Showing papers on "Investment management published in 1979"
13 Mar 1979
TL;DR: In this article, the authors discuss changes made to the computerized business simulation, INSTRAT: An Investment Management Simulation, to make the simulation more useful in terms of realism and the application of theoretical models to decisions in the simulation.
Abstract: The purpose of this paper is to discuss changes made to the computerized business simulation, INSTRAT: An Investment Management Simulation [2]. These changes were made to make the simulation more useful in terms of realism and in terms of the application of theoretical models to decisions in the simulation. The changes made to the simulation and the theoretical implications of these changes will be discussed.
2 citations
TL;DR: For example, this article found that 60% of the companies surveyed by the author's organization delegate key policy decisions to investment managers, but this does not dispose of responsibility for managing pension assets.
Abstract: *. Although ERISA vests primary responsibility for managing pension assets in the sponsoring corporation, 60 per cent of the companies surveyed by the author's organization delegate key policy decisions to investment managers. Delegating operating authority, however, does not dispose of responsibility. Sponsors cannot avoid becoming involved in the great debate between traditional concepts of investment management and modern capital market theory-whether to diversify broadly or to concentrate on selected investments, whether to minimize portfolio turnover as a largely unnecessary cost or to accept it as necessary to the pursuit of significant opportunity, whether to change portfolio volatility over the market cycle or to hold it constant-in sum, whether to manage reward or to manage risk. The techniques of modern capital theory make it possible to obtain highly predictable investment results given the investment environment. Managers and clients should be using these techniques to tailor pension portfolios to such presumably basic client considerations as the size of the company, the size of the plan, the percentage of plan participants now working, the benefit formula and the average age and length of service of the plan participants. The management of employee benefit funds demands competence in the area of general management-the development of realistic long-term objectives and the careful articulation of investment policies that can serve as a basis for continuing, responsible communication between money manager and client. l
2 citations
TL;DR: In 1970, Wells Fargo Bank began the development of an investment management process utilizing the new insights of Capital Market Theory but retaining workable elements of Classical Financial Theory as discussed by the authors, and by the end of 1972, the new system had taken sufficient form to be introduced as the process to manage the $1.58 billion of assets entrusted to the Investment Advisors Division, the money management arm of the Trust Division.
Abstract: In 1970 Wells Fargo Bank began the development of an investment management process utilizing the new insights of Capital Market Theory but retaining workable elements of Classical Financial Theory. Two years later, by the end of 1972, the new system had taken sufficient form to be introduced as the process to manage the $1.58 billion of assets entrusted to the Investment Advisors Division, the money management arm of the Trust Division. At the end of 1977, the sharpened management system calls the shots on the investment of $2.1 billion of institutional assets and another $1.7 billion of personal trust assets, and is subscribed to by nearly 100 other money managers throughout the world. The annual net profit to Wells Fargo is currently about $3.5 million and growing rapidly.
A major underpinning of the process comes from a highly systematic approach to understanding the structure of equity prices. Using the oldest available theory, the discounting of future cash flows to present value, in combination with a modern definition of risk, the “Security Market Line” of the Capital Asset Pricing Model is derived.
The Security Market Line description of the equity market, along with a similar description of the fixed income market, in combination with the clients' ability to bear risk, are inputs to the asset allocation model which determines the optimal mix of equity and fixed income investments. Within the equity market a quadratic programming model structures a “value added” risk-controlled optimal portfolio. In addition, index funds, pioneered by Wells Fargo, are used in a growing number of accounts. In some cases index funds are used in conjunction with the “value added” strategies.
1 citations
TL;DR: The Modern Portfolio Theory or MPT is the notion of risk measurement as mentioned in this paper, and it has been used extensively in investment management, with more than 20 institutions providing risk measures, and the investment community spends over $200 million per annum on MPT services alone.
Abstract: During the past decade, there has been a revolution in investment management If you pick up any professional investment journal in the States you will find that the articles and advertisements continually refer to Modern Portfolio Theory or MPT At the heart of MPT is the notion of risk measurement And nowadays, portfolio managers in almost any large American investment institution use modern risk measurement to analyse their portfolios They realise that investment is as much about risk as return and that professionalism in their approach to risk is crucial There are more than 20 institutions providing risk measures, and the investment community spends over $200 million per annum on MPT services alone
1 citations