Euromoney Audit Training

Course overview

'Strategic Portfolio Management and Asset Allocation' has been in existence for more than three years and it continues to further develop its contents, as the Course Director enriches the course by adding new cases, exercises, tools, techniques and criteria, which respond to the daily challenges, priorities and needs faced by professionals in the investment management business.

The Course Director has successfully delivered this Course for Euromoney Training in Hong Kong, New York, Miami, and Singapore, under the format of both Public Courses and In-house courses.

The frequent occurrence of critical and shocking events of different nature (economic, financial, political, military, social and climate) requires that we evaluate and re-define the investment management criteria, models, and strategy that we have implemented to manage and control our investments and meet our
investment objectives.

The aim and objective of the course is to further develop the skills, competencies, and knowledge needed to achieve investment objectives by managing and controlling investment risk and enhancing the returns of
investment portfolios.

Summary of course content

• Comprehend the nature and sources or investment risk and develop new effective risk criteria to measure and manage investment risk in multi asset portfolios
• Manage strategically the risk-return equation of a portfolio and set achievable investment objectives for their clients or investment funds
• Understand and apply the practical contributions of Modern and Post Modern Portfolio Theory, Capital Asset Pricing Model and Arbitration Pricing Theory in asset allocation and portfolio construction
• Learn the importance of economic cycles and the need for strategic investment planning when investing in different economic scenarios
• Construct new investment criteria and risk management tools to manage investments efficiently in emerging markets
• Acquire in-depth knowledge of equity value and company valuation methodologies, ion order to strategically construct growth portfolios at reasonable value
• Apply different investment management styles in order to achieve specific clients’ investment objectives, risk profiles, and needs
• Provide efficient investment solutions to client’s portfolios management needs by using behaviour finance concepts and understanding investor’s needs, preferences, and expectations
• Increase their knowledge on the strategic use of alternative investments including hedge funds, specialty funds, exchange traded funds, private equity, structured products and non-financial assets
• Develop the skills, competencies, and knowledge needed to achieve investment objectives, manage and control investment risk, and enhancing the returns of investment portfolios

Methodology

Formal material presented by the Course Director may include any of the following:

• Power Point slides
• Use of flip-boards
• Short films on DVD or internet clips of selected topic related to the course
• Interactive exercises and case studies for group discussion
• Hand-outs containing articles, statistics, and theoretical support
• Delegates’ own ideas, experiences and questions
• The Course Director’s extensive experience in global investment management
• Comprehensive supporting literature and statistical research from different reliable sources

Computer-based exercises

All delegates are encouraged to bring along their laptops to facilitate in-class studies and exercises.

Who should attend this training course?

• Investment heads and managers
• Portfolio managers
• Asset managers
• Fund managers
• Private bankers and wealth managers
• Investment advisors and family office representatives
• Bank relationship managers
• Securities sales and distribution representatives
• Securities brokers
• Financial advisors and family offices
• Legal, compliance, and regulators
• Wealthy private investors

 Supporting publications

   

Day 1: Criteria and tools designed to strategically manage the risk-return equation

Introduction: investment management sector up-date

• Up-date on the continuing effects of the credit crunch and financial crisis
• Main changes in the financial and investment management sector
• Constructing new investment management criteria to successfully manage the 2012 economic and
  financial challenges
• Designing an investment strategy for different economic recovery scenarios

A strategic approach to managing investment risk

• Defining risk and its different sources
• Re-defining risk after the credit crunch and financial crisis
• Evaluating different quantitative tools and criteria to measure and manage risk
• Examining the concepts of uncertainty and risk
• Are these concepts the same?
  Are they measured and managed differently?
• Relevance and value of Harry
  Markowitz’ Modern Portfolio Theory in today’s world
• Markowitz’ concept of portfolio risk and its measurement
• Considerations when using the variance and covariance analysis
• Probabilities of occurrence and normal distribution concept in an abnormal financial world
• Calculating the standard deviation of a portfolio composed of different asset classes with different correlations
• The problem of correlation in our asset allocation strategy
• Portfolio optimisation and the efficient frontier concept
• The limitations of optimisation models in portfolio management
• The client’s investment needs vs. mathematical recommendations
• The efficiency of asset allocation models in scenarios of changing correlations, volatilities, and expected returns

Exercise: Delegates will discuss in groups how efficient and successful their quantitative tools and criteria have been in managing volatile markets and will analyse in an Excel spreadsheet provided by the Course Director, the effects of positive and negative asset correlations when measuring the volatility of a multi-asset class portfolio.

