Professional Documents
Culture Documents
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• Policy Statement
– Specifies investment goals and acceptable risk levels
– Should be reviewed periodically
– Guides all investment decisions
• Study Current Financial and Economic Conditions
巩固 and Forecast Future Trends
– Determine strategies to meet goals
– Requires monitoring and updating
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The Portfolio Management Process The Portfolio Management Process
Exhibit 2.3
• Construct the Portfolio 1. Policy Statement
Focus: Investor’s short-term and long-term needs,
– Allocate available funds to minimize investor’s risks and familiarity with capital market history, and expectations
meet investment goals
2. Examine current and project financial, economic, political,
• Monitor and Update and social conditions
Focus: Short-term and intermediate-term expected
– Evaluate portfolio performance conditions to use in constructing a specific portfolio
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Why the Need for a Policy Statement Why the Need for a Policy Statement?
政策声明?
• Sets standards for evaluating portfolio
• Understand investor’s needs and articulate performance
realistic investment objectives and constraints – The statement provides a comparison standard in
– What are the real risks of an adverse financial judging the performance of the portfolio manager.
outcome, and what emotional reactions will I have? – A benchmark portfolio or comparison standard is used to
– How knowledgeable am I about investments and reflect the risk an return objectives specified in the
the financial markets? policy statement.
– What other capital or income sources do I have? – It should act as a starting point for periodic portfolio
How important is this particular portfolio to my review and client communication with the manager.
overall financial position?
– What, if any, legal restrictions affect me?
– How would any unanticipated portfolio value
change might affect my investment policy?
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Why the Need for a Policy Statement? Constructing the Policy Statement
• Other Benefits • Constructing the policy statement begins with a
– It helps reduces the possibility of inappropriate or profile analysis of the investor ’s current and
unethical behavior on the part of the portfolio future financial situations and a discussion of
manager. investment objectives and constraints.
– A clearly written policy statement will help create • Objectives
seamless transition from one money manager to
another without costly delays. – Risk
– It also provides the framework to help resolve any – Return
potential disagreements between the client and the • Constraints
manager. – Liquidity, time horizon, tax factors, legal and regulatory
constraints, and unique needs and preferences
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Investment Policy Statement - Example Investment Policy Statement – Example
(continue I)
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Asset Allocation Summary Asset Allocation Summary
• Policy statement determines the types of assets • Asset Allocation and Cultural Differences
to include in portfolio – Social, political, and tax environments influence the
• Asset allocation determines portfolio return more asset allocation decision
than stock selection – Equity allocations of U.S. pension funds average 58%
• Over long time periods, sizable allocation to – In the United Kingdom, equities make up 78% of assets
equity will improve results – In Germany, equity allocation averages 8%
– In Japan, equities are 37% of assets
• Risk of a strategy depends on the investor’s goals
and time horizon
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Real Estate
Investment Choices
• Fixed-Income Investments • Real Estate Investment Trusts (REITs)
– Bonds and preferred stocks – Investment fund that invests in a variety of real estate
properties, similar to a stock or bond mutual fund
• Equity Investments – Construction and development trusts provide builders
• Special Equity Instruments with construction financing
– Warrants and options – Mortgage trusts provide long-term financing for
properties
• Futures Contracts
– Equity trusts own various income-producing properties
• Investment Companies/ Mutual Fund
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Low-Liquidity Investments Low-Liquidity Investments
• Basic Concepts • Antiques 古董
– Some investments don’t trade on securities markets
– Dealers buy at estate sales, refurbish, and sell at a
– Lack of liquidity keeps many investors away profit
– Auction sales 拍卖销售 create wide fluctuations in – Serious collectors may enjoy good returns
prices – Individuals buying a few pieces to decorate a home
– Without notional markets 名义市场 , dealers incur may have difficulty overcoming transaction costs to
ever enjoy a profit them more as hobbies than
招致 high transaction costs investments
– Some may consider them more as hobbies than
investments
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– Investment requires substantial knowledge of art and – Enjoyed by many as hobby and as an investment
the art world – Market is more fragmented 支离破碎 than stock
– Acquisition of work from a well-known artist requires
market, but more liquid than art and antiques
large capital commitments and patience
markets
– High transaction costs
– Price lists are published weekly and monthly
– Uncertainty and illiquidity – Grading specifications aid sales
– Wide spread between bid and ask prices
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Low-Liquidity Investments Low-Liquidity Investments
• Stamps - Example • Diamonds
– Can be illiquid
– Grading determines value, but is subjective
– Investment-grade gems require substantial
investments
– No positive cash flow until sold