Quĩ đầu tư - Chapter 7: Basics of portfolio planning and construction

Chapter 7 Basics of Portfolio Planning and ConstructionPresenterVenueDateReasons for a Written Investment Policy Statement (IPS)IPSSuitability of an InvestmentLegal or Regulatory RequirementsGovernance Arrangements Major Components of an IPSIntroductionStatement of PurposeStatement of Duties and ResponsibilitiesProceduresInvestment ObjectivesInvestment GuidelinesEvaluation and ReviewAppendicesWhat Are the Different Types of Risk Objectives?Risk ObjectivesAbsolute: Stated without contextThe 12-month 95% value at risk (VAR) of the portfolio must not be more than ¥1 billion. Relative: A comparisonAchieving a return within 4% of the TOPIX return approximately 95% of the time.How Does the Willingness to Take Risk Differ from the Ability to Bear Risk?Risk ToleranceWillingness to Take RiskAbility to Bear RiskTime horizon?Expected income?Wealth relative to liabilities?Personality type?Self-esteem?Inclination for independent thinking?EXHIBIT 7-1 Measuring the Willingness to Take RiskInvesting is too difficult to understand.I am more comfortable putting my money in a bank account than in the stock market.When I think of the word “risk,” the term “loss” comes to mind immediately.Making money in stocks and bonds is based on luck.In terms of investing, safety is more important than returns.Possible responses for all five questions: (A) Strongly agree, (B) Tend to agree, (C) Tend to disagree, and (D) Strongly disagree.Source: Grable and Joo (2004).EXAMPLE 7-2 The Case of Henri Gascon: Risk ToleranceHenri Gascon is an energy trader who works for a major French oil company based in Paris. He is 30 years old and married with one son, aged 5. Gascon has decided that it is time to review his financial situation and consults a financial adviser. The financial adviser notes the following aspects of Gascon’s situation:Gascon’s annual salary of €250,000 is more than sufficient to cover the family’s outgoings.Gascon owns his apartment outright and has €1,000,000 of savings. Gascon perceives that his job is reasonably secure.EXAMPLE 7-2 The Case of Henri Gascon: Risk Tolerance (continued)Gascon has a good knowledge of financial matters and is confident that equity markets will deliver positive returns over the longer term.In the risk tolerance questionnaire, Gascon strongly disagrees with the statements that “making money in stocks and bonds is based on luck” and that “in terms of investing, safety is more important than returns.”Gascon expects that most of his savings will be used to fund his retirement, which he hopes to start at age 50.Henri Gascon’s Tolerance for RiskRisk ToleranceWillingness to Take RiskAbility to Bear RiskSecure jobHigh income relative to expensesSignificant assetsTime horizon of 20 yearsKnowledgeable about financial marketsAnswers to survey suggest risk toleranceWhat Are the Important Considerations When Setting Return Objectives?Return ObjectivesAbsolute or Relative?Nominal, Real, or Required?Realistic?EXAMPLE 7-4 The Case of Henri Gascon: Return ObjectivesHaving assessed his risk tolerance, Henri Gascon now begins to discuss his retirement income needs with the financial adviser. He wishes to retire at age 50, which is 20 years from now. His salary meets current and expected future expenditure requirements, but he does not expect to be able to make any additional pension contributions to his fund. Gascon sets aside €100,000 of his savings as an emergency fund to be held in cash. The remaining €900,000 is to be invested for his retirement.EXAMPLE 7-4 The Case of Henri Gascon: Return Objectives (continued)Gascon estimates that a before-tax amount of €2,000,000 in today’s money will be sufficient to fund his retirement income needs. The financial adviser expects inflation to average 2% per year over the next 20 years. Pension fund contributions and pension fund returns in France are exempt from tax, but pension fund distributions are taxable upon retirement.What Is Henri Gascon’s Return Objective?Gascon’s retirement needs:€2,000,000 × (1 + 0.02)20 = €2,971,895Gascon’s return objective:€900,000 × (1 + x)20 = €2,971,895x ≈ 6.20%Constraints on Portfolio SelectionUnique CircumstancesLegal