Post modern portfolio theory: a strategic view on down-side risk

• Understanding the concept of downside risk and its importance in meeting investment goals and managing investment risk
• Fundamentals of Post Modern Portfolio Theory
• Assessing investment risk according to the investor’s investment goals
• Measuring risk below the client’s Minimum Accepted Return (MAR)
• Using the semi-variance and down-side volatility to measure risk according to different risk profiles
• Managing investor’s expectations and investment goals with Port Modern Portfolio Theory – a quantitative approach to satisfying client’s needs
  
  Case study: Delegates will analyse a practical case that illustrates the differences between the total
  volatility and the down-side volatility of two assets – determining which asset offers more risk considering the client’s minimum accepted return.

Pricing risky assets: how much return should and investor require for taking risk?

• Relevance of Markowitz’ Capital Market Theory and William Sharpe’s and Jack Treynor’s Capital Asset Pricing Mode (CAPM) in calculating required rate of returns for risky assets
• Examining the CAPM variables and their efficiency in determining risk premiums
• Practical uses of the CAPM in determining the strategic value of an asset
• Using the Securities Market Line (SML) concept to spot over-valued and under-valued assets
• The market reality of the CAPM
• Practical uses in corporate finance and asset management
• Limitations and problems of Beta as a risk measure
• Adjustments to Beta and the CAPM for practical uses
  
  Exercise: Delegates will calculate the expected and the required rates of return of different assets,
  in order to determining which assets are undervalued, fairly valued, and overvalued, using the CAPM.
  
• Relevance of Steven Ross’s Arbitration Pricing Theory in calculating required rates of return for risky assets
• Incorporating macro and microeconomic variables into our model
• Comparing the Arbitration Pricing Theory to the CAPM
• Practical difficulties of implementing the Arbitrage Pricing Theory
• What can investors learn from the Arbitrage Pricing Theory when calculating risk premiums

Exercise: Delegates will calculate the required rate of return of different assets using the Arbitration Pricing Theory, and compare these returns with those obtained using the CAPM.

Risk adjusted performance measures

• Determining the efficiency of the riskreturn equation in portfolios composed of different asset classes
• Is the investor compensated for the risk taken?
• Analysing different risk-adjusted performance ratios
• The Sharpe Ratio
• The Treynor Ratio
• The Sortino Ratio
• Other tailored-made risk-adjusted return ratios
• The concept of Alpha according to Michael Jensen
• The real meaning of Alpha
• The strategic value of Alpha and its misconceptions in portfolio management
• The expected benefits of “Portable Alpha” and the investment risks incurred in its pursue

Exercise: Delegates will compare the returns and risk indicators of different portfolios to determine
which portfolios were more efficient considering different risk profiles.

Asset allocation exercise: group practical application

Exercise: In small groups delegates will conduct an asset allocation exercise in a given Excel spreadsheet, with the objective of achieving a desired return within specific risk parameters and limitations. The spreadsheet will incorporate all of the concepts and quantitative measures learned during the day. The course Director will provide feed-back to each group and will analyse the asset allocation’s performance in an adversely critical financial scenario.

Day 2: The importance of economic cycles and indicators in the investment growth strategy

Investing through the different economic cycles

• What are economic cycles and what causes them?
• The causes of economic recoveries, expansions, slow-downs and recessions
• Analysing what asset classes and sectors outperform the rest in different economic cycles
• Economic indicators to watch during the cycles
• Macroeconomic figures
• Monetary and fiscal policy
• Stimulus, demand and supply shocks
• Experiences and realties behind the economic indicators

Exercise: Delegates will analyse different up-dated global economic indicators and their significance in asset allocation and portfolio management.

