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UNIVERSITY OF PARIS DAUPHINE MASTER BIM SYLLABUS OF THE COURSE ASSET MANAGEMENT Professors This course will be taught in French by Professor Gerard Kanengieser and in Professor Pierre Clauss. Overview: The investment management industry is responsible for managing pools of savings or asset management. Asset managers thus provide diversification, reduced risk and lower transaction costs. Over the past several decades, the industry has experienced spectacular growth in assets under management with a shift in the flow of client assets towards large management companies, ongoing growth in assets under management, and declines in funds’ expense ratios. The financial crisis is changing drastically the landscape since this growth was driven by market appreciation and consistent net inflows. Course Objectives: This course is NOT a primer on portfolio theory. Take this opportunity to revisit your courses on Markowitz diversification, the efficient frontier, capital asset pricing model, the alpha and beta coefficients, the Capital Market Line and the Securities Market Line, with a focus on application of these concepts on real data. This course covers topics that are essential for understanding the real functioning of investment management companies: - How they operate and who are their customers (institutional investors), the KYC principle - Understanding portfolio construction and asset allocation methodologies. - The management strategies in equity, fixed income and alternative asset classes - Operational risks and management of these risks - Performance results and evaluation Course mechanics: Lectures and Discussion of cases. Class participation is actively encouraged. The course site is the information center for the course. Please check the 1course site regularly. Registered students can reach the course site on http:// www. master-bim.fr. Readings Cochrane. J.H., Asset Pricing, revised edition, 2005 Princeton University Press. Markowitz, H., 1952, Portfolio Selection, Journal of Finance, 7, 77-99. Perold, A.F & Sharpe, W.F., 1988, Dynamic Strategies for Asset Allocation, Financial Analysts Journal, January/February, 16-27. Grading The course grade will be based on the following: Case write-ups and memos count 40%; the final exam counts 40%; class participation counts 20%. The numerical grade distribution will dictate the final grade, according to the faculty’s recommended grade distribution. Class participation: Active class participation – this is what makes classes lively and instructive. Treat each class as a client meeting. Come on time and prepared. Class participation is based on quality of comments, not quantity. Exam policy: In the exam, students will not be allowed to bring any document and calculators will not be needed. Unexcused absences from exams or failure to submit cases will result in zero grades in the calculation of numerical averages. Exams are collected at the end of examination periods. Cases write-ups: For indicated classes, there is a written case assignment to be handed in as group reports. The memos should be concise and can be in bullet-point format, when appropriate. Every student in the group must retain a copy of the write-up and bring it to the class that the case or the memo is discussed. Academic integrity All work turned in for this course must be your own work, or that of your own group. Working as part of a group implies that you are an active participant and fully contributed to the output produced by that group. When you use the web, please state your sources. 2Course Schedule Session 1 – Pierre Clauss 1. Financial Risks and Investment Performances 1.1. Financial capitalism 1.2. Financial risks measures 1.3. Investment performances measures 2. Allocation and dynamic strategies 2.1. Markowitz efficient allocation 2.2 Buy-and-hold and constant mix strategies Session 2 – Pierre Clauss First application on financial data: summary statistics, normality tests. Session 3 – Pierre Clauss Application on data to measure portfolios performances precisely and to allocate financial investment. Session 4 – Gerard Kanengieser 1. HOW THE INVESTMENT SERVICES INDUSTRY OPERATES General Highlights, Industry Statistics, Earnings 2. THE COMPETITIVE LANDSCAPE Basic review of Investment management companies and their strategy 3. PRESENTATION OF CSAM Assignment: SWOT analysis of CSAM Session 5 – Gerard Kanengieser 1. SWOT ANALYSIS OF CREDIT SUISSE ASSET MANAGEMENT Discussion 2. PORTFOLIO CONCEPTS Mean-variance analysis, measures of covariance among investments, realities of the marketplace 3. ASSET CLASSES Traditional asset classes (stocks and bonds), hedge funds and other alternative asset classes 4. PORTFOLIO CONSTRUCTION Top Down, Bottom Up approaches/ active vs passive strategies Assignment: TBD Session 6 – Gerard Kanengieser 1. ASSET ALLOCATION top-down macroeconomic view that forms the basis for setting target allocations for each of the major strategies and regions 2. EVALUATION OF PERFORMANCE 33. BUY SIDE RISK MANAGEMENT Manager risk, market risk, liquidity risk, leverage, operational risk and disaster risk. "Value-at-Risk" (VaR) and volatility measures. 4