Publisher Description

An industry leader candidly examines the role of investment leadership in portfolio management Investment Leadership & Portfolio Management provides a top down analysis of successful strategies, structures, and actions that create an environment that leads to strong macro investment performance and rewarding investor outcomes. By examining how to manage and lead an investment firm through successful investment decision-making processes and actions, this book reveals what it will take to succeed in a radically changed investment landscape. From firm governance and firm structure-for single capability, multi-capability, and investment and product firms-to culture, strategy, vision, and execution, authors Brian Singer, Barry Mandinach, and Greg Fedorinchik touch upon key topics including the differences between leading and managing; investment philosophy, process, and portfolio construction; communication and transparency; and ethics and integrity.

• Leadership issues in investment firms are a serious concern, and this book addresses those concerns
• Details the strong correlation between excellence in investment leadership and excellence in portfolio management
• Written by a group of experienced professionals in the field, including the Chairman of the CFA Institute Board of Governors

Back Cover

The new breed of investment professional knows that there is a strong correlation between excellence in investment leadership and excellence in portfolio management--and in this book, a group of experienced investment industry experts puts this paradigm in perspective. Investment Leadership and Portfolio Management provides a top-down analysis of successful strategies, structures, and actions that create an environment for generating strong investment performance and, most importantly, delivering rewarding investor outcomes. By examining how to manage and lead an investment firm through successful investment decision-making processes, this reliable resource reveals what it takes to excel in a radically changed investment environment. Additionally, it includes informative case studies of the approach in action, so you can see the real applications of the ideas addressed throughout these pages. From firm governance and structure for investment and product firms to culture, strategy, vision, and execution, authors Brian Singer--Chairman of the CFA Institute Board of Governors--and Greg Fedorinchik touch upon pressing issues, including the differences between leading and managing; investment philosophy, process, and portfolio construction; communication and transparency; and ethics and integrity. Along the way, you'll also become familiar with: The role of behavioral biases and market behavior analysis in the investment decision-making process The appropriate incentive structures and fee models for asset management firms The practical considerations required for living organizational values, setting goals, and measuring organizational success The details involved in developing a meritocratic investment process that rewards individual contributions And much more There is no one-size-fits-all approach to leading a diverse group of intelligent individuals and the firms they represent. However, there are a few best practices and rules that can make the task a more manageable one. With the ideas articulated in Investment Leadership and Portfolio Management, you'll gain a better understanding of how to effectively operate within today's competitive investment industry and achieve a significant level of success.

Flap

The new breed of investment professional knows that there is a strong correlation between excellence in investment leadership and excellence in portfolio management--and in this book, a group of experienced investment industry experts puts this paradigm in perspective. Investment Leadership and Portfolio Management provides a top-down analysis of successful strategies, structures, and actions that create an environment for generating strong investment performance and, most importantly, delivering rewarding investor outcomes. By examining how to manage and lead an investment firm through successful investment decision-making processes, this reliable resource reveals what it takes to excel in a radically changed investment environment. Additionally, it includes informative case studies of the approach in action, so you can see the real applications of the ideas addressed throughout these pages. From firm governance and structure for investment and product firms to culture, strategy, vision, and execution, authors Brian Singer--Chairman of the CFA Institute Board of Governors--and Greg Fedorinchik touch upon pressing issues, including the differences between leading and managing; investment philosophy, process, and portfolio construction; communication and transparency; and ethics and integrity. Along the way, you'll also become familiar with: The role of behavioral biases and market behavior analysis in the investment decision-making process The appropriate incentive structures and fee models for asset management firms The practical considerations required for living organizational values, setting goals, and measuring organizational success The details involved in developing a meritocratic investment process that rewards individual contributions And much more There is no one-size-fits-all approach to leading a diverse group of intelligent individuals and the firms they represent. However, there are a few best practices and rules that can make the task a more manageable one. With the ideas articulated in Investment Leadership and Portfolio Management, you'll gain a better understanding of how to effectively operate within today's competitive investment industry and achieve a significant level of success.

Author Biography

BRIAN SINGER is Chief Investment Officer of Singer