三级CFA考试SS8复习笔记.pdf

2 2 2 2011011011011年年年年6 6 6 6月月月月CFACFACFACFA三级基础班讲义三级基础班讲义三级基础班讲义三级基础班讲义 Portfolio management for institutional investorsPortfolio management for institutional investors 讲师 洪波 CFA 日期 2011年3月6日 地点 上海 北京 深圳 讲师 洪波 CFA 日期 2011年3月6日 地点 上海 北京 深圳 上海金程国际金融专修学院上海金程国际金融专修学院上海金程国际金融专修学院上海金程国际金融专修学院 100 Contribution Breeds Professionalism100 Contribution Breeds Professionalism 2 2 5858 Topic in CFA Level IIITopic in CFA Level III SS 1 2ETHICS MONITORING AND REBALANCING SS 17PERFORMANCE EVALUATION AND ATTRIBUTION SS 18GLOBAL INVESTMENT PERFORMANCE STANDARDS 100 Contribution Breeds Professionalism100 Contribution Breeds Professionalism 3 3 5858 Framework of SS8Framework of SS8 SS 8 Asset Allocation R26 Asset Allocation R27 The Case for International Diversification 100 Contribution Breeds Professionalism100 Contribution Breeds Professionalism 4 4 5858 Framework of SS8Framework of SS8 SS8 Asset Allocation R26 Asset Allocation 100 Contribution Breeds Professionalism100 Contribution Breeds Professionalism 5 5 5858 Strategic Asset AllocationStrategic Asset Allocation Strategic asset allocation combines capital market expectations formally represented by the efficient frontier and the investor s risk return and investment constraints from the IPS Strategic asset allocation is long term in nature and hence the weights are called targets and the portfolio represented by the strategic asset allocation is called the policy portfolio Short term deviation from the strategic asset allocation may be based on short term capital market expectations and would be the result of active management Strategic asset allocation reflects the investor s desired systematic risk exposure 100 Contribution Breeds Professionalism100 Contribution Breeds Professionalism 6 6 5858 Tactical Asset AllocationTactical Asset Allocation Tactical asset allocation is the result of active management wherein managers deviate from the strategic asset allocation to take advantage of any perceived short term opportunities in the market Tactical asset allocation introduces additional risk which should be justified by additional return i e positive alpha Since portfolio managers are the experts at seeking out these opportunities why should strategic allocation even be performed Provide discipline that is to maintain focus on objectives and constraints The importance of long run strategic asset allocation has been well established empirically One study shows that 94 of the variability of total portfolio returns is explained by the strategic asset allocation 100 Contribution Breeds Professionalism100 Contribution Breeds Professionalism 7 7 5858 AssetAsset Only and ALM Approaches to Asset AllocationOnly and ALM Approaches to Asset Allocation Contrast the asset only and ALM approaches to asset allocation ALM approach For investors with specific asset allocation is tailored to meet liabilities and to maximize the surplus given an acceptable level of risk Even for those investors who don t have specific contractual liabilities future obligations can be modeled as liabilities and an ALM approach to strategic asset allocation can be applied Asset only approach The focus is on earning the highest level of return for a given acceptable level of risk without any consideration for liability modeling 100 Contribution Breeds Professionalism100 Contribution Breeds Professionalism 8 8 5858 Dynamic and Static Asset AllocationDynamic and Static Asset Allocation Dynamic asset allocation takes a multi period view of the investment horizon In other words it recognizes that asset and liability performance in one period affects the required rate of return and acceptable level of risk for subsequent periods Monte Carlo simulation Static asset allocation ignores the link between optimal asset allocations across different time periods Behavior finance and asset allocation Individuals tend to display loss aversion rather than risk aversion and approach investing from a segmented perspective rather than from a portfolio perspective Because of the mental accounting they meet goals one at a time starting with the most important The resulting overall allocation is likely different from their optimal strategic allocation and could even be inconsistent with their risk tolerance 100 Contribution Breeds Professionalism100 Contribution Breeds Professionalism 9 9 5858 Specifying Risk and Return ObjectivesSpecifying Risk and Return Objectives The return objective for an individual s or institution s