What you will study
The aim of this module is twofold. First, to provide you with the theoretical knowledge and analytical skills to enable you to evaluate different investment possibilities, such as bonds, equities, and alternative investments, as well as the ability to construct optimal portfolios in a risk-return sense, including the use of derivatives.
Second, to give you an understanding of the key factors affecting investment-decision making, including investment objectives and constraints, behavioural and ethical issues, as well as an understanding of the different institutions involved in portfolio management.
The content of the module will be spread across six units:
Unit 1 – Introduction
This unit introduces you to the main investing institutions and intermediaries, to the markets in which they invest and to the way in which the investment industry works. It also includes a discussion on Fintech. It focuses on the key elements of determining investment objectives and constraints, and constructing portfolios of different types of securities that will offer the best expected return per unit of risk given the investor’s objectives and constraints.
Unit 2 – Fixed Income
Unit 2 starts by offering a broad view of fixed income by considering a history of fixed income from biblical times to the present day. Session 2 provides a macroeconomic context for examining fixed income and includes discussion of quantitative easing and tightening. You’ll then look at bond prices and yields, as well as the different approaches to fixed income trading.
Unit 3 – Equities
You’ll start by building on the earlier macroeconomic discussions from Unit 2, and explore the sensitivity of a firm to the business cycle, the typical life cycle of an industry and strategic issues that affect firm performance. You’ll consider how securities are marketed to the public and how they are traded among investors before turning to explore the role of trading arenas, such as the New York Stock Exchange and electronic markets. You'll also look at forms of analysis other than fundamental analysis, the efficient market hypothesis, and equity valuation.
Unit 4 – Derivatives and Structured Products
In this unit, you’ll look at derivatives based on cash products and foreign exchange derivatives. You’ll then learn how these derivatives are used in practice, such as to try to profit from a view on the market, to find arbitrage opportunities or to manage risk. The unit ends with a focus on structured products.
Unit 5 – Alternative Assets
The aim of this unit is to examine the alternatives to the conventional asset classes covered in previous units. This will include commodities, private equity/venture capital, and real estate/infrastructure; or investment strategies, such as hedge funds which use leverage or short selling.
Unit 6 – Asset Allocation and Performance Measurement
This unit will look at:
- The different types of asset allocation approach, perhaps the most important aspect of a fund manager’s role.
- Performance measurement, that is, how to measure the performance of an investment portfolio.
- Performance attribution, which is the breaking down of portfolio performance into its constituent parts.
- Some of the big issues facing the investment industry, such as transparency and fees, the rise of ETFs, and the changing client base.
You will learn
This module will enable you to understand:
- how to value financial securities including bonds equities and derivatives
- the trade-off between risk and return for securities and portfolios
- the different approaches to asset allocation
- structured products, that is, combinations of securities and derivatives which deliver a particular risk /return combination
- the various risks inherent in investment and know how to use derivatives and other products to hedge (mitigate) such risks.
You'll also gain an awareness of the:
- latest developments in Fintech
- investment objectives and the constraints of different types of investors.