Strategically managing growth in emerging markets

• Concepts and criteria for defining emerging markets
• What are they and why invest in them at all?
• Do they ever stop being emerging?
• World strategic importance of emerging markets
• Statistics, trends, and facts
• The stages of development of an emerging market
• The emerging market cycle
• Factors that begin and end the cycle
• Emerging markets opportunities and risks
• Constructing investment management criteria to successfully manage investments in emerging markets

Case study: Delegates will analyse the different experiences of investors in Emerging markets in
the last decades, examining the different crises in Asia, Latin America and Europe. Delegates will analyse the common factors and signs of warning of Emerging Markets before a crisis, proposing
an investment strategy that would allow them to earn rewarding returns with an efficient investment risk management strategy.

Using equity portfolios to achieve strategic value and growth

• Unique characteristics of equity investments
• Benefits and considerations to the investor
• An accounting and legal view at equity investments
• Approaches to stock valuation
• Comparing discounted cash-flow models to relative valuation models
• Earnings: historical trend analysis and realistic forecasting
• Where is the value in equity?
• Spotting the difference between cheap prices and great value
• Analysing beyond equity ratios and market multiples
• What ratios and multiples really mean and what they do not show
• Understanding ratios of efficiency, size, value, growth, and distress
• Dividend Discount Models in today’s financial scenario

Case: Delegates will analyse market and financial ratios of different companies from chosen sectors in order to choose the ones that would offer more value, more growth, and are better managed companies.

• Discounted cash-flows models
• Rational, characteristics, and value drivers
• Perpetuity method and residual value
• Limitations of the valuations methods
• Issues when valuating distressed companies
• Is there any value in a company with negative earnings or negative equity?
• Credit and company risk indicators
• Credit risk ratings for corporate issues: crossing the investment risk between debt and equity

Practical company valuation case: analysing value under different valuation models and approaches

Case study: Delegates will go through an equity valuation using the DCF (discounted free cash flows method) to then compare the valuation with market multiples such as PER, PEG, and multiples of EBITDA, book value, sales, assets, cash-flow, etc. The aim is to detect possible economic value not incorporated in the market price or an overpricing of the equity in the market place using different valuation methods and approaches.

Day 3: The strategic use of alternative investments during critical scenarios and the postcrisis recovery phase

The universe of alternative investments

• The universe of investing opportunities and the rational for alternative investments
• The limitations and restrictions of traditional investment funds
• Mutual funds and special funds vehicles
• Legal structures, style, practical uses, and fees
• Evolution, pros and cons and the reason for alternative investments
• The problem of product offering differentiation and the investment strategy performance through time

Benefits and risks of exchange traded funds and their strategic use in a portfolio

• The concept of an exchange traded fund and the concept of indexing
• Exchange traded funds (ETFs)
• Rational for using ETFs in the asset allocation process
• Comparing the benefits of ETFs for the investor and for the fund manager
• Types and legal structures
• Different structures provide different risks
• Hidden risks and issues of ETF’s
• The effect of ETFs in the investor’s portfolio

Case study: Delegates will analyse different structures and types of ETF’s determining the risks and
the benefits for both the investor and the portfolio manager.

Evaluating the risks and benefits of using hedge funds and specialty funds in our investment strategy

• What are really hedge funds about?
• The legal concept and definition
• Origins and characteristics
• Legal vehicles available
• The hedge fund universe
• By styles, strategy, tools, type of assets, sectors, and securities
• Rational of hedge funds in the investor’s portfolio
• Hedge fund structures and fees
• Absolute returns vs. relative returns
• Analysis of the following hedge funds strategies
• Macrocentric or global macro
• Managed futures
• Emerging markets
• Long-short
• Equity market neutral
• Distressed securities
• Merger arbitrage
• Multi-strategy
• Fund of hedge funds
• Values-based investments
• Hedge funds collapses and crashes
• Misconceptions of hedge funds
• What are the alternatives to including hedge funds in the investors’ portfolio?
  
