Asset Allocation

Asset allocation is part of the overall investment process. Investment managers are guided by written policies formally known as investment guidelines. A good portion of realized return is often associated with asset allocation. Investors, however, may approach this differently. For example, an institutional investor, such as an insurance company, needs to consider matching the sensitivity of their assets with the sensitivity of their liabilities. An asset manager such as a Mutual Fund will be judged against a benchmark/index. Asset allocation is more than just changing amounts invested in different assets or sectors. Understanding the risks/limits when reallocating needs to be taken into account. For example, there may be restrictions on the amount a manager may be allowed to underweight or overweight a particular sector, or duration limits determining the amount of interest rate risk. Further there is a difference between strategic and tactical asset allocation.

Course Objectives

By the end of the course, participants will be able to:

• Describe the steps in asset allocation
• Differentiate between:
  • Strategic and tactical asset allocation
  • Institutional investors and asset managers
• Describe key asset classes and their respective behavior – equities, fixed income and commodities
• Discuss asset sub-sector and product offerings in the market
• Develop the rationale for asset allocation decisions
• Appraise market cycles and applicable strategies for tactical asset allocation

Suggested Prerequisites:

• Fundamentals of the Capital Markets/Securities Industry or equivalent knowledge

Program Level:Foundational –Intermediate

Advance Preparation: None

Computers and Financial Calculators: N/A

Recommended CPE Credits: 7