premium disappeared to?

Case study: asset allocation theory. Delegates will apply asset allocation theory to explain a number of high profile asset allocation moves by institutional money managers

Strategic and tactical asset allocation – constrained and unconstrained

• A comparison of the different approaches to asset allocation.
• Strategic, tactical, integrated and insured approaches.
• The Yale Endowment Model.
• Core / Satellite approaches.
• Unconstrained approaches.
• Defining the dimensions of unconstrained and tactical asset allocation frameworks.
• Tactical asset allocation, tactical style allocation and credit yield spreads.
• New approaches to the asset allocation decision.

Case study: develop a benchmark timing and composite tactical asset allocation framework to help reduce the risks to this important decision.

Asset mix rebalancing

• What is rebalancing and why do it?
• A comparison of the different approaches to rebalancing.
• Buy-and-hold.
• Constant mix.
• Constant proportion portfolio insurance – CPPI.
• Options based portfolio insurance – OBPI.

Case study: style investing was a hot topic at the peak of the last cycle and examine a number of new approaches to the important issue of equity style management in portfolios.

Global asset allocation simulation

Day 3

Reassessing the investment case for real estate

Introduction: the product

• Investment characteristics of real estate.
• What has changed?
• What is changing?
• Performance drivers.

How much in real estate?

• Risk and return.
• Diversification.
• Modern portfolio theory and real estate.
• Why international?

Exercise: using optimisation – how much in property?

How to invest in real estate: direct vs. indirect; public vs. private

• Available vehicles.
• Open ended vs. closed ended vehicles.
• Private vehicles vs. quoted property stocks.
• Investor preferences.
• Derivatives.
  

Case study: using indirect vehicles for international exposure - a model for the direct market.

• Investment models and valuation.
• Income.
• Yield, RFR.
• Rent, demand and supply.
• Forecasting returns.
• A property return model.
• Opportunities in the public markets.
• Commercial mortgage backed securities.
• European real-estate investment trusts.

Exercise: international appraisal approaches.

Day 4

Portable alpha and dynamic portfolio approaches

Asset and liability issues

• The global pensions crisis – European, UK and US perspectives.
• The rising costs of funding pension schemes.
• The importance of the pension fund to corporate balance sheets.
• The relationship between pension assets and liabilities.
• Measuring and modelling a pension liability.
• Impact of liabilities on investment strategy.
• Liabilities and funding strategy.
• Pension surplus and the risk-adjusted change in surplus.
• Current issues in asset / liability modelling.

Case study: assessing the impact of liabilities on a pension fund’s investment strategy – The case of The Boot’s PLC Pension Fund

Dynamic portfolio approaches

• Dynamic portfolio analysis with assets and liabilities.
• Developing a strategic benchmark in an asset / liability framework.
• Portfolio optimisation with drawdown constraints.
• Global equity and bond investing for pension funds.
• The absolute vs. relative return decision for a pension fund.
• Dynamic investment approaches.
• Liability matching strategies - duration matching and cashflow matching.
• Strategies with upside - dynamic contingent optimization and portable alpha.
• Limiting the sponsor risk - absolute return and liability hedging.
• Generating real returns - new asset classes and real alpha.

Key case study: asset allocation and fund manager selection.

• Delegates will analyse the case of a pension fund with an asset / liability mismatch and a corresponding inappropriate asset allocation policy. You will be required to perform the following tasks:
• Analyse the potential impact of the pension deficit on the company’s balance sheet.
• Analyse the impact of the fund’s liabilities on overall investment strategy.
• Devise an appropriate funding strategy.
• Devise an appropriate strategic benchmark and asset allocation for the fund.
• Develop an appropriate investment philosophy for the fund.
• Appoint external managers for the fund.

Portable Alpha in Theory and Practice

• What is portable alpha and how does it work.
• The components of a portable alpha strategy.
• Alpha-beta separation.
• Portable alpha and asset allocation.
• Portable alpha in a world of low returns.
• Portable alpha implementation.
  

Global Asset Allocation Simulation

Day 5

Hedge funds, private equity and commodities : broken promises and busted flushes

Myth versus reality in the hedge fund world

• Are hedge funds a busted flush and what does the future hold?
• Are hedge funds even a stand-alone asset class.
• Why hedge funds should never have been sold as absolute return vehicles.
• Cause and effects of the hedge fund implosion.
• Separating alpha from beta in the hedge fund space.
• Revisiting the drivers of hedge fund returns.
• Do hedge fund-of-funds have a future in light of recent events?
• Implications of external regulation on the hedge fund industry.

Outlook for hedge fund strategies in a post-credit crunch world

• Relative Value strategies.
• Opportunistic strategies.
• Event Driven strategies.
• Global Macro strategies.

Case study: hedge funds in the new environment

Private equity - revisiting the investment case

• Characteristics of private equity as an asset class.
• The different routes to investing in private equity.
•  The drivers of private equity returns.
• The J-curve of a private equity investment.
• How do private equity managers add value.
• How will private equity perform in a credit constrained environment.
• Can private equity outperform public equity without the use of leverage?

Case study: Private equity

Commodities – Desmond Fitzgerald

• Commodities as an asset class.
• Risk, return and correlation characteristics of commodity markets.
• Overview of major commodity markets.
• Should commodities be considered a strategic or a tactical asset class?
• Is the bull argument for commodities still in place?