and Regulatory FactorsTax ConcernsTime HorizonLiquidityPortfolio SelectionHow Does the Need for Liquidity Affect Sampo Group’s Investments?Allocation of Investment Assets, Sampo Group 31 December 2008 (€16,502 million)Fixed-Income Investments by Type of Instrument, Sampo Group31 December 2008 (€13,214 million)Breakdown of fixed-income investmentsHow the Investor’s Time Horizon Affects Portfolio Asset SelectionInvestor’s Time HorizonNeed forLiquidityAbility to Take RiskPortfolioAssetSelectionTax Concerns and Legal and Regulatory Factors Tax ConcernsInvestor’s tax statusTax rates: income and capital gainsLegal and Regulatory FactorsLegal restrictions on portfolio compositionLimits on the use of material nonpublic informationUnique CircumstancesUnique CircumstancesEthical ValuesReligious BeliefsPersonal PreferencesEXAMPLE 7-7 Henri Gascon: Description of ConstraintsGascon expects that he will continue to work for the oil company and that his relatively high income will continue for the foreseeable future. Gascon and his wife do not plan to have any additional children, but expect that their son will go to a university at age 18. They expect that their son’s education costs can be met out of their salary income.EXAMPLE 7-7 Henri Gascon: Description of Constraints (continued)Gascon’s emergency reserve of €100,000 is considered to be sufficient as a reserve for unforeseen expenditures and emergencies. His retirement savings of €900,000 has been contributed to his defined contribution pension plan account to fund his retirement. Under French regulation, pension fund contributions are paid from gross income (i.e., income prior to deduction of tax) and pension fund returns are exempt from tax, but pension payments from a fund to retirees are taxed as income to the retiree.What Are the Constraints on Henri Gascon’s Retirement Portfolio?Liquidity: No need for liquidity.Time Horizon: Approximately 20 years.Tax Concerns: Portfolio is tax exempt.Legal and Regulatory Factors: French pension fund regulations.Unique Circumstances: No significant exposure to oil and other commodity stocks.How Are Portfolios Constructed?Investment Policy Statement (IPS)Capital Market Expectations for Each Asset ClassStrategic Asset AllocationTactical Asset Allocation or Security SelectionQuantifying Capital Market ExpectationsCorrelation with Other Asset ClassesStandard DeviationExpected ReturnStrategic Asset Allocation (SAA)CashEquitiesBondsReal EstateAlternative InvestmentsStrategic asset allocation (SAA) is a means to providing the investor with exposure to the systematic risks of asset classes in proportions consistent with the IPS.Defining an Asset Class BondsGovernmentDomesticForeignCorporateInvestment GradeHigh YieldAre all of these specifications necessary?EXAMPLE 7-9 Specifying Asset ClassesAsset class correlation matrix:High-paired correlations between equity asset classes suggest that defining equity asset classes narrowly has limited value.The case for treatment as a separate asset class can best be made for emerging market stocks.Steps Toward an Actual PortfolioOverall Portfolio RiskRisk BudgetingStrategic Asset AllocationTactical Asset AllocationSecurity SelectionTactical Asset Allocation and Security SelectionStrategic Asset Allocation - - - -Tactical Asset AllocationSecurity SelectionNonsystematic risk factorsSystematic risk factorsMarket return: passive investing or indexingExcess return or alpha: active investingCan Security Selection Add Value?Value Added by Security SelectionValue Lost by Security SelectionZeroAt the macro level, security selection is a zero-sum game.What factors affect the ability to add value via security selection?Rebalancing PolicyPolicy Portfolio WeightsReturns on Asset Classes and SecuritiesWeights Deviate from PolicyPortfolio Rebalanced to Policy WeightsEXAMPLE 7-12 Strategic Asset Allocation for a European CharityKey factors affecting rebalancing:Ending weight of European equities.Expectations regarding future asset class returns.SummaryComponents of the IPSRisk and return objectivesDeterminants of risk toleranceInvestment constraintsRisk budgetingStrategic asset allocationTactical asset allocation and security selectionRebalancing policy