Asset Management Program Università Bicocca

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Asset Management Program Università Bicocca

  1. 1. Asset Management Program Università Bicocca May 2007
  2. 2. Programs <ul><li>Equity Investment </li></ul>Fideuram Investimenti SGR <ul><li>Investment Process </li></ul><ul><li>Asset Allocation </li></ul><ul><li>Alternative investment </li></ul><ul><li>Multimanager / open architecture </li></ul><ul><li>Quantitative Techniques and Risk Management </li></ul>
  3. 3. Multimanager Fideuram Investimenti SGR
  4. 4. What is the multimanager approach <ul><li>3 ways of multimanager: </li></ul><ul><li>Top down allocation decided by internal manager </li></ul><ul><li>The generation of alpha is deputed to external managers (funds of funds) </li></ul><ul><li>2. Mixed structure </li></ul><ul><li>3. Mandate to an external company to manage a fund / managed account </li></ul><ul><li>the top down process and the generation of alpha are totally deputed to an external manager </li></ul>Fideuram Investimenti SGR
  5. 5. Why the multimanager approach <ul><li>3 main reasons: </li></ul><ul><li>Range and Quality </li></ul><ul><li>through the multimanager is possible to acquire expertise on markets / approaches / styles not covered </li></ul><ul><li>2. Diversification </li></ul><ul><li>approach and market diversification </li></ul><ul><li>3. Economic rationale </li></ul><ul><li>trend of demand towards multimanager </li></ul>Fideuram Investimenti SGR
  6. 6. Universe of funds <ul><li>2 ways to enter the funds universe: </li></ul><ul><li>Direct agreements </li></ul><ul><li>Issues: </li></ul><ul><li>long time and costs to negotiate legal and commercial agreement </li></ul><ul><li>few fund houses </li></ul><ul><li>need of a trading platform </li></ul><ul><li>2. Comprehensive Platform (Allfunds Bank) </li></ul>Fideuram Investimenti SGR
  7. 7. Mapping the funds Differences from an universe of stocks: No reliable information from data providers (morningstar, s&p) or official classification (assogestioni) about: market on which the fund invests (no discriminaton from an area and a part of that area) utilisation of systematic currency hedging correlation to particular markets (real estate) different styles etc. Fideuram Investimenti SGR
  8. 8. Mapping the funds <ul><li>Solutions: </li></ul><ul><li>Best way: </li></ul><ul><li>due diligence on all funds </li></ul><ul><li>sophisticated quant analysis (multifactorial regression) </li></ul><ul><li>Issues: </li></ul><ul><li>time and resources: many resources and long time to cover all the universe </li></ul><ul><li>multicollinearity </li></ul><ul><li>2. Light due diligence (creation of a DB with key information) </li></ul><ul><li>single factor regression to validate qualitative data </li></ul><ul><li>Attribution to the appropriate benchmark </li></ul>Fideuram Investimenti SGR
  9. 9. Time series <ul><li>Critical aspect: </li></ul><ul><li>Time series are available but not all in line with the market: </li></ul><ul><li>Time series shifted by one day </li></ul><ul><li>easy solution </li></ul><ul><li>2. Pricing of the assets intraday </li></ul><ul><li>correct the series by adding and subtracting the market performance </li></ul>Fideuram Investimenti SGR
  10. 10. Quantitative screening <ul><li>Type of fund </li></ul><ul><li>Equity or fixed income fund </li></ul><ul><li>regression with the attributed benchmark </li></ul><ul><li>2. Absolute return fund </li></ul><ul><li>ability to reach the performance target within volatility and var limits </li></ul>Fideuram Investimenti SGR
  11. 11. Quantitative screening <ul><li>Goals: </li></ul><ul><li>Benchmark driven portfolio with short to mid term horizon, top down approach with tactical asset allocation </li></ul><ul><li>Profile of indicators to look for </li></ul><ul><li>we need funds with high predictability, close to ETF / index tracker, high Rsqare, consistence of Beta, better with outperformance but we can bear light underperformance </li></ul><ul><li>Usually funds with these characteristics have quantitative investment process, low tev, little deviation from benchmark allocation, securities diversification, risk management process is a key </li></ul>Fideuram Investimenti SGR