Case study: assess and select a number of hedge fund manager profiles and rank them against pre-defined qualitative and quantitative criteria.

Global asset allocation simulation

Day 6

Case study work

Day 7

Behavioural finance, style management and performance attribution and analysis

Introducing behavioural finance

• What is behavioural finance.
• Efficient market hypothesis and behavioural finance.
• What can behavioural finance teach us about investing.
• Systematic errors in investment thinking.
• The major foundations of behavioural finance theory: Limited arbitrage and investor sentiment.

Common behavioural finance traits

• Framing and Coding.
• Over-confidence.
• Over-reaction bias.
• Myopic loss aversion.

Case study: Behavioural finance Delegates will examine recent asset bubbles and subsequent crashes and explain both phenomena using the precepts of behavioural finance

Style allocation and style management

• What is style management and why do it?
• Growth/Value betas and alphas.
•  Extremes in growth and value stocks.
• Growth/Value barbell portfolios.
• What drives style cycles.
• Style and expectations formation in the equity markets.

Case study: Style allocation and style management

Performance Attribution and Analysis

• The skill / luck matrix.
• Standard error of the information ratio.
• Cross sectional comparison performance.
• Returns-based performance analysis.
• Components of investment performance.
• Performance attribution analysis.
• Risk adjusted performance analysis and measurement.
• Sharpe ratio.
• Sortino ratio.
• Treynor measure.
• Jensen measure.
• Fama measure.

Global Asset Allocation Simulation

Day 8

Emerging alternative investments

Environmental and alternative energy

• Overview of the economics of climate change.
• Factors driving the growing appetite for environmental assets.
• Ways to invest in environmental assets.
• Venture capital funding of clean tech companies.
• Carbon as an asset class.
• The basics of carbon emissions trading.
• Biofuels.
• Solar and wind installation.
• The reemergence of nuclear.

Case study: Playing the environmental theme.

Infrastructure, forestry and farmland

• What are infrastructure assets.
• Key factors behind the emergence of infrastructure assets.
• Characteristics of infrastructure assets.
• The debt market for private infrastructure financing.
• The impact of the credit crunch on the outlook for infrastructure investing.
• Characteristics of forestry and farmland as an asset class.
• The investment case for forestry and farmland.
• Determinants of forestry and farmland returns.
• Tax efficiency of forestry and farmland as asset classes.
• The risks of investing in forestry and farmland.

Case study: Incorporating infrastructure, forestry and farmland into an asset allocation policy.

Emotional assets

• What are emotional assets?
• The long term case for investing in emotional assets.
• Risk, return and correlation characteristics of this unique asset class.
• Are these assets suitable for institutional investors?
• Revisiting the British Rail Pension Fund.

Case study: assess the merits and demerits of a range of equity portfolio construction techniques.

 

Day 9

Strategic Issues facing the fund management industry

Top performing investment teams and creative collaboration for investment professionals

• The markets are an expensive place to discover your personality.
• Do top investment professionals share common traits?
• Carrying out a self-diagnosis.
• Teamwork in today’s investment environment.
• Collaborative techniques for investment teams.
•  Enhancing the creativity of investment teams.

Guest Speaker – Dr. Amin Rajan

Forming and managing the ‘Top Investment Team’

Creating an information advantage

• Information and active portfolio management.
• Information analysis and transforming information into portfolios.
• The information horizon and the shelf life of information.
• Different types of active forecast.
• Consensus expected returns and naïve forecasts.
• Refined forecasts: forecasting rules of thumb.
• T-statistics, information ratios and information coefficients.
• Data mining and information analysis.

Case study: assess the value-added of information from various sources and how it can be integrated into the investment process.

Performance attribution and analysis

• The skill / luck matrix.
• Standard error of the information ratio.
• Cross sectional comparison performance.
• Returns-based performance analysis.
• Statistical and investment theory refinements.
• Portfolio based performance analysis.
• Components of investment performance.
• Performance attribution analysis.
• Risk adjusted performance analysis and measurement.
• Sharpe ratio.
• Sortino ratio.
• Treynor measure.
• Jensen measure.
• Fama measure.

Case study: assess the merits of how and when to apply different performance measures to a range of equity portfolios.

 

• Bernard Duffy

  Bernard Duffy is a dedicated training solutions provider to the Global Wealth Management and Fund Management industries. His consultancy specialises in the design and delivery of training programmes across the full spectrum of products and asset classes, both traditional and alternative. He is highly respected for his ability to integrate selling skills training with complex product training in an informative and entertaining style.
  
  Bernard 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 the single premium bond market. He joined County Bank at the end of 1986 as Research and Development executive in the unit trust division. In 1987 he transferred to the pension fund department, assuming responsibility for the management and performance of Canadian equity investments. In 1991, he was seconded to the European equity desk to manage a research project on smaller European companies. At the end of 1992, he was appointed head of the North American equity desk.
  
  Bernard has a B.A.(Hons) in Economics and Politics, an M.A. in Development Economics and an M.B.A. in Finance from City University Business School in London. Bernard is the course director and lead trainer on a number of Euromoney training programmes. He has undertaken numerous training assignments throughout Europe, Asia and the U.S.A. for leading private banks and asset managers. In 2007, Bernard founded a boutique asset manager focused on researching and investing in a broad range of emotional assets from fine art and rare stamps to diamonds and classic cars.
  

London School of Investment Management

Interested in holding this course in-house? Please fill out your details and a member of our team will be in touch with more information.

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