🎓 Investment Management - Study Guide

📋 Course Structure

📖 Chapter 1: Ethical and Professional Standards

What this chapter covers:

🔑 Essential Concepts & Formulas

🛠️ Problem Types

Type A: Identifying Conflicts of Interest

Type B: Determining Appropriate Disclosure

🧮 Solved Example

Problem:

Given:

Answer:

⚠️

❌ Mistake 1: Failing to disclose a conflict of interest.

❌ Mistake 2: Assuming disclosure is sufficient to resolve a conflict.

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Remember the acronym "DICE" (Disclosure, Independence, Competence, Ethics) to recall the core principles of ethical conduct.

📖 Chapter 2: Portfolio Construction and Execution

What this chapter covers:

🔑 Essential Concepts & Formulas

🛠️ Problem Types

Type A: Calculating Effective Spread

Type B: Estimating VWAP Transaction Costs

🧮 Solved Example

Problem:

Given:

Answer:

⚠️

❌ Mistake 1: Using the wrong formula for effective spread (buy vs. sell).

❌ Mistake 2: Incorrectly calculating VWAP due to weighting errors.

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Visualize the order book to understand how your order size impacts execution price and effective spread.

📖 Chapter 3: Derivatives and Risk Management

What this chapter covers:

🔑 Essential Concepts & Formulas

🛠️ Problem Types

Type A: Adjusting Portfolio Duration with Futures

Type B: Using Interest Rate Swaps for Duration Management

🧮 Solved Example

Problem:

Given:

Answer:

⚠️

❌ Mistake 1: Forgetting to account for the sign of the hedge ratio.

❌ Mistake 2: Ignoring the limitations of hedge ratios due to convexity or non-parallel yield curve shifts.

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Remember that futures are typically used for short-term duration adjustments, while swaps are better suited for longer-term adjustments.

📖 Chapter 4: Asset Allocation and Portfolio Management

What this chapter covers:

🔑 Essential Concepts & Formulas

🛠️ Problem Types

Type A: Determining Strategic Asset Allocation

Type B: Evaluating Tactical Asset Allocation Decisions

🧮 Solved Example

Problem:

Given:

Answer:

⚠️

❌ Mistake 1: Failing to align SAA with client objectives.

❌ Mistake 2: Overreacting to short-term market fluctuations with TAA.

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Remember that SAA is the foundation of a portfolio, while TAA is used to enhance returns or mitigate risks in the short term.

📖 Chapter 5: Performance Measurement and Evaluation

What this chapter covers:

🔑 Essential Concepts & Formulas

🛠️ Problem Types

Type A: Identifying GIPS Violations

Type B: Calculating Capture Ratios

🧮 Solved Example

Problem:

Given:

Answer:

⚠️

❌ Mistake 1: Misinterpreting GIPS requirements.

❌ Mistake 2: Incorrectly calculating capture ratios.

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Focus on understanding the principles behind GIPS rather than memorizing every detail.

📖 Chapter 6: Alternative Investment Strategies and Risk Management

What this chapter covers:

🔑 Essential Concepts & Formulas

🛠️ Problem Types

Type A: Identifying Factor-Based Strategies

Type B: Analyzing Hedge Fund Strategies

🧮 Solved Example

Problem:

Given:

Answer:

⚠️

❌ Mistake 1: Overestimating the benefits of alternative investment strategies.

❌ Mistake 2: Failing to conduct thorough due diligence on hedge funds.

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Remember that alternative investment strategies often have higher fees and lower liquidity than traditional investments.