Fixed Income Portfolio Asset Allocation This course can also be presented in-house for your company or via live on-line webinar

Transcription

1 Fixed Income Portfolio Asset Allocation This course can also be presented in-house for your company or via live on-line webinar The Banking and Corporate Finance Training Specialist

2 Course Objectives Participants will: Be introduced to recent industry developments Get an overview of the risks associated with fixed income portfolios Have explained to them the investment policy, review and impact Master asset allocation strategy Gain an understanding of asset allocation, including understandind the cell-based approach and Course the primary Overview risk factors Learn about benchmarking including benchmark, choice and investment objectives, risk factor cascade and the use and misuse of risk-based weighting schemes. Course Content Introduction Welcome, course objectives Recent industry developments -Exchange Traded Funds - ETFs, -Smart Beta -Constraint investing strategies -Outcome orientated funds -return orientated -unconstrained orientated The passive and active debate 'redefining active management' - Alpha: manager skills or good fortune? - Academic evidence - the Fixed Income portfolio management exception Case Study: Analysing an outcome orientated fund historical returns versus political and macro-economic news Risks associated with Fixed Income portfolios Credit risk Political risks Event and jump risks Concentration risk Asset types Curve Sector Country Geographical risks Political Regional Volatility risk Interest rate risk Duration risk Refinancing risks Liquidity and funding risks Systemic risk Tracking risk Identifying and managing riks Case Study: Smart beta and risks Investment policy: review and impact Setting investment objectives

3 How to define constraints Establishing the investment process Setting Investment Objectives vs constraints Establishing Investment Policy Scope, context and purpose Investment, return and risk objectives Risk Management Selecting a Portfolio Strategy Active Passive Combination Dedication Immunization Benchmarking Selection of assets Tools to measuring fund performance The performance evaluation process Asset Allocation Strategy: a review of the theory Diversification and portfolio risk The flaws with Markowitz assumptions Asset and portfolio risk and return Capital Asset Pricing Model - CAPM The meaning of Beta and expected return for fixed Income portfolio Duration «Beta» Definition and use of Alpha Efficient market hypothesis - EMH Weak form Smi-strong Strong form EMH and active versus passive management styles The flaws in the efficient market framework The key advantages of the Black-Litterman model Black-Litterman compared with the standard approach Case Study: applications of the theories Understanding asset allocation Asset allocation decision Link between portfolio construction and theory Understanding the cell-based approach The limits of the cell-based method Primary risk factors Systematic risk factors Idiosyncratic risk factors Multi factor modeling for portfolio construction Practical risk decomposition steps Computation of the tracking error Analysis of the tracking error The role of tracking error Beta-type measures Rebalancing issues Case Study: Calculating and analysing tracking errors on a portfolio return

4 Benchmarking Defining benchmarks Benchmarks compared with market indices The «normal» portfolio approach Benchmark choice and investment objectives Strategies for benchmark-driven fixed income portfolio management Benchmark selection process The meaning of risk factors in practice Risk factor cascade Enhanced indexing strategies The issues with market-cap weighted indices The Bum s and other problems The limits of conventional bond benchmarks The use and misuse of risk-based weighting schemes Monitoring active return, tracking error tracking difference Separation of alpha and beta Case Study: using a benchmark to monitor the management of a portfolio Final discussion and close Course Summary The fixed-income asset class is very large in terms of notional outstanding and comprises a great variety of different instruments such as corporate and government bonds, supranational and municipal bonds, mortgage-backed securities, inflation-indexed debt to name but a few. This programme aims to give delegates an understanding of the key parameters, methods and models used in the allocation process. We will review some of the more recent developments in the fixed income portfolio management area, the risks inherent to portfolio management and the critical steps in investment policy. The programme will endeavour to discuss portfolio management theories, analyse their meaning for practitioners and compare current practice with empirical evidence of the theories. We will particularly focus on the various elements of portfolio construction, examining risk decomposition for portfolio management geared toward benchmarking, after an understanding of key risk factors related to investment policy constraints. We will also discuss best practice in the approaches to the strategic and tactical allocation process, the practical use of the multi factor model, and the appropriateness and choice of internal or external benchmarking. The workshop style programme uses a variety of teaching methods including relevant case studies, illustrative examples, multiple choice questionnaires and participant interaction to help attendees quickly grasp and internalise new knowledge. Participants will be invited to discuss examples and case studies in groups in order to relate them to their own firm s experience and gain a practical understanding of key concepts.

5 Tailored Learning All of our training courses can be tailored to suit your company s exact training needs. We will work closely with you to help develop a training programme with content that is unique for your organisation. Please us on enquiries@redcliffetraining.co.uk for more information E-Learning This course can also be presented as a bespoke e-learning programme created by you to fit your exact requirements.