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Asset Allocation and Portfolio Construction
This programme covers the latest trends in quantitative modelling for asset allocation and portfolio construction and highlights approaches which help improving real-world in investment decision processes by taking into account risk factors, capital market scenarios, estimation risk and generally real-world aspects in applied investing beyond mean-variance.
Innovations suggested over the last twenty years are contrasted with current industry practice and illustrated with examples with an eye for practical implementation. Perspectives are provided on the latest industry trends like Smart Beta and Machine Learning / Artificial Intelligence.
Six practical exercises simulate real-life key decisions in asset allocation and portfolio construction. Mathematical concepts are discussed and illustrated using Excel spreadsheets that delegates can take away.
Recommend to a ColleagueThis course is also available in London Time Zone and New York Time Zone
This course is FTS-Eligible* and also eligible for 24 CPD hours. GARP & CFA Institute members are eligible for 24 CE/CPD credits. See details
- Quants / Financial engineers
- Chief Investment Officers
- Portfolio and investment managers
- Fund and wealth managers
- Treasury and liquidity managers
- Risk managers
- Traders
- Strategists
- Comprehensive discussion of different approaches to portfolio construction
- Latest research trends and industry best practice and implications for practitioners
- Practical suggestions on estimation risk, model risk and advanced topics
- Workshops on all models and detailed teaching on quantitative concepts
- Basic knowledge of financial markets, asset classes and derivative instruments
- Elementary mathematics and statistics (probability distributions mean, variance and correlation)
- Microsoft Excel
*FTS Eligible
This programme is approved for listing on the Financial Training Scheme (FTS) Programme Directory and is
eligible for FTS claims subject to all eligibility criteria being met. Please note that in no way does
this represent an endorsement of the quality of the training provider and programme. Participants are
advised to assess the suitability of the programme and its relevance to participants' business activities
or job roles. The FTS is available to eligible entities, at a 50% funding level of programme fees subject
to all eligibility criteria being met. FTS claims may only be made for programmes listed on the FTS Programme
Directory with the specified validity period. Please refer to www.ibf.org.sg for more information.
Andreas Steiner is an independent consultant with over 15 years of practical experience in investment management. He focuses on investment process with related projects ranging from risk management to portfolio construction. He has published research on a wide range of investment topics - i.e. "Risk Parity for the Masses" in The Journal of Investing - and is currently working on a book covering asset allocation and applied portfolio theory.
Previously, Andreas held various roles at banks and fund management companies and was Head of Investment Risk Management at a private bank in Switzerland. He was also an external lecturer at the Zurich University of Applied Sciences, delivering courses on portfolio theory, performance analysis, international investing and Behavioural Finance.
Andreas holds a Master's degree magna cum laude in Economics from the University of Zurich specializing in Monetary Economics and Financial Markets. He is also a member of various industry associations related to investment performance and risk.
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a Brochure with full details for Asset Allocation and Portfolio Construction
Review of MPT and Traditional Asset Allocation Practice
- The impact of the Financial Crisis and the low-yield environment on investment management
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Review of Modern Portfolio Theory (MPT) - discussion of pre-course readings and questions
- The many definitions of “risk”
- A reinterpretation of Two-Fund-Separation as factor investing advice
- MPT applications: surplus management, active management relative to a benchmark
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Issues of traditional asset allocation industry practice
- Pseudo asset classes & diversification
- Risk characteristics of fixed weight policy portfolios
- Drivers of the success of rebalancing strategies
- Industry Trend: Factor-based asset allocation
Exercise: Factor risk budgeting in a mean-variance framework
An Overview of Newer Approaches to Asset Allocation
- Investment horizons and time-variable risk and return characteristics
- The case for flexible asset allocations: moving from static portfolio risk to managing portfolio risk and return dynamically over time
- Industry Trend “Smart Beta”: Is it a strategy, a product or a distribution approach?
