Course Summary:

The program is designed as a pilot course on a risk focused approach to pension fund management and supervision. Within the framework of a risk focused approach, case studies and vignettes will be used to examine the desired outcomes of a pension system, identify and assess the risks involved in achieving those outcomes, the chronology of problem evolution, and how to resolve the problems.

The program will be highly interactive and practical, using case studies, group discussions, and breakout sessions to foster debate and effectively transfer knowledge from the vast and deep experiences of our program leaders and all of the participants joining us from around the world.

Course Objectives:

• Understand what institutional investors are and how they operate
• Identify the characteristics of the principal asset classes
• Identify and distinguish between the principal investment products
• Understand the importance of establishing investor preferences
• Understand the basic principles of portfolio construction
• Distinguish between active and passive portfolio strategies and styles
• Differentiate between equity and fixed income management styles
• Understand the interaction between institutional investors and brokers/investment banks

Course Outline

INTRODUCING THE INVESTMENT MANAGER

• What is investment management?
• Industry development, ownership and structure
• Industry drivers
• Current trends and themes

THE INVESTMENT MANAGEMENT PROCESS

• Establishing investor objectives
• Investment return profile
• Risk tolerances and investment constraints
• Portfolio construction and risk management
• Portfolio monitoring and administration
• Performance evaluation –measurement and attribution

PRINCIPALS OF PORTFOLIO CONSTRUCTION

• Strategic asset allocation – definition and formulation
• Principal asset characteristics - expected return and volatility (risk)
• Typical strategic weightings and a stylized investment cycle
• Tactical asset allocation
• The concept of correlation
• Diversification and the efficient frontier

KEY PLAYERS IN THE INVESTMENT DECISION PROCESS

• The asset allocation committee
• The Trustee Board and consulting actuaries
• The portfolio manager and the ‘buy-side’ analyst
• The centralized dealing desk

MANAGING AN EQUITY PORTFOLIO

• Active equity investment strategies – motivations and characteristics
• Styles: growth, income, value, technical etc.
• Passive equity investment
• Strategies – motivations and characteristics
• Methods: replication, sampling, optimization and synthetic
• Hedge funds: a different active strategy

MANAGING A FIXED INCOME PORTFOLIO

• Active fixed income investment strategies – motivations and characteristics
• Passive fixed income investment strategies – motivations and characteristics

FUND MANAGEMENT AND DERIVATIVES

• The major products: equity, debt, foreign exchange
• Equity options: volatility / delta /gamma
• Equity futures / equity swaps
• Fixed income derivatives / interest rate swaps
• Credit derivatives / default swaps

INVESTMENT PRODUCTS – AN OVERVIEW

• Pension funds – defined benefit and contribution
• Collective investment schemes –mutual funds, unit trusts & OEICs
• Investment trusts
• ISAs
• Exchange-Traded Funds (ETFs)
• Hedge funds – the new investors
• Private client wealth management