Fund Management Flashcards
Give examples of active equity strategies
1) Value investing
2) Growth investing
3) momentum investing
4) GARP
5) Fundamental analysis
6) technical analysis
7) quantitative investing
8) Smart Beta
What is value investing?
Investing in undervalued companies
expected to return to their intrinsic values
undervalued vs intrinsic value
Give 4 key features of value investing
(types of companies that apply)
1) established / mature (may pay dividend)
2) Low P/E ratio
3) Strong Brand / Patents (economic moat)
4) High price to book ratio
What must investors be careful of when it comes to value investing?
Falling into a “value trap”
What is growth investing?
Investing in companies whose rate of growth is expected to be greater than the markets
Give 4 key features of growth investings
1) High P/E Ratio
2) Low / no dividend (newly established business)
3) May not be cash generative
4) Currently things like tech stocks
What is growth at a reasonable price? (GARP)
Investing in companies who are growing but at at afforadable measure
What is the key measure for GARP?
Give the figure as well
Price/Earnings to Growth (PEG)
(1:1 or less) e.g. 15 pe needs 15% growth
What is fundamental analysis?
1) Analysis of copmanies’ financials & ratios
2) Assess current value and future growth
What is technical analysis?
Using charts to review historic patterns
Expect historic patterns to re-occur
self-fulfilling to an extent (expect to sell off -> manager sells)
What is momentum investing?
Invest in companies whose price has been rising
use indicators like 50 day moving average
short term strategy
What is quantitative investing?
uses programs / code to quickly execute trades
identifies patterns / signals to trade off of
popular in hedge funds
What is smart beta
Index tracking which avoids troublesome holdings
Adjusts weights to remove negative performers / increase strong performers
Give examples of passive equity strategies
1) Buy & Hold
2) Indexation
