Portfolio Management
Syllabus Overview
This module explains the stages of the portfolio management process, including risk, return, the main principles of Modern Portfolio Theory (MPT), the Capital Asset Pricing Model (CAPM), collective investment schemes, international investment risk assessment, and overseas markets. It then considers aspects of taxation, financial-services regulation, and takeovers.
Calculations
Students will be expected to perform simple calculations of the following items (calculators may be used):
- (i) Accounting Rate of Return
- (ii) Simple project appraisals including Payback, Present Value and Net Present Value
- (iii) The risk of a portfolio
- (iv) Capital Asset Pricing Model
1. Investment Management
On Successful Completion Of This Part, Students Will Be Able To:-
• Discuss Fund Management In Terms Of Benefits, Approach, The Role Of Fund Managers, And Diversification
• Discuss The Components Of And Balance Between Risk And Return
• Discuss Institutional Investment Management In Terms Of Types Of Fund And Strategies
• Explain The Uses, Advantages, And Disadvantages Of Indices
• Discuss Individual Investment Advice In Terms Of Criteria, Identifying The Customer’s Needs And Objectives, And Portfolio Development And Review
• Outline Sources Of Information
• Distinguish Between Profit Maximisation And Wealth Maximisation
• Discuss The Following Concepts And Make Relevant Calculations:
• Return On Capital Employed (Roce);
• Payback Period;
• Time Value Of Money And Terminal Values; Present Value And Net Present Value;
• Discount Factors; And
• Internal Rate Of Return (IRR)
• Discuss Modern Portfolio Theory (MPT)
• Explain Applications Of MPT
• Discuss The Concepts Of Efficient Frontier And Capital Market Line
• Discuss Types Of Unit Trust, Including Their Benefits, And The Role Of The Manager And The Trustee
• Discuss Investments Trusts, Venture, And Open-Ended Investment Companies, And Distinguish Between Them And Unit Trusts
• Distinguish Between Direct Foreign Investment And International Portfolio Investment
• discuss types of country risk
• discuss country-risk analysis, credit ratings and other components of country-risk assessment
• discuss tell-tale signs of deteriorating conditions
• discuss the benefits and problems of overseas investment
• discuss the equity markets of the US, Japan, Hong Kong, Germany, France, and Australia
• discuss the government bond markets of the US, Japan, Germany, and France
• define normal yield curves (Yes) and flat Yes
• explain reverse Yes
• outline theories concerning Yes
• outline uses of YCs
• discuss the Hatch system
• explain technical analysis, including line charts and point-and-figure charts
2. Taxation and Regulation
• On successful completion of this Part, students will be able to:-
• distinguish between types of taxes
• discuss double taxation (DT), DT agreements, types of DT relief, and overspill
• discuss profits taxes, and withholding taxes
• outline sales taxes, and stamp duty, and name other types of indirect tax
• differentiate between residence, ordinary residence and domicile, and explain their significance for income-tax purposes
• outline taxable income, allowances, and exemptions
• outline the income-tax treatment of married couples
• outline UK tax treatment of overseas income
• define what is meant by chargeable persons, exempt persons, chargeable assets, chargeable disposals, exempted gains and transactions, and principal private residence
• explain the rules in relation to UK capital-gains tax (CGT) indexation allowance, and taper relief
3. Regulation
• distinguish between pluralistic and sole-agency approaches to financial-services supervision
• outline the US system of financial-services supervision
• evaluate the advantages and disadvantages of the sole-agency approach as found in the UK
• explain how a UK quoted company might fund a major overseas acquisition
• discuss the framework of European financial-services regulation and ongoing issues in the creation of a single market in financial services
• explain passporting, and treaty rights, and outline the scope of the Investment Services (ISD), and the role and responsibility of home and host states
• identify rules concerning electronic cross-border activity
• outline the work of International Organisation of Securities Commissions (IOSCO), the Basel Committee on Banking Supervision (BCBS), and the Financial Action Task Force (FATF)
• explain the scope of the UK Companies Act 1985 as amended
• explain the work of the Panel on Takeovers and Mergers (PTM), and the advantages and disadvantages of self-regulation
• explain the scope of the European Takeover Directive
• explain the scope and General Principles of the City Code, and the timetable of an offer
• summarise some important percentage share stakes and their consequences.
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