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Portfolio Management

Asset Management Group. Portfolio Management. P R E S E N T E D B Y M. Corinne Larson, CTP Vice President (914) 765-3505 corinne.larson@mbia.com. Investing in Today’s Market. Develop a Plan: Investment Policy Cash Flow Forecasting Investment Strategies.

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Portfolio Management

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  1. Asset Management Group Portfolio Management P R E S E N T E D B Y M. Corinne Larson, CTP Vice President (914) 765-3505 corinne.larson@mbia.com

  2. Investing in Today’s Market • Develop a Plan: • Investment Policy • Cash Flow Forecasting • Investment Strategies • Execute the Plan: • Investment Instruments • Investment Options • Spread Analysis • Reevaluate the Plan: • Benchmarks • Portfolio Performance • Portfolio Rebalance

  3. Importance of a Benchmark • Control risk in portfolio • Target expected returns • Establish accountability • Promote communication

  4. Characteristics of Benchmarks • Faithful to investment style and discipline it represents • Closely mirror the portfolio • Types of investments • Maturity limits • Active or passive management • Verifiable • Published • Easily calculated

  5. Choosing a Benchmark • Choose a security type • Come from appropriate industry or sector • Have a similar weighted average maturity or duration • Calculate one-month, six-month, and 12-month averages

  6. Choosing a Benchmark • Choose an index • Investable • Measurable • Repeatable • Consistent with portfolio guidelines

  7. Common Benchmarks • Standard & Poor’s LGIP Index • Public Investor 10-bill Performance Index • Constant Maturity Treasury Rates • 3- and 6-months • 1-, 2- and 5-years

  8. Treasury Yield Curve Rates www.treas.gov

  9. Common Benchmarks • Merrill Lynch U.S. Treasury Indices • Salomon U.S. Treasury Benchmark Indices • Lehman Brothers Government Bond Indices • Merrill Lynch U.S. Corporates A-AAA

  10. Where to Find Benchmarks • Wall Street Journal • Barron’s • Bloomberg • Internet • GFOA’s Public Investor newsletter

  11. Portfolio Performance • Compare returns • Evaluate risk incurred to achieve returns • Determine if returns meet expectations • Reevaluate benchmark at least annually or when investment strategy changes

  12. How to Review Performance

  13. Portfolio Rebalancing • Evaluate • Compliance issues • Credit risk • Liquidity needs • Diversification • Market conditions • Interest rate risk • Investment strategies

  14. Portfolio Rebalancing • Diversify • Market sectors or issuers • Rate • Maturity • Match asset allocation goals and tolerance for risk • Adjust WAM for market conditions • Swap out of underperforming securities

  15. Putting It All Together • Establish the framework for investing • Understand investment alternatives • Develop cash flow forecasts • Develop investment strategies • Report investment results

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