Investment Leadership and Portfolio Management: The Path to Successful Stewardship for Investment Firms
224
Investment Leadership and Portfolio Management: The Path to Successful Stewardship for Investment Firms
224eBook
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Overview
The new breed of investment professional knows that there is a strong correlation between excellence in investment leadership and excellence in portfolio management—and in this book, a group of experienced investment industry experts puts this paradigm in perspective.
Investment Leadership and Portfolio Management provides a top-down analysis of successful strategies, structures, and actions that create an environment for generating strong investment performance and, most importantly, delivering rewarding investor outcomes. By examining how to manage and lead an investment firm through successful investment decision-making processes, this reliable resource reveals what it takes to excel in a radically changed investment environment. Additionally, it includes informative case studies of the approach in action, so you can see the real applications of the ideas addressed throughout these pages.
From firm governance and structure for investment and product firms to culture, strategy, vision, and execution, authors Brian Singer—Chairman of the CFA Institute Board of Governors—and Greg Fedorinchik touch upon pressing issues, including the differences between leading and managing; investment philosophy, process, and portfolio construction; communication and transparency; and ethics and integrity. Along the way, you'll also become familiar with:
The role of behavioral biases and market behavior analysis in the investment decision-making process
The appropriate incentive structures and fee models for asset management firms
The practical considerations required for living organizational values, setting goals, and measuring organizational success
The details involved in developing a merito-cratic investment process that rewards indivi-dual contributions
And much more
There is no one-size-fits-all approach to leading a diverse group of intelligent individuals and the firms they represent. However, there are a few best practices and rules that can make the task a more manageable one. With the ideas articulated in Investment Leadership and Portfolio Management, you'll gain a better understanding of how to effectively operate within today's competitive investment industry and achieve a significant level of success.
Product Details
| ISBN-13: | 9780470543337 |
|---|---|
| Publisher: | Wiley |
| Publication date: | 09/29/2009 |
| Series: | Wiley Finance , #502 |
| Sold by: | JOHN WILEY & SONS |
| Format: | eBook |
| Pages: | 224 |
| File size: | 2 MB |
About the Author
GREG FEDORINCHIK is head of investor solutions at Mesirow Advanced Strategies, Inc., an institutional fund of hedge funds firm based in Chicago. Prior to joining Mesirow, he was a senior strategist with the global investment solutions team at UBS Global Asset Management (formerly Brinson Partners, Inc.) and a member of the asset allocation and currency committee. Fedorinchik holds an MBA from the Kellogg School of Management, Northwestern University.
Table of Contents
Preface xiAcknowledgments xvii
Chapter 1 Characteristics of Successful Asset Management Firms 1
You Can Take the Boy Out of the Culture, but You Can’t Take the Culture Out of the Boy 3
Size Matters, but Not in the Way Most People Believe 7
Governance: The Guardian of an Investment-Driven Firm 12
Fostering Collaborative Freedom: Everybody is a Peer 19
Integrity: An Unquestionable Characteristic of Success 23
Conclusion 25
Chapter 2 Building a Cathedral: A Framework for Turning the Mission into Collective Action 27
A Framework for Effective Leadership and Management 28
Establishing and Living Organizational Values 29
Creating Mission and/or Investment Philosophy Statements 31
Strategic Goals and Key Performance Indicators 33
Conclusion 37
Chapter 3 Building a Meritocracy: Understanding, Evaluating, and Rewarding Employee Contributions 39
Performance: A Deeper Dive 39
Horizon: The Fallacy of the Three-Year Track Record 40
Performance Analysis: Practically Speaking 45
Top-down and Bottom-up Approach to Determining Performance 48
Designing Your Rating System to Help Make the Difficult Decisions 51
What Does the Performance Score Really Mean? 53
Criticality: A Deeper Dive 53
Merit Zones: Putting It All Together 57
Communication of Performance and Criticality 59
Values and Compensation 64
Conclusion 67
Chapter 4 Investment Philosophy and Process: A Lofty Cathedral Needs a Deep Foundation 69
The Importance of Investment Philosophy and Process in Investment Organizations 69
Investment Philosophy: Core Beliefs 70
Investment Process: Control and Anarchy 73
Avoiding the Pitfalls of Behavioral Biases 78
Conclusion 83
Chapter 5 Investment Process in an Evolving World 85
Implementation Overview: The “How” of the Investment Process 86
Fundamental Valuation 88
Market Behavior and How It Challenges the Fundamental Investor 90
Team Behavior: Lessons for the CIO from Jelly Beans and Freud 118
Portfolio Design 127
Conclusion 129
Chapter 6 Communication for Superior Client Outcomes 131
The Problem: Human Nature 133
A Classic Tale 134
Case 1: Individual Investors, the Impact of Performance Chasing 137
Case 2: Are Institutional Investors the “Smart Money?” 137
The Reality of Investing in Equities 139
The Mathematics of Recovery 142
Dilemma: Investment Firm or Distribution Shop? 143
The Importance of Culture 145
Sales and Marketing in an Investment Firm 146
Conclusion 149
Appendix: Client Communication in Extreme Market Conditions 149
Chapter 7 Where are the Clients’ Yachts?: Reasonable Fee Structures 159
The “Gamma Trade” 161
Anatomy of a Blowup 167
Catch 22 168
Faults of Existing Fee Structures 170
Our Recommendation: High Integrity Fee Structures 178
Conclusion 186
Chapter 8 Final Thoughts 187
Characteristics of Great Asset Management Firms 188
It Starts with a Shared Mission and Values 188
True Meritocracy 189
Avoiding the Pitfalls 190
For Successful Client Outcomes: Communicate, Communicate, Communicate 192
It’s All about Incentives 193
Integrity 193
Notes 195
Bibliography 201
About the Authors 205
Index 207