  12. 12. Quantitative screening Goals: 2. Benchmark as a reference for the portfolio, mid to long term horizon, no need to beat the benchmark, but to have a better risk / performance profile (usually private portfolios) Profile of indicators to look for lower Rsquare, no matter the inconsistence of Beta, higher tev, profile of outperformance Usually funds with these characteristics have bottom up discretional investment process, concentrated portfolios, some deviation from benchmark allocation. They can base the generation of outperformance both on asset allocation, market timing and security selection Fideuram Investimenti SGR
  13. 13. Quantitative screening Goals: 3. Portfolio with outperformance target vs benchmark in a mid term horizon, costs to repay (usually funds of funds) Profile of indicators to look for some funds with mid to high Rsquare, consistence of outperformance, mid tev: to reduce drawdown probability and limit the dimension of the underperformance some funds identified for the second portfolio: to generate excess return vs benchmark Fideuram Investimenti SGR
  14. 14. Quantitative screening Goals: 4. Portfolio with an absolute return target Profile of indicators to look for good risk / return profile, low / no correlation with equity or bond market, little drawdown Fideuram Investimenti SGR
  15. 15. Qualitative analysis <ul><li>Many aspects to investigate: </li></ul><ul><li>The firm </li></ul><ul><li>ownership, organisation, AUM </li></ul><ul><li>2. Investment philosophy & process </li></ul><ul><li>investment universe: coherence with benchmark, market and style declared </li></ul><ul><li>investment process </li></ul><ul><ul><li>initial screening, idea generation, valuation techniques: is the process robust, is it coherent with the investment philosophy? </li></ul></ul><ul><ul><li>changes in the process settle the quant analysis </li></ul></ul>Fideuram Investimenti SGR
  16. 16. Qualitative analysis <ul><ul><li>buy & sell discipline: trade off flexibility - risk? </li></ul></ul><ul><li>positions held for risk purposes: conviction? </li></ul><ul><li>asset allocation is a key? consequences on the portfolio construction </li></ul><ul><li>3. The manager / management team </li></ul><ul><li>single star manager: quick decisions, but what if he lives? </li></ul><ul><li>team: internal conflicts but continuity </li></ul><ul><li>who is responsible for what? </li></ul><ul><li>motivation and remuneration </li></ul><ul><li>are managers motivated? </li></ul><ul><li>are they evaluated on performances? What is the time period for the evaluation: one calendar year consolidation of the performance? </li></ul><ul><li> rolling period </li></ul>Fideuram Investimenti SGR
  17. 17. Qualitative analysis <ul><ul><li>4. Characteristics of the portfolio </li></ul></ul><ul><ul><li>investment style, capitalisation, approach </li></ul></ul><ul><ul><li>asses coherence with: what declared </li></ul></ul><ul><li> past performance </li></ul><ul><ul><li>number of securities in the portfolio </li></ul></ul><ul><ul><li>utilisation of cash, derivatives, currency hedging: </li></ul></ul><ul><ul><li>coherence with the approach </li></ul></ul><ul><ul><li>targets in terms of performance and tev </li></ul></ul><ul><ul><li>is there also tev and performance budgeting? </li></ul></ul><ul><ul><li>is the performance consistent with this? </li></ul></ul><ul><ul><li>how do they explain the past performance? </li></ul></ul><ul><ul><li>limits relative to the benchmark (beta, countries & sectors): </li></ul></ul><ul><ul><li>coherence with the approach </li></ul></ul>Fideuram Investimenti SGR
  18. 18. Portfolio construction Goals: Equity portfolios: beat the Msci tr net dividend index Absolute return portfolios: reach the declared target How: Equity portfolios diversification in terms of: markets, style, approach Uncorrelated alpha Risk control (beta, tev, deviation from benchmark) Absolute return portfolios: Diversification in terms of: strategies / markets Uncorrelated performances Risk control (volatility, correlation and beta vs equity and bond market) Fideuram Investimenti SGR

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