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Week 11: Portfolio Management I (Investor and the investment process…
Week 11: Portfolio Management I
Investment - short and long positions
Investor and the investment process
Investment policy: active vs passive (p.6 - 7)
index = basket of securities
Investment companies
types of funds
Managed Investment Companies
Hedge Funds
Mutual vs Hedge funds (p.18)
strategies (p.20)
directional: bet on one direction
non- directional: hedging => beta neutral (try to make)
relative value positions (pure play)
convertible bond arbitrage
convergence value positions
take opposite positions in the future
portable alpha (p.22)
Performance measure for hedge funds (p.24)
illiquidity
prices in illiquid markets tend to exhibit serial correlation
sharp ratio (excess return/ std) vs serial correlation
Survivorship bias
Time varying risk
option- like performance
Tail events (p.30)
fee structure
fixed management fee
incentive fee
Black- Scholes valuation of incentive fee
Unit Investment Trusts
cannot be traded publicly
Open- end investment companies
NAV = Net Asset Value
Valuing investment company shares (formula: page 10)
Closed- end investment companies
does not issue or redeem shares
price of the fund is different from its NAV
stock trades on the regular secondary market
table: page 10
ETFs and REITs
ETF: Exchange- traded fund (p.12)
ETF Creation Process (p.13)
ETFs as a hedging tool (p.16)
Do ETFs increase volatility?
Panel B: ETF is very active