portfolio Be based upon the size of the portfolio long term spending liquidity needs the time horizon and maintenance of the principal Unless specifically stated otherwise we always assume the investor will maintain the principal so the portfolio must not only meet spending needs it must also cover expected inflation For example assume the before tax required return is estimated at 4 and inflation is expected to average 3 The nominal before tax required return for the portfolio is 7 12 R before tax 1 04 1 03 1 0 0712 7 12 The investor s risk objective should be specified in light of the investor s risk aversion We classified investors as having below average average or above average risk tolerance Those with below average risk tolerance highly risk averse investors are given a score of 7 to 10 while those who are highly tolerant of risk low risk aversion are given a score of 1 to 3 100 Contribution Breeds Professionalism100 Contribution Breeds Professionalism 1010 5858 Specifying Risk and Return ObjectivesSpecifying Risk and Return Objectives Approach 1 Maximizing UP E RP 0 005RF P2 Two implications When choosing from a set of assets with the same risk and return rankings Portfolio B has both a higher expected return and higher standard deviation than A the choice is driven by the investor s risk aversion As risk aversion increases denoted with a higher risk aversion score the deduction for adjustment for risk increases 2 Use Roy s safety first ratio maximize SFR E RP RMAR P 3 Upper limits on standard deviation target semivariance 2 ii 1 semi VARxx xx N 2 ii 1 target semi VARtx xt target return N 100 Contribution Breeds Professionalism100 Contribution Breeds Professionalism 1111 5858 Asset classes have been appropriately specified if Assets in the class are similar from a descriptive as well as a statistical perspective They are not highly correlated so they provide the desired diversification Individual assets cannot be classified into more than one class They cover the majority of all possible investable assets They contain a sufficiently large percentage of liquid assets Some well accepted asset classes include domestic equity domestic fixed income global equity global fixed income cash and equivalents and alternative investments which may be further divided into classes such as real estate private equity etc Specifying Asset ClassesSpecifying Asset Classes 100 Contribution Breeds Professionalism100 Contribution Breeds Professionalism 1212 5858 Inflation Adjusted Securities Global Securities and AlternativInflation Adjusted Securities Global Securities and Alternative e InvestmentInvestment Inflation protected securities provide the obvious characteristic of helping guard against the potential effects of rising or falling inflation Adding global securities is the potential to increase return at all levels of risk Some argue that during economic downturns exactly when the investor needs the diversification effects the most emerging and developed markets tend to be highly correlated Alternative investments can be considered fairly risky but in a portfolio they bring the potential of significantly increased returns The practical drawbacks to investing in alternative investments include the typically large amount of capital required and the need to carefully select out performers 100 Contribution Breeds Professionalism100 Contribution Breeds Professionalism 1313 5858 Steps in Asset AllocationSteps in Asset Allocation Determining the investor s return requirement and risk tolerance subject to the investor s current wealth and constraints Formulate long term capital market expectations and their potential effects on the various asset classes Determine the mix of assets allocation that best meets the objectives defined in the IPS Once the strategic allocation has been implemented it should be monitored regularly as specified in the IPS If the market changes are only short term in nature the manager should consider implementing tactical allocation measures which have been approved in the IPS 100 Contribution Breeds Professionalism100 Contribution Breeds Professionalism 1414 5858 6 Approaches to Asset Allocation 6 Approaches to Asset Allocation Mean variance Resampled efficient frontier Black Litterman Monte Carlo Simulation Asset Liability Management ALM Experienced based 100 Contribution Breeds Professionalism100 Contribution Breeds Professionalism 1515 5858 MeanMean Variance Variance The mean variance frontier is the outer