  Case study: Delegates will analyse different proposed hedge funds characteristics, fee structures,
  styles and strategies, and vehicles, in order to choose the more suitable ones to match different
  clients’ profiles and requirements.

A strategic approach to investing in private equity

• The concept of private equity and its strategic relevance in an investor’s portfolio
• Different types of private equity transactions
• Direct investing
• Private equity funds
• Start-up projects, venture capital, buy-outs, capitalising stable companies
• Different risks different returns
• Discovering the value in private equity
• Stages in a private equity investment
• Planning the exit
• The importance of planning the way out of the transaction
• Integrating private equity in the investor’s portfolio
• Where is private equity in the efficient frontier?
• How does it improve the risk-return equation of the portfolio?

Day 4: Managing portfolios with a strategic approach and investor’s expectations with behaviour finance

Strategic asset allocation

• The strategic view to investing and its process
• The benefits of strategic investment vs. trading and following the market
• The impact of market perception and market reality in our portfolio
• The importance of the cycle of earnings expectations
• Setting objectives that can be defined, quantified, and achieved successfully
• Types of asset allocation
• Strategic, tactical, integrated, and other unique types
• Asset allocation styles and their strategic use
• Macro economic top-down allocation
• Microeconomic bottom-up allocation
• Fundamental vs. technical analysis
• Active and passive asset management and their strategic use
• Comparing different investment strategies
• Buy and hold, market timing, growth, value, GARP, quality, income, cost averaging, contrarian,
  etc.

Market efficiency and the behaviour finance anomalies

• The fundamentals and implications of Eugene Fama’s Market Efficient Theory
• Analysing the case of rational markets with irrational investors
• Investors’ believes and expectations
• What do our clients believe and
  what do we believe regarding market efficiency and the risk-reward equation?
• Managing investor’s expectations, needs, and portfolios using behaviour finance concepts
• Fundamentals of the behaviour finance discipline
• Psychology applied to finance: framing and cognitive biases
• Description of the main anomalies analysed by behaviour finance
• Behaviour finance ratios and market indicators
• Analysis of different behaviour anomalies and biases including: loss aversion, regret, herd
  behaviour, confirmation bias, hindsight bias, mental accounting, over-reaction and over-confidence, winner’s course, and other chosen ones based on delegates’ experiences
• Constructing portfolios using behaviour finance concepts
• Products that match clients’ believes, preferences, and risk aversion attitude
• The cycle of emotions and the cycle of bubbles
• Integrating traditional, quantitative, and behaviour finance managers styles

Exercise: Delegates will analyse how to spot behaviour anomalies, preferences, and requirements
among their clients by using behaviour profiling and questioning techniques.

Technical analysis and market timing: the tactical approach

• Incorporating a tactical view in our long term strategic approach
• The benefits of determining market trends in our strategy
• The value of technical analysis
• A practical use of technical analysis
• Misconceptions of technical analysis
• What technical analysis shows and does not show
• Determining market trends and trend changes
• Charting, volume, moving averages and technical analysis main indicators
• Integrating technical analysis to fundamental analysis
  
  Exercise: The delegates will analyse different market movements in order to determine if there is a bullish, bearish, or side-ways trend. In addition, the delegates will determine if the market movements present an opportunity to buy or to sell.

Portfolio rebalancing

• Monitoring the investment process and investment mandate
• Objectives, planning, execution, and control
• What is rebalancing and why should we do it?
• When should we rebalance?
• How to conduct an efficient rebalancing: what do we look for?
• The benefits and costs of rebalancing and the costs of not rebalancing
• Meeting our investment goals through rebalancing

Closing session

• Brief questions and answers session
• Course Director’s recommendations and summary
• Analysis of additional training needs
• Course valuation on behalf of the delegates

• Eduardo Bustos

  Mr. Bustos is an accomplished investment management professional dedicated to designing and delivering investment finance training programmes, aimed at enhancing the skills, knowledge and competencies of professionals engaged in asset and wealth management, investment products structuring, and client relationship management. His areas of expertise include strategic asset allocation and portfolio management, private banking and wealth management, behaviour finance, equity investments, and emerging markets.

