Learning outcomes

By the end of this video, you will know :

 The questions you should ask yourself (or your client)

when it comes to investment management

 The various types of risk you should be aware of

 How to differentiate strategic from tactical asset allocation

What is Investment Management about?

 Knowing your (or your client’s) financial needs, objectives,

investment horizon and risk tolerance

 Understanding how each asset class (cash, equities, bonds,

commodities, currencies, hedge funds, real estate, …) works

 Deciding whether you want to be an active investor (i.e. try to

beat the market) or a passive one (i.e. replicate the performance of
the market)
Investment management is about managing… risk!
 The key to successful Investment Management is to
constantly be aware of the underlying risks:
Country risk
Market risk
Currency risk
Liquidity risk The key is
Inflation risk DIVERSIFICATION
Shortfall risk
Investment management: a 2-step approach

Client Objectives Investment Policy

Strategic Asset Tactical Asset

Allocation Allocation

Portfolio Construction
Know your customer (or yourself)
 What kind of investor are you ?
Do you wish to have a regular stream of income ?
Are you looking for solid - and rapid - capital appreciation ?
Do you want to be implicated in the investment process ?
 From your investment profile, define a strategic asset allocation
(which is to be adjusted tactically) on the basis of the:
Macro picture
Market volatility
Market valuation
Private Banking is about knowing who you are…
Hunter Farmer

Customer Relationship manager Portfolio manager

Key takeaways when investing in bonds

■ Beware of the limitations of benchmarking in the bond market

■ Consider the fundamentals of the borrower you lend to

■ The lower the starting yield, the lower the expected return

■ Buy bonds if you expect a macroeconomic slowdown and conversely

Key takeaways when investing in equities

■ Beware of the limitations of benchmarking in the equity market

■ Strong GDP growth does not always imply higher equity returns

■ Dont chase past performance

■ Look for truly active managers

Conclusions
 Successful Investment management is about knowing how
each instrument used in the asset allocation process works and
what their risks are
 You must decide whether you want:
To be directly involved in the investment management
process
Delegate the investment decision and monitor the results
 Know yourself / your customer:
Active / Passive investor
Risk tolerance / appetite