An Introduction to Fund Management

This guide is derived from the author's notes for the two-day course of the same name that he presents for the Securities and Investment Institute.

<b>Ray Russell</b> has been a consultant and trainer within the financial services industry since 1988.  Prior to this he spent 25 years in investment banking.  Operating as GCR Management Services he has served as a director of a fund management firm for 10 years and has developed introductory training for the SII and fund management firms in the UK and Ireland.  He also created a week long course for the compliance Institute.

Preface

xi

About the author

xiii

1 INTRODUCTION

1

(12)

Economic background

3

(1)

'Money makes the world go round'

4

(1)

'Money doesn't grow on trees'

5

(1)

Risks and rewards

6

(3)

Considerations

9

(1)

Markets

10

(1)

Investment instruments

11

(1)

'Neither a borrower nor a lender be'

12

(1)

2 ROLE OF FUNDS

13

(40)

Definitions

14

(1)

Investment businesses

15

(1)

Types of fund

16

(7)

Open-ended and closed-ended funds

23

(1)

Uses of funds

24

(1)

Associated packaging

25

(1)

Features and characteristics

25

(1)

Purpose, providers and players

25

(2)

Costs, benefits and comparisons

27

(4)

How to invest

31

(1)

Sales, marketing and disclosure

31

(1)

Categories, sectors and statistics

32

(1)

Investor protection

33

(1)

'Be it enacted by the Queen's most Excellent Majesty...'

33

(9)

Regulation in practice

42

(5)

Establishing a fund

47

(1)

Who wants one and why?

47

(1)

Options and approaches

48

(2)

Documents and authorisations

50

(1)

Launching the fund

51

(2)

3 PORTFOLIO MANAGEMENT

53

(34)

Strategies, styles, objectives and policies

54

(2)

Meeting investors' requirements

56

(1)

Risks to be managed

57

(2)

Hedging

59

(3)

'Please don't ask for credit...'

62

(1)

'You can't do that!'

63

(2)

Asset allocation versus stock selection

65

(1)

Choosing the investments

66

(1)

'First, pick your markets'

66

(2)

Portfolio weightings and profiles

68

(1)

Income and growth

69

(1)

Liquidity

70

(1)

Evaluating alternatives

71

(4)

Data, ratios and measurements

75

(3)

Dealing with events

78

(1)

News and announcements

79

(2)

New issues and underwriting

81

(2)

Rights, splits and scrip

83

(2)

Breaches of regulations

85

(2)

4 PORTFOLIO ADMINISTRATION

87

(16)

'Day by day in every way...'

88

(1)

Buying and selling

88

(1)

Delivery and settlement

89

(1)

Registration

89

(2)

Custody

91

(1)

Use of nominees

91

(2)

Stock exchange reporting

93

(1)

Records and regulations

93

(1)

Portfolio accounting and controls

94

(2)

Profits, income and taxation

96

(2)

Valuation and pricing

98

(5)

5 INVESTOR ADMINISTRATION

103

(12)

Agents, agreements and delegation

104

(1)

Investor transactions

105

(3)

Registration

108

(1)

Communicating with investors

109

(6)

6 PERFORMANCE MEASUREMENT

115

(18)

Sector comparisons - 'my fund is better than your fund'

116

(3)

Yields and returns

119

(4)

Time- and money-weighted returns

123

(4)

Indices and benchmarking

127

(3)

Volatility and risk adjustments

130

(3)

7 INVESTMENT MATHEMATICS

133

(14)

The arithmetic of indices

134

(3)

Standard deviation

137

(2)

Capital Asset Pricing Model

139

(8)

Glossary

147

(8)

List of abbreviations

155

(2)

Index

157

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An Introduction to Fund Management

Summary

Author Biography

Table of Contents

Supplemental Materials