edge of a graphical plot of all possible combination of risky assets The number of estimates that must be incorporated into a mean variance optimization can be overwhelming Strengths Identifies portfolios with the highest expected return at each level of risk inexpensively Widely understood and accepted Weaknesses Static one period approach Must specify expected returns for all assets Can lead to input bias Can be overwhelming Can yield allocations that are not well diversified Can be heavily concentrated in some assets 100 Contribution Breeds Professionalism100 Contribution Breeds Professionalism 1616 5858 ResampledResampled Efficient Frontier Efficient Frontier A simulation approach utilizing historical means variances and covariance of asset classes which combined with capital market forecasts assumes they are fair representations of their expectations His resampling technique is based on a Monte Carlo simulation that draws from the distributions to develop a simulated efficient frontier Advantages Since it utilizes an averaging process the generated efficient frontier is more stable than a traditional mean variance efficient frontier Portfolios generated through this process tend to be better diversified Disadvantage Lack of a sound theoretical basis 100 Contribution Breeds Professionalism100 Contribution Breeds Professionalism 1717 5858 BlackBlack LittermanLitterman Method Method One of the primary weaknesses of any mean variance optimization process is the need to estimate individual asset expected returns Black Litterman uses returns implied by a value weighted global market index Equilibrium returns implied by existing market prices Use the index return and allocation to determine the implied return for the individual assets in the index Returns can be adjusted for manager s expectations Then used in mean variance optimization Diversification Since returns are extracted from a well diversified portfolio the global index the Black Litterman method yields portfolios that are much more diversified Avoids input bias associated with expected returns Only weaknesses are understanding how to perform the process and the need to utilize historical volatility 100 Contribution Breeds Professionalism100 Contribution Breeds Professionalism 1818 5858 Monte Carlo Simulation Monte Carlo Simulation Using different strategic allocations the program incorporates the effects of various assumed capital market factors inflation yield spread recession varying tax rate etc in the next period as well as their compounding effects over several future periods This way the model overcomes the static one period nature of the typical mean variance analysis Mean variance analysis typically incorporates one year expected returns and standard deviations and assumes they will be constant over future periods The manager selects the strategic allocation that yields the best long run strategic results with respect to the investor s objectives 100 Contribution Breeds Professionalism100 Contribution Breeds Professionalism 1919 5858 AssetAsset Liability ManagementLiability Management Asset liability management ALM considers the allocation of assets with respect to a given liability or set of liabilities The ALM approach maximize the difference the surplus between assets and liabilities at each level of risk much like the efficient frontier represents the maximum return at each level of risk 100 Contribution Breeds Professionalism100 Contribution Breeds Professionalism 2020 5858 As with any efficient frontier there is a minimum variance portfolio allocation which has the minimum expected surplus As you move to the right on the frontier both the expected surplus and the risk of the allocation increase ALM requires estimations of all associated mean variance parameters and thus suffers from estimation bias To help avoid this problem the manager can utilize a resampling technique or the Black Litterman approach AssetAsset Liability ManagementLiability Management 100 Contribution Breeds Professionalism100 Contribution Breeds Professionalism 2121 5858 ExperiencedExperienced Based Techniques Based Techniques Examples 1 Investors with long time horizons can tolerate more risk Young professionals for example should be invested heavily in riskier higher return assets such as equities As individuals approach retirement they can tolerate less risk and should be moved into high quality corporate bonds and treasuries 2 60 40 rule 60 diversified equities 40 diversified