A modern institutional investment management firm’s front office has what four main areas of responsibility?
- portfolio management
- trade execution
- sales and marketing
- client service
What are the two primary duties of the chief investment officer?
- providing general mgmt of the firm’s investment management function and the supervision of their direct reports (ie. head of equities). This position doesn’t normally have any involvement in the daily management of the firm’s various portfolios
- acting as the chair person of firms asset mix committee
What is the primary purpose of the asset mix committee?
-to establish the target asset mix, which is the desired market value weighting for the major asset classes included in the firm’s various balanced fund portfolios
What are the key responsibilities of the head of equities?
- providing direct managerial supervision to the firm’s equity portfolio managers
- being involved in decisions to change the sector mix or cash weightings in the firm’s various equity portfolios
What are the key responsibilities of the head of fixed income?
- providing direct managerial supervision to the firm’s fixed income portfolio managers
- being involved in tactical investment decisions for the firm’s fixed income portfolios
What is the typical career path of an institutional portfolio manager?
- investment analyst
- assistant portfolio manager
- portfolio manager
- asset class head
- chief investment officer
What are the three primary reasons that client service is imperative for institutional investment firms?
- client service demonstrates to investors a firm’s level of commitment to the delivery of an entire institutional investment management service- one that goes beyond performance results
- if done well, client service can be a defensive mechanism that helps a firm retain investors in the event that its performance starts to deteriorate
- if done well, client service reduces the amount of time a PM is out of the office presenting and meeting with current and potential investors
Internally, a firm’s sales and marketing staff primarily interface with its ______________.
Portfolio management staff
A firm’s client service staff primarily interface with ___________ and ___________.
- portfolio managers
- fund accounting staff
A typical annual client review process is done ______ and ______.
- Monthly
- Quarterly
Portfolio accounting information typically includes the following:
- detailed portfolio holdings
- a report on all security transactions
- an income report
The portfolio management information portion of the quarterly report typically includes what four things?
- return data
- holdings data
- attribution analysis
- market commentary
List the front office best practices
- performance measurement (middle office staff solely responsible for calculation)
- dual signatures
- employee personal trading (pre-trade permission, send trade confirmations and statements)
- investment management agreement (salient terms and conditions)
- investment guidelines and restrictions
Investment guidelines and restrictions service what 4 potential benefits?
- Explain particular investment style and strategy (uniqueness)
- Explains future investment performance
- Protects against a claim from an investor should investment results be particularly poor
- Helps increase the probability that investment performance will be more consistent and less volatile
What are the three basic types of institutional clients?
- Institutional investors (non mutual fund clients)
- Mutual fund sponsors
- Individual investors (high net worth clients)
For institutional investment managers, new asset management opportunities arise in what 2 situations?
- dissatisfaction with their current institutional investment manager
- institutional investor is expanding their investment fund product mix and has decided to add new investment managers with skills in these new mandates
What are the three primary steps in the institutional sales and marketing process?
- Creating sales and marketing literature
- Determining a sales and marketing approach
- Preparing a presentation to potential investors
Sales and marketing materials introduce the firm to potential new investors and tend to focus on what four main topics?
- A brief history of the firm, current ownership structure, and an organizational chart
- Investment mandates
- Investment strategy and investment decision-making process
- Portfolio performance track record
What are the two basic sales and marketing approaches for intuitional investors?
- Direct contact
2. The use of pension consultants
Regarding the use of pension consultants sales and marketing approach, what is the primary objective?
- to have a umber of pension consultants agree to conduct a due diligence review of the firm
- afterwards, the firm becomes part of the consultants proprietary database of institutional investment managers
For what three main reasons is three years is generally considered the minimum amount of time a firm must be in operation in order to receive consideration?
- Evaluate the robustness of the firm’s investment management strategy
- Determine whether the firm’s partners can operate all aspects of the firm properly and effectively
- Test the cohesiveness of the partnership
Regarding losing clients, contract terminations tend to be a result of one or both of the following:
- Weak investment performance
2. Low-quality client service
