R14 - Investment Manager Selection Flashcards
Due diligence
Analysis and investigation in support of an investment decision, action or recommentation
Manager universe
Only those managers that are suitable for the portifolio objectives and constrains
Describe the 4’s P for continuity of returns
Philosophy, process, people and portifolio
Describe the test hyphotesis for manager hiring and continuation
Decribe cost associated with each error type (I and II)
Type I - retaining managers who are weak
Tipe II - not retaining managers who are strong
Tips
The dispersion of return distribution between the two grous is smaller due to dificullt to obtain alpha throught active managment
Describe the difference between RBSA and HBSA
Tips
RBSA- return based style analysis
RBSA
Top down approach
Computacional is Easy
Assumes static portifolio for period
HBSA
Look the actual securities included in the portfólio.
Drawdown
Total peak trough loss for a specific time period
Risk premium
Return earned above the risk free for bearing undiversifiable risk, referred as systematic risk
Difference between behavioral inefficiencies and structural
Explain types of behavioral biases (groupthink, authority, aversion to complexity)
Explain SMA and adv/disa - separately managment accounts
Separately accounts hold funds of one investor
- tailoring of client specific objectives and constrains
- control, tax eficiente, separate reporting, transparency
- higher cost
Describe (3) forms of mngment fees
All three structures manager are paid even when the manager underperforms
Describe the bônus fee in terms of an option
What’s the goal of qualitative investmet due diligence
Investigates the manager’s philosophy, process, people and portifolio
GIPS the concept of full provisions:
For periods beginning on after 1 january 2011, total value assets must be the aggregate fair value of all discretionary and non discretionary assets managed for the company.
Concept
Full provision - all the necessary supplies, arrangements, or measures taken to meet a particular need or contingency, encompassing everything required for a specific purpose or situation