bonds Considered a starting point for all individual allocations Considered a neutral position average The equities in the portfolio provide long term growth potential and the bonds provide income and risk reduction 100 Contribution Breeds Professionalism100 Contribution Breeds Professionalism 2222 5858 3 100 age rule Subtract the investor s age from 100 to arrive at the preferred allocation to equities The allocation to equities automatically falls as the investor ages Strengths Incorporates asset allocation experience Easy to understand and inexpensive Weaknesses Not based on sound investment theory Allocation rules may be too simple for some investors ExperiencedExperienced Based Techniques Based Techniques 100 Contribution Breeds Professionalism100 Contribution Breeds Professionalism 2323 5858 The Minimum Variance FrontierThe Minimum Variance Frontier With short sale restrictions the frontier changes from a smooth curve to one with corner portfolios A corner portfolio is formed when the weights of an asset go from zero to positive or vice versa No negative weights We can approximate the standard deviation for an efficient portfolio given those of adjacent corner portfolios 100 Contribution Breeds Professionalism100 Contribution Breeds Professionalism 2424 5858 Choosing an Asset Allocation Example Choosing an Asset Allocation Example An endowment s return objective is 7 which includes a spending rate of 3 Given the corner portfolio returns on the next slide and assuming no short sales determine the standard deviation and asset weights for the portfolio that will meet their objective 100 0 0 0 4347 6 5 3 4 60 40 0 04557 7 5 5 3 0 20 80 0 47811 5 7 5 2 0 0 100 0 43616 9 1 Asset C Weight Asset B Weight Asset A Weight Sharpe Ratio E R Corner Portfolio 100 Contribution Breeds Professionalism100 Contribution Breeds Professionalism 2525 5858 Estimating the Standard Deviation The approximate standard deviation of the portfolio is a weighted average of the standard deviations of Corner Portfolios 2 and 3 P 0 75 0 115 0 25 0 077 P 0 1055 10 55 Note that the estimate is an upper it to the true standard deviation Does not account for diversification correlation Asset Class Contributions To calculate how much the strategic portfolio invests in assets A B and C use the 75 25 weights in Corner Portfolios 2 and 3 Portfolio 2 has weights 80 20 0 in Assets A B and C Portfolio 3 has weights 0 40 60 in Assets A B and C Choosing an Asset Allocation Example Choosing an Asset Allocation Example 100 Contribution Breeds Professionalism100 Contribution Breeds Professionalism 2626 5858 Introducing a RiskIntroducing a Risk Free AssetFree Asset If there is a risk free asset available combining it with the corner portfolio with the highest Sharpe ratio can increase the investor s utility This is equivalent to combining the risk free asset with the tangency portfolio In capital market theory the market portfolio i e the tangency portfolio has the highest available Sharpe ratio of any portfolio on the efficient frontier If the return on the corner portfolio with highest Sharpe ratio is greater than the required return hold positive weights of the corner portfolio and the risk free asset If its return is less than the required return borrow at the risk free rate to lever up the return This assumes no restrictions on leverage In our example Corner Portfolio 2 has the highest Sharpe ratio 100 Contribution Breeds Professionalism100 Contribution Breeds Professionalism 2727 5858 Calculating the Portfolio Weights Given a return objective of 7 Corner Portfolio 2 return of 7 5 and a risk free return of 2 solve for the weights of CP 2 and RF 0 07 0 075w2 0 02 1 w2 w2 0 909 wRF 0 091 Put 90 9 of the value of the portfolio in Corner Portfolio 2 and 9 1 in the risk free asset Calculating the Standard Deviation Since the standard deviation of the risk free asset is zero the portfolio standard deviation is determined by the allocation to Corner Portfolio 2 P W2U2 WRFURF P 0 909 0 115 0 091 0 P 0 1045 10 45 Introducing a RiskIntroducing a Risk Free Asset ExampleFree Asset Example 100 Contribution Breeds Professionalism100 Contribution Breeds Professionalism 2828 5858 Calculating the Portfolio Weights If the required return is 9 Corner Portfolio 2 has a return of 7 5 and the risk free rate is 2 we have to short the risk free asset to attain the desired return 0 09 0 075w2 0 02 1 w2 w2 1 27 wRE 0 27 Put 127 in Corner Portfolio 2 and 27 in the risk free asset i e short