  Mr. Bustos is a Course Director for Euromoney Training and its subsidiary DC Gardner Training, and has accomplished numerous training projects in America, Asia, Europe, and Latin America. Mr. Bustos trains in both English and Spanish and possess a global cultural and professional background as a result of having studied and worked in Latin America, Europe and the United States.

  Mr. Bustos began his career in the mid 80’s in the area of international credit with First Interstate Bank of California (presently Wells Fargo), acquiring valuable experience in credit risk assessment and restructurings as a result of different Latin American crises. He initiated his investment management career by managing a Private Investment Services firm -Family Office, in Texas, USA, where he structured and distributed discretionary alternative investments to high net worth investors.

  In 1992, Mr. Bustos joined Citigroup in Buenos Aires, where he headed the Research Department to later become the Senior Equity Portfolio Manager for all equity mutual funds and discretionary portfolios. He was an active and permanent member of Citibank’s Emerging Markets Investment Committee based in London, and of the Account Reviews Committee in Buenos Aires. He travelled world-wide conducting presentations on macroeconomic trends and recommending equity portfolios to mutual funds directors, institutional investors, and to the bank’s senior management. Mr. Bustos’ product knowledge and global background allowed him to join Citibank’s Private Banking Group as an Investment Product Specialist, coordinating the product offering and sales budget of the sector. Mr. Bustos counselled Private Bankers on product and portfolio management and advised ultra-high net worth investors on portfolio strategy. He was a permanent member of Citibank’s Private Bank Product Panel of New York.

  In 2000, Mr. Bustos joined HSBC in Buenos Aires, as an Investment Product Manager for the Asset Management Group, with the responsibility of developing a wide range of alternative and structured investment products for the Private Bank and Pension Fund of the group.

  By the end of 2002, Mr. Bustos moved to Madrid, where he became an Independent Global Investment Consultant providing consultancy and coaching services to Latin American wealth management firms and high net-worth investors on investment strategy and investment business development. In 2007, Mr. Bustos moved to London, where he initiated his activity as global Trainer and Consultant in the investment management sector.

  Presently, Mr. Bustos resides in Washington D.C., USA, from where he continues to conduct training, coaching and consultancy services for global investors, private bankers, wealth and asset managers focusing in the development of a new investment culture that will enable the investment management businesses to grow during the recovery phase of the present economic cycle

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.

Private Equity and Leveraged Transactions

18-20 Jun 2012 (Singapore, Singapore)

This course reviews critical aspects of private equity and includes the analysis of several private equity deals and leveraged buyouts, including a series of Asian transactions.

Portfolio Performance Measurement and Attribution Analysis

21-23 May 2012 (Hong Kong, Hong Kong)
15-17 Oct 2012 (Singapore, Singapore)

Portfolio performance measurement is the quality control element of the investment decision process. It provides the necessary information to enable asset managers and clients to assess exactly how their money has been invested and the results of the process. Performance measurement is a core part of the decision process providing essential information to several key stakeholders.

Asian Investment Management School

3-7 Sep 2012 (Hong Kong, Hong Kong)

This 'Asian Investment Management School' will give you all the in-depth information you will need to advance your investing skills through structured study, group exercises and investment simulations.

Exchange Traded Funds (ETFs) Masterclass

31 Oct 2012 - 2 Nov 2012 (Hong Kong, Hong Kong)

This unique new masterclass will help you navigate the rapidly evolving world of ETFs and understand the role of the different players in the structuring, management, administration and marketing of ETFs.

Pension Fund Strategy

28-30 Nov 2012 (Singapore, Singapore)

This comprehensive course addresses many of the pension issues from both the asset and liability perspectives to give you a holistic appreciation of the complex issues involved.

Global Macro Allocation Strategies

20-23 Mar 2012 (Hong Kong, Hong Kong)

This course will advocate an holistic approach to macro market analysis and investing and will explain this approach by examining inter-relationships across all relevant asset classes as expressed in the day to day co-movements revealed in global markets. The advertised price is our Early Bird Discount. Early Bird Deadline is 21 February 2012. Register and pay before this date to receive this special discounted rate.