The purpose of this seminar is to give you a good and practical understanding of the state-of-the-art methods and tools for managing investment portfolios.
First, we discuss the challenges that face investors and investment managers in the aftermath of the global financial crisis. We discuss how these challenges can be taken into account when formulating investment objectives, policies and benchmarks. We also discuss the increasing impact of “behavioral” (non-rational) considerations in investment decision making, and we explain how this may lead markets becoming increasingly non-efficient, in violation of many of the assumptions behind “modern” portfolio theory.
We then take a closer look at the various traditional and alternative asset classes and their historical and prospective risk-return characteristics and we explain how funds can be allocated to these asset classes using a pragmatic “pyramid” approach as well as the optimization techniques suggested by modern and post-modern portfolio theories. We also explain how dynamic asset allocation strategies such as “constant mix”, “constant proportion portfolio insurance”, “contingent immunization” and “option-based portfolio insurance” can be implemented to obtain the optimal risk-return profile, or to manage surplus risk, under various market conditions.
Further, we explain how an alternative low-volatility investing strategy can be designed and implemented and how this strategy may lead to the achievement of market returns with lower risk. We also we explain how to manage “surplus risk” and how the increasingly popular “Risk Budgeting” technique can be used to allocate “risk units” to optimize the risk-adjusted returns across managers and asset classes.
Finally, we explain and demonstrate how derivatives can be effectively used in managing investment portfolios. Examples include synthetic investing with futures, hedging of duration risk, tactical asset allocation, “insurance” strategies with options and “overlay” strategies with swaps.