Portfolio Construction and Management
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Bridging theory and practice: Developing an investment strategy and implementing a solution
Yoram Lustig and Sébastien Page
Bridging theory and practice: Developing an investment strategy and implementing a solution
Foreword: Preparing for change: Notes from an asset management leader
Preface
Introduction
The evolution of portfolio theory
Factor investing for practitioners
Introduction to alternative risk premium investing
Systematic credit investing
Enhanced risk parity and factor investing: ATP’s surplus investment strategy based on risk allocation to investment factors
Integrating climate risk considerations within portfolios: An investor’s viewpoint
Bridging theory and practice: Setting investment objectives
Bridging theory and practice: Developing an investment strategy and implementing a solution
Optimisation of trading portfolios under regulatory capital constraints
The wealth management perspective
The asset management challenge
Ignorance is bliss: Applying risk management techniques from alternatives to long only investing
The digitalisation of portfolio construction – Part 1
The digitalisation of portfolio construction – Part 2
After reviewing the first step in the portfolio management process of setting investment objectives in Chapter 7 (see Figure 7.1), this chapter goes through the next three steps: (II) developing an investment strategy; (III) implementing a solution; and (IV) reviewing progress. We review how each step impacts portfolio construction and illustrate the interaction between modern portfolio theory and applied experience. Portfolio management has a history of investors turning academic insights into practice, and practitioners producing academic research, seeking solutions for real-world problems. A final section focuses on the future of portfolio theory.
Three themes run throughout the chapter. First, we use frameworks to consider all pertinent angles in a disciplined and repeatable manner at the different stages of portfolio management. Second, we break down complex concepts into manageable building blocks. Third, we emphasise the need of constantly adapting to change – the only constant in investing.
STEP II: DEVELOPING AN INVESTMENT STRATEGY: STRATEGIC ASSET ALLOCATION
Once the investment objectives and constraints are set, the next step in the portfolio management process
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