Portfolio Management Techniques


The principal aim of this course is to develop and enhance participants' skills that are commonly used in asset allocation decision and equity as well as alternative investment management. The course starts of with statistical and theoretical approaches to fund management, asset allocation, investor profiles and behavioral finance applications. The 2nd focuses on equity portfolio management including asset pricing models, portfolio management techniques, indexing strategies and emerging market equities. The last day is dedicated to alternative investments and performance measurement. The last case study will allow participants to use all topics learned during the previous days to evaluate a group of investment portfolios.

On completion of 3-day training course you will be able to:
  • Strengthen your understanding of modern portfolio theory
  • Understand the process of building efficient portfolios of bonds, equities and alternative investments
  • Know about the importance of behavioral investment biases
  • Appreciate the specifics of emerging markets equity portfolio construction
  • Gain an insight in alternative investment strategies as portable alpha and the use of derivative strategies
  • Learn about performance measurement, evaluation and attribution
  • Day 1

    We begin the course with an introduction to the fundamentals of today’s portfolio management – Modern Portfolio Theory (MPT). We will explore concepts such as efficient frontier, risk/return trade-offs, the asset allocation process and conclude the day with a look at investor characteristics and new developments in behavioral finance.

    Principles of modern portfolio management (1 session)

    Introduction and objectives
  • Overview of course
  • What is Portfolio Management?

  • Statistical and theoretical approaches to investment management
  • Commonly used statistical measures
  • Diversification and the creation of efficient frontier using Markovitz mean variance model
  • Risk vs. return trade-off
  • Other applications of Modern Portfolio Theory (MPT)
  • Essential asset pricing models

  • Case study –Portfolio management decisions

    Participants will be given a historical portfolio of common stock, debt securities and other assets and will be asked to calculate related portfolio statistics: expected returns, standard deviation of returns, covariance, correlation coefficients and beta of the assets. Participants will then use this information to construct an efficient portfolio.

    The asset allocation strategies; Strategic asset allocation using investors risk tolerance, characteristics and qualities(2 sessions)
  • Steps in the portfolio management process
  • Analyzing risk and return objectives
  • Influence of political and economic factors in determining optimal asset mix
  • Types of asset allocation: Fixed, flexible, strategic and tactical asset allocation
  • Overcoming greed-fear cycle for rational investment decisions
  • Strategic vs. tactical AA
  • Investor psyche: overcoming greed-fear hurdle to optimize investors’ returns.
  • Measuring investors risk tolerance to decide asset allocation
  • The cases for and against international diversification

  • Case study: Strategic asset allocation

    Participants will be given a background information for a variety of different investors and asked to design appropriate portfolio mixes.

    Exploiting market anomalies and understanding behavioral finance for prudent portfolio management (1 Session)
  • The active vs. passive management debate
  • Growing importance of Behavioral Finance- Behavioral biases and their implication on portfolio returns.
  • Comparing momentum vs contrarian investment strategy using behavioral finance framework
  • Forecasting alpha using the Treynor-Black model for security selection

  • Exercise – The importance of behavioral finance topics

    Participants will examine how a series of behavioral investment biases affect optimal investment decisions as defined by MPT. Biases to be evaluated include:

  • Frame dependence
  • Overconfidence
  • Representativeness
  • Loss aversion

  • Day 2

    Equity portfolio management is often a critical component of overall investment success since equity securities often represent a significant portion of many investment portfolios. After a review of equity vital equity valuation techniques, we will discuss the role of equities in an investment portfolio, the major approaches employed to manage equities and conclude with a look at strategies used to manage international and emerging market equity portfolios.

    Equity portfolio management

    Asset pricing models revisited and equity valuation

    General principles (1 session)
  • Using the Capital Asset Pricing Model (CAPM)
  • Weighted Average Cost of Capital (WACC)
  • Fundamental equity valuation
  • Multiples analysis

  • Exercise – Using asset pricing models

    Participants will answer a series of questions related to applications of CAPM and equity valuation techniques

    Equity portfolio management-Active strategies (2 sessions)
  • Underlying drivers for use of equity
  • Issuer/investor perspectives
  • Selecting optimum portfolio using Sharpe’s single index model
  • Equity style management
  • Security selection approaches: top-down or bottom up
  • Establishing relevant benchmarks
  • Long-short vs. long-only strategies
  • Equitising market-neutral portfolios
  • Alpha / Beta separation
  • Applications of portable alpha

  • Exercise – Evaluating equity funds

    We will review several equity portfolios, discussing relative weightings, sector allocation and other important attributes affecting performance

    Equity indexing-Passive strategy (1 session)
  • Weighting schemes of major indices
  • Equity index futures and their role
  • Index mutual funds
  • Exchange-traded funds
  • Strategies and benchmarking approaches

  • International equity portfolio management
  • Constructing international equity benchmarks
  • Classification issues: Developed, emerging of frontier?
  • To hedge or not to hedge FX risk
  • Effect of home bias and information advantage

  • Case study – Emerging markets portfolio construction Participants will first examine some of the major issues confronting emerging market portfolio construction, including high correlations during crisis, cost of capital computation difficulties, and non-normal return distributions.Then, groups will prepare a presentation to investors demonstrating the advantages of an emerging market portfolio.

    Day 3
    Measuring and evaluating Managed portfolio’s performance and exploiting alternative investment strategies for superior portfolio performance

    Performance measurement, evaluation and attribution (2 sessions)
  • Computing sub-period returns and arithmetic average rates of return
  • Time- and dollar-weighted rates of return
  • Evaluating portfolio performance using risk adjusted measures.
    •     1. Sharpe ratio
    •     2. Treynor ratio
    •     3. Jenson’ s alpha
    •     4. Fama’s net selectivity
    •     5. Timing and style based measures
  • Overview of GIPS – Global Investment Performance Standards
  • Benchmark portfolios and return attribution analysis

  • Case study: Portfolio performance evaluation and attribution

    Case on raking various managed portfolios based on risk adjusted performance and attribution analysis of superior performance

    Alternative investment management & strategies (2 sessions)

    The alternative investments universe

    Different investments and their investor characteristics

  • Common features of alternative investments
  • Special issues for investment managers and advisers

  • Principal classes of alternative investments including:
  • Hedge funds
  • Private equity
  • Commodities
  • Real estate
  • Distressed securities

  • Alternative Investment strategies to create portfolios with superior returns
  • Hedge funds strategies
  • Key drivers of hedge fund returns
  • 130/30 Funds
  • Portable alpha strategies
  • The risk of hedge funds
  • Alpha and beta separation
  • Identifying suitable hedge funds
  • Core-Satellite programs
  • Use of derivative strategies

  • Exercise: alternative investment analysis
    Participants will evaluate different alternative investments and select suitable investors to match various portfolios.

    Participants attending the entire course shall be eligible to receive Participation Certificate from the BSE Institute Ltd.

    Portfolio managers, Equity and fixed income analysts, Wealth managers and private bankers, Independent financial advisors, Back and middle office professionals, Pension fund trustees

    3 days
    10.00 am to 5.30 pm

    Rs. 12,000.00 + Applicable Taxes per participant inclusive of tuition fees, reference material and (morning / evening) refreshments only.

    For further details regarding contents,
    E-mail: training@bseindia.com