Controlling Misfit Risk in Multiple-Manager Investment by Jeffrey Bailey, David Tierney

By Jeffrey Bailey, David Tierney

Controlling Misfit possibility in Multiple-Manager funding courses is a pragmatic, instructive advisor which deals an answer to a problem progressively more associations are facing-misfit hazard. whilst a sponsor makes use of a number of managers for one asset classification, type biases could cause the sponsor's managers in mixture to underperform the objective regardless of each one person supervisor appearing good opposed to the manager's benchmark. during this quantity, the authors supply an easy analytical framework for comparing and treating this in all probability expensive misfit challenge.

Show description

Read or Download Controlling Misfit Risk in Multiple-Manager Investment Programs (Research Foundation of AIMR and Blackwell Series in Finance) PDF

Similar corporate finance books

Public Policy for Venture Capital: A Comparison of the United States and Germany

Enterprise capital is commonly considered as an enormous motive force of monetary progress. whereas the us has the most important and such a lot refined enterprise capital industry on this planet, its German counterpart has just recently started to mature, and diverse governmental schemes exist that are supposed to aid accelerate the improvement of the German marketplace.

Building financial models with Microsoft Excel

A accomplished consultant to construction monetary types construction monetary types with Microsoft Excel + CD-ROM presents starting or intermediate point computing device clients with step by step directions on construction monetary types utilizing Microsoft Excel-the most well liked spreadsheet application to be had. The accompanying CD-ROM includes Excel worksheets that music the process the e-book and make allowance readers to construct their very own monetary types.

Derivatives: A Manager's Guide to the World's Most Powerful Financial Instruments

As a company supervisor or govt, in case you have little touch with the particular day by day buying and selling of derivatives contracts. Regardless, your oversight duties position your occupation without delay within the fingers of competitive derivatives investors. Do you actually comprehend what they are as much as? DERIVATIVES is the 1st and purely booklet written for the chief who's now not a derivatives professional yet is chargeable for the specialists.

Entrepreneurship in Finance: Successfully Launching and Managing a Hedge Fund in Asia

Contemplating launching your personal hedge fund? are looking to examine extra concerning the diversified steps considering developing and scaling a hedge fund? are looking to comprehend what are the worldwide top practices so that it will develop your present hedge fund and allure institutional traders? This booklet is the 1st hands-on booklet to set out in concrete and sensible phrases a few of the steps and concerns essential to effectively release and deal with a hedge fund in Asia, with a selected concentrate on Hong Kong and Singapore.

Additional info for Controlling Misfit Risk in Multiple-Manager Investment Programs (Research Foundation of AIMR and Blackwell Series in Finance)

Example text

Consequently, although the combination of style portfolios may display acceptable common factor risk characteristics, the underlying industry- and stock-specific misfit risk may still be present and compromise the performance of the Illisfit-control portfolio. 3, the aggregate portfolio of a plan sponsor's managers was segmented in the following manner: P =T + ( B * - T ) +A*. Now, define a hedge portfolio, H (that is, a portfolio of long and short positions that in total has no net dollar investment), with the following attributes: H = T-B*.

If a boat is listing to one side, shifting a certain amount of weight to the center of the boat will relieve some of the tilt but not as efficiently as shiftiig the same weight to the other side of the boat. Furthermore, because an index fund has a zero (actually, slightly negative) expected active-managementreturn, taking assets from the active managers and placing them in an index fund will reduce the investment program's expected value-added returns. If the plan sponsor has not previously used passive management, it makes little sense to sacrifice positive expected value of active management to control misfit through the Lase of an index fund.

As a result, to achieve acceptable misfit reduction, the sponsor may be forced to hire a manager who provides little or nothing in terms of active-management skills. The misfit horse has been put before the valueadded cart. Third, and perhaps most importantly, the misfit problem is dynamic, potentially changing from period to period. What happens if the plan sponsor chooses to alter the manager alignment, perhaps firing an existing manager and replacing that manager with another or simply deciding to allocate more funds to an existing manager and less to another?

Download PDF sample

Rated 4.73 of 5 – based on 20 votes