Chapter 16: The Portfolio Management Process

In this section

• 16.1 The Portfolio Management Process
  • 16.1.1 Overview of the Process
    An introduction to the structured approach of managing investments through a series of integrated steps, ensuring alignment with client goals while managing risk and optimizing returns.
• 16.2 Step 1: Determine Investment Objectives and Constraints
  • 16.2.1 Identifying Client Goals
    A detailed exploration of identifying client investment objectives and constraints within the portfolio management process.
  • 16.2.2 Assessing Risk Tolerance
    An in-depth exploration of the methods and considerations integral to evaluating a client's risk tolerance as an essential component of the portfolio management process.
  • 16.2.3 Evaluating Constraints
    This section provides an in-depth analysis of evaluating constraints within the portfolio management process, focusing on liquidity needs, legal and regulatory considerations, and unique circumstances.
• 16.3 Step 2: Design an Investment Policy Statement
  • 16.3.1 Purpose and Structure
    Detailed exploration of the purpose and structure of an Investment Policy Statement (IPS), and its significance in the portfolio management process.
  • 16.3.2 Creating an IPS
    Detailed exploration of the creation and importance of an Investment Policy Statement (IPS) in portfolio management, with client involvement and review processes.
• 16.4 Step 3: Develop the Asset Mix
  • 16.4.1 Strategic Asset Allocation
    Strategic Asset Allocation focuses on long-term asset allocation to achieve investment goals, leveraging diversification benefits to optimize returns and manage risks.
  • 16.4.2 Tactical Asset Allocation
    Exploration of tactical asset allocation strategies to optimize investment portfolios by adjusting asset allocation in response to short-term market conditions while balancing long-term investment goals.
• 16.5 Step 4: Select the Securities
  • 16.5.1 Security Selection Criteria
    Overview of the qualitative and quantitative criteria involved in selecting securities as part of the portfolio management process.
  • 16.5.2 Building the Portfolio
    An in-depth exploration of constructing a portfolio, including steps for diversification and risk management, and criteria for buy/sell decisions.
• 16.6 Step 5: Monitor the Client, the Market, and the Economy
  • 16.6.1 Performance Monitoring
    An in-depth exploration of the role of performance monitoring in the portfolio management process, focusing on the use of performance metrics and regular reporting.
  • 16.6.2 Economic and Market Analysis
    An exploration of the critical role of economic and market analysis in the ongoing process of portfolio management, emphasizing market dynamics and their impact on portfolio performance and risk.
  • 16.6.3 Client Communication
    Explore the importance of client communication in portfolio management, focusing on ongoing dialogue and adapting to client changes.
• 16.7 Step 6: Evaluate Portfolio Performance
  • 16.7.1 Performance Evaluation Methods
    A comprehensive guide to evaluating portfolio performance through absolute and relative measures as well as risk-adjusted methodologies.
  • 16.7.2 Attributing Performance
    Detailed exploration of the performance attribution analysis in portfolio management, focusing on asset allocation and security selection to enhance learning and inform future decisions.
• 16.8 Step 7: Rebalance the Portfolio
  • 16.8.1 Rationale and Timing
    An in-depth exploration of the rationale behind portfolio rebalancing and the timing strategies involved.
  • 16.8.2 Rebalancing Strategies
    An in-depth exploration of different strategies for rebalancing investment portfolios, including threshold and calendar rebalancing, with consideration for cost-effectiveness.