3 major steps of Portfolio mngmt
- PLANING (RR TT LL U)
. Risk tolerance
. Returns
. Time horizon
. Tax
. Liquidity
. Legal
. Unique investor preferences
Results : IPS (investment policy)
- EXECUTION (asset allocation)
Analysis of risk and return of various asset classes
Economics conditions, assets classes, etc.. ( asset allocation)
Bottom-up securities analysis and pick
- FEEDBACK
Monitor and rebalance
Types of investor (companies and individuals ) and characteristics (6) (liq. Risk , time horizon)
- Individuals (all depends)
- Banks - High liquidity, short horizon
- Endowments - low liq. High horizon (perpetual), High risk tolerance
Including Charitable foundation kakak
- Insurance - low risk, high liq.
Long horizon - life
Short horizon - prev - Mutual funds - liq high, rest depends
- Defined benefit pension - high horizon, low liq, risk high, income depends
What type of investment Most likely to trade in NAV (net asset value)
Open - end mutual fund
MtM of share
Do Hedge funds have a good amount of regulation?
No. Exempt from reporting of typical public investment
Differences between
Buyout funds = Private equity funds
and
VCapital
BF = Few large investments
VC = “short time” horizon, small investments
Pensions Plans (2)
Defined benefit - risk employer
Defined contribution - risk employee
Money market funds
Short term investments
Overnight to 90days
Treasuries, commercial papers
