Venue: Kolocep, Croatia. Date: To be announced

Course Description and Objectives

Asset management industry is in a state of serious crisis. Among the main culprits for such a dismal situation experts identify inadequate management of risks. The expected outcome of regulatory changes that are likely to sweep the market is a steep increase in imporance that regulator will place to risk management.

This course is intended to equip participants with both the technical and conceptual tools that will allow them to take an active role in this fast-evolving environment. More specifically, the course first focuses on the technical challenges involved in portfolio optimization with specific emphasis on the need for enhanced estimates of risk and expected returns. After this presentation of state-of-the-art techniques for optimal beta management, we also review various quantitative methods used in the optimal management of alphas, including a detailed presentation of portfolio style and performance analysis. The course then goes on to cover an overview of recent academic research and practical industry examples of the latest techniques used in mixing alphas and betas within investors’ portfolios. Finally, we discuss in conclusion how the asset management process should be adapted to account for the presence of liability constraints.

After several years of down markets that have emphasized the weakness of current asset management practices, a profound paradigm change is currently affecting the whole asset management industry, with the modern approach to portfolio management that advocates a clear separation between the management of normal returns (a.k.a. betas) emanating from exposure to rewarded sources of risk and the management of abnormal returns (a.k.a. alphas) emanating from active managers’ unique expertise to generate excess return above and beyond the risks taken.

Expected Outcomes

At the end of the course you should be able to master modern portfolio optimization techniques including:

• Understand expected regulatory changes in risk and asset management area
• Master modern portfolio selection techniques including Bayesian portfolio construction techniques, Black-Litterman analysis, etc 
• Understand the basic concepts behind risk management techniques
• Implement quantitative management selection techniques
• Gain a basic understanding of asset-liability management techniques

Who Should Participate

• Asset Managers
• Risk Managers
• Multi-Managers
• Investment Bankers
• Private Bankers
• Institutional Investors
• Academics interested in investment science

Course Outline

Day 1

• Overview of the impact of global financial crisis on asset management industry
• Active versus Passive Money Management
• Alphas versus Betas
• Asset Allocation versus Stock Selection
• Inefficiency of Tight Tracking Error Constraints
• Inefficiency of Stock Market Indices
• Core-Satellite Approach
• Advanced Techniques for Covariance Matrix Estimation
  -Constant Correlation Approach
  -Factor-Model Approach
  -Statistical Shrinkage Approach
• Advanced Techniques for Expected Return Estimation
  -Factor model Approach
  -Black-Litterman Analysis
  -Minimum Risk Approach

Day 2

• Competing Risk Measures
• Extreme Risk Measures
• VaR and Beyond
• Historical VaR
• Parametric Gaussian VaR
• Semi-Parametric VaR
• Risk and Performance Measurement
• Relative versus Absolute Performance Evaluation
• Persistence of Performance
• Types of Factors Models
• Style Analysis
• Manager Selection
• Practitioner guest speaker presentation

Day 3

• Core-Satellite Portfolio Construction
• Manager Optimization
• Portable Alpha Techniques
• Immunization Techniques in Asset-Liability Management
  Surplus Optimization
• Liability-Driven Investment Techniques