Modern Equity Portfolio Management
September 28-30, 2009 • FRANÇOIS-SERGE LHABITANT
Over the past few years, portfolio management has become significantly more complex due to the volatile performance of markets and the emergence of new financial instruments and trading techniques. As a result, quantitative techniques have emerged as a required pillar to build better portfolios and monitor them.
Objectives: The course focuses on fundamental quantitative concepts in equity portfolio management. Participants will gain a clearer and more extensive understanding of how to determine the real investment style of both long only and long/short equity portfolios. Participants will also learn how to analyze the performance of a given equity portfolio, and how to implement and what to expect from dynamic portfolio strategies.
Lecture modules are illustrated with real-world examples and practical case study discussions and intertwined with group discussions and computer assignments.
The Fall 2009 edition of this course will place special emphasis on capital protection for equity strategies - CPPI, volatility-cap, dynamic risk allocation. It will also feature a discussion of the collapse of "Quant hedge funds" in mid 2007 and again in Q4 2008 with a view of assessing the failures, weaknesses and dangers of pure quantitative equity strategies.
Target audience: The course is designed for professionals in the portfolio management industry, e.g. private client portfolio managers, institutional fund and fund of funds managers, and fund analysts. Basic knowledge of modern portfolio theory and statistics is required.
Fees: The fee for this course is CHF 4’700 (incl. VAT). This covers tuition, extensive course material (including pre-course readings), lunches and an official event.
Accreditation: CFA 21 CE credits
Key topics: factor models; style analysis and extensions; managing alpha versus managing beta exposures; dynamic allocation strategies for equities
COURSE CONTENT
Monday
Style classification and style analysis:
- Style classification systems and the role of style indexes;
- Factor-based, statistical (PCA), macroeconomic and fundamental (Barra-like) models;
- Discussion of the Sharpe style analysis model and its extensions (switching regressions, Kalman filters and smoothers).
Application: Evaluating the investment style of equity mutual funds.
Long/short equity portfolios:
- From long only to long/short – the rationale;
- Gross exposure, Net exposure, Market neutrality, Exposure dynamics;
- Fundamental stock selection, statistical arbitrage and market neutral investing;
- Managing alpha versus managing beta exposures.
Application: Evaluating the investment style of equity hedge funds.
Tuesday
Performance evaluation and attribution:
- The sources of performance: Timing versus selectivity;
- Sharpe ratios, Treynor ratios and Jensen’s alpha;
- Tracking error and information ratios;
- Performance analysis and factor models;
- Discussion of the Brinson and the Karnosky and Singer performance attribution models.
Application: Evaluating the performance of equity mutual funds.
Wednesday
Dynamic equity portfolio strategies:
- Constant mix; Volatility cap; Constant Proportion Portfolio Insurance; Risk-based portfolio insurance;
- Building trend following systems;
- Option based strategies: Covered call writing; Protective put buying.
Application: Creation of dynamic trading factors to analyze hedge fund strategies.
New developments:
- Monte Carlo analysis and portfolio risk analysis;
- Extreme value analysis.
Application: Monte Carlo value at risk.
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