Expected Returns & Return-Based Asset Allocation
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Return-Based Strategies:
- Market-cap-weighted passive & adaptive asset allocation
- Tactical asset allocation, strategic asset allocation
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Estimating expected returns
- Scenario-based approaches to return estimation: Markov-Regime switching models and approaches used in the industry
- Alpha estimation: benchmark-implied returns, Treynor/Black portfolios, Information Coefficient
- The Black/Litterman model & introduction to Bayesian Expectations
- Denoising with the James Stein return estimator
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Turning forecast scores into portfolio allocations without optimizers
- Turning rankings into scores
- Deriving risk-adjusted scores
- Taking into account restrictions: tactical bands, turnover, general linear constraints
Exercise: A macroeconomic scenario-based approach to risk and return estimation
Risk Expectations and Risk-Based Investing
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Risk-based investment strategies
- Minimum variance
- Risk parity
- Risk budgeting
- Equal-weighted
- Most-diversified, maximum diversification
- Drivers of the success of low risk investment strategies: interest rate regimes, market anomalies or factor risk premium?
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Time-varying risk characteristics
- Autocorrelation & volatility clustering
- Comparison of volatilities and correlation dynamics
- Understanding the positive relationship between risk and return
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Volatility and correlation matrix estimation
- Historical estimators, rolling and exponentially-weighted implementations, introduction to GARCH
- Properties of a valid correlation matrix, consequences of invalid correlation matrices
- Robust correlation estimators: average correlation matric, Bayesian shrinkage estimators (the Ledoit/Wolf approach)
- Handling asymmetrical dependencies and tail-risk dependence
Exercise: Developing a quantitative volatility trading strategy
Estimation Risk and Its Management
- A scenario-approach to explicitly taking into account uncertainty in expected returns and correlations
- The statistical nature of the efficient frontier: from confidence bands to the Resampled Efficient Frontier™
- Distorted risk and return: the impact of illiquidity, survivorship bias
- Robust portfolio construction approaches: minimizing regret
Exercise: Decision making under uncertainty in a scenario framework
Quantitative Portfolio Construction beyond Mean and Variance
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Overview of risk measures beyond volatility
- Downside risk measurement: semi-variance, LPM, VaR/CVaR
- Interim risk: drawdown measures (max drawdown, drawdown-at-risk)
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Higher moments
- Skewness and kurtosis as tail risk characteristics
- Their use in risk measurement and portfolio construction and estimation risk issues
- CVaR and LPM/UPM optimization: exact solutions and approximations
- Behavioural Portfolio Construction: Applying insights from Prospect Theory
- Random portfolios & convex hulls
- Understanding the advanced optimization algorithms: threshold accepting, simulated annealing, genetic optimizer
- Multi-criteria portfolio optimization: taking into account sustainability scores in the construction of ESG portfolio
- The use of AI (Artificial Intelligence), Machine Learning, Big Data Approaches in portfolio construction
Selected Topics in Quantitative Analysis
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Tail risk management
- Understanding the normal distribution assumption
- Non-normal distributions: Cornish-Fisher, NIG, normal mixtures
- Tail risk contributions, risk budgeting with Modified VaR/CVaR
- Modelling fat portfolio tails with elliptical distributions
- Overdiversification and diworsification
- Taking into accounting asymmetries in correlations: equities, bonds and gold
Exercise: Downside, upside, average and tail correlation measurement
Currency Management
- Risk, return and exposure analytics for unhedged and hedged currency exposures
- Approaches to currency management: active management versus hedging
- Optimal currency hedging: optimization approaches (1-stage, 2-stage) and practitioner approaches (strategic and tactical hedge quotas, currency overlay portfolios)
Exercise: 1-stage versus 2-stage optimization in currency management
Model Risk Management
- Forecast risk = model risk + parameter estimation risk
- Backtesting: in-sample versus out-of-sample, overfitting issues
- Elements of a buy-side model risk management framework
Andreas is a fine instructor with a strong knowledge of his field, both from an academic and practical perspective.
(Portfolio Manager - EIB)
If you are serious about asset allocation, you should definitely consider this course.
(Manager Portfolio Strategy & Risk - Annuitas Management Ltd)
Very interesting course to understand the developments on quantitative asset allocation in our world and how disconnected most investors are from most recent actions!
(Senior Investment Analyst - Sedco Capital)
The program is very extensive and insightful. It encompasses not just the theory behind the models/concepts but also how to apply it into the real world/industry.
(Technical Assistant - Bureau of Treasury)
The course made me realize the modern techniques in the art and science of investment and risk management. This course is highly recommended for people who would like to boost up their knowledge on the subject matter.
(Treasury Operations Officer IV - Bureau of Treasury )
Great course that gives a good overview of current applicable research in the modern asset allocation field
(Financial Risk Advisor - Delta Lloyd Asset Management)
The Asset Allocation and Portfolio Construction offered exactly what I had in mind. It dealt with the most recent developments in the field. I have tried to keep up with the literature, but it's much better to have Andreas explaining it to you. He is a real good teacher.
(Economist, Strategist, Mutli-Asset Manager - Delta Lloyd Asset Management)
Andreas is a very good tutor. He's very clear and combines amazingly practical advice with theoretical approach and intuition. Materials are rich and insightful. Lots of examples help to clarify and are a very good take away to implement what I learnt.
(Equity Portfolio Manager - Banca d'Italia)
The seminar is a really useful mix of academic content, practical exercises and concrete market experience. A sound update on the most recent developments in the space of Asset Allocation and solutions to key challenges managers face in portfolio construction.
(Portfolio Manager - Banca d'Italia)
Andreas is very experienced with a lot of practical methodology in portfolio analysis. The course is ideal for portfolio managers and other professionals who want to build and expand their quantitative tool kits.
(Treasury & Risk Senior Specialist - Inter- American development bank )
This course covered a very broad area, it allowed me to gain lots of new insights and to deepen existing knowledge. The course comes with an extensive reading list and lots of spreadsheets, that allow you to further deepen the gained knowledge. I liked the course very much!
(Senior Financial Risk Specialist - National Bank of Austria)
The course covers many asset allocation theories and models in a comprehensive and detailed manner. Everything is explained cum grano salis.
(Strategist - Banca IMI)
This was a very good course. Teacher's experience and ability to explain the topics was evident. It provided a good overview of recent developments in SAA modelling and portfolio construction. The materials as well as the side readings, papers and exercises enable us to provide a deep technical understanding of the area.
(Senior Relationship Manager - Bank of International Settlements)
Mr Steiner is one of the best teachers I have had in all the financial courses I participated.
(Director - Credit Suisse)
Exhaustive content with high dedicated and pedagogic speaker. The (small) size of the group allowed us to interact in a very constructive way.
(Team Head Portfolio Management - Zuercher Kantonalbank)
Great course, excellent program and very good presentation - strongly recommended.
(Head of Multi-Asset Strategies - Fondaco Sgr Spa)
The tutor is excellent, knows the theory and practice very well. I greatly appreciate that he shares all the spreadsheets, the reading material and gets into the practical aspects instead of only focusing on theory.
(Senior Vice President - Sumitomo Mitsui Banking Corporation)
Excellent and well-structured course. Teachers’ knowledge was first class and his delivery was excellent.
(Head of Diversified Portfolio Management - BT Financial Group)
The teacher was excellent. He has a deep understanding of theoretical framework, as well as practical applications.
(Risk Management - Bladex)
"A very interesting, informative and useful course for anyone involved in asset allocation or risk management - highly recommended."
(Organisational Risk - Central Bank of Ireland)
Course Details
This course is also available in London Time Zone and New York Time Zone
- To run this course at your organisation, contact us.
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