April 2011
Beginner
704 pages
21h 44m
English
book
The Theory and Practice of Investment Management: Asset Allocation, Valuation, Portfolio Construction, and Strategies, Second Edition
by Frank J. Fabozzi, Harry M. Markowitz
Content preview from The Theory and Practice of Investment Management: Asset Allocation, Valuation, Portfolio Construction, and Strategies, Second Edition
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SETTING INVESTMENT OBJECTIVES
Setting investment objectives, begins with a thorough analysis of the investment objectives of the entity whose funds are being managed. These entities can be classified as individual investors and institutional investors. Within each of these broad classifications is a wide range of investment objectives.
Institutional investors include:
• Pension funds.
• Depository institutions (commercial banks, savings and loan associations, and credit unions).
• Insurance companies (life companies, property and casualty companies, and health companies).
• Regulated investment companies (mutual funds and closed-end funds).
• Endowments and foundations.
• Treasury department of corporations, municipal governments, and government agencies.
In general, we can classify institutional investors into two broad categories: those that must meet contractually specified liabilities and those that do not. We can classify those in the first category as institutions with “liability-driven objectives” and those in the second category as institutions with “nonliability driven objectives.” A liability is a cash outlay that must be made at a specific time to satisfy the contractual terms of an issued obligation. An institutional investor is concerned with both the amount and timing of liabilities because its assets must produce the cash flow to meet any payments it has promised to make in a timely way.
Some institutions have a wide range of investment products that they ...
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