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Risk Management & Asset allocation by

Jony Islam


What is Asset Allocation •

A comprehensive and complex process oriented towards optimizing returns within comfort zones

• • • •

Systematised approach to invest in various asset class Based on defined future goals and requirements Investors circumstances, risk profile and time horizon available for investments Analysis of risk tolerance of the investor


The goal of asset allocation •

- select an “optimal” portfolio of assets given a plan’s risk tolerance and capital market expectations.

• • • • • • • •

• Risk tolerance includes factors such as: — Time horizon; — Demographics; — Plan design; — Funded level; and • Typically, assets are modeled with a “mean/variance” optimizer, and the results are integrated with liability modeling. Goal analysis- The goal of the asset allocation process is to select an “optimal” portfolio of assets given a plan’s risk tolerance and capital market expectations exposure.


Connection between Asset allocation and Diversification •

Don’t put all your eggs in one basket

Simply a strategy to spread risk with the assumption that downside in one area will get covered by upside in another investment.

Asset allocation allows building of portfolios having specific financial goals in mind

Control risk


Importance of rebalancing •

picture


Diversification- theory •

Mean/ variance optimization

Picture

Efficient frontier pic


What is risk?


• Standard deviation • Beta


Asset allocation models • Between 4 objectives: • -Capital preservation • Income • Balanced • Growth Oriented


Adopting the right model • Set specific future financial goals • Determine time horizon • Analysis of Risk tolerance


ASSETS MANAGED IN THE UK Asset Allocation £1 trillion

Money Market 7.7%

Other 10.1%

Bonds 36.4%

Source: Investment Management Association

Fixed Income Allocation £366 billion

High Yield Bonds 0.5%

Equities 45.8%

Investment Grade Bonds 48.0%

Government Debt 51.5%


HEDGING


Example of a saxo clients portfolio


Building optimal portfolio using leverage/collateral

Asset classes available on the Saxo trader

Risk management tools

• • •

Practical strategies - stop/loss -trailing


Thank you for your time!

Asset Allocation  

Jony Islam by • A comprehensive and complex process oriented towards optimizing returns within comfort zones • Systematised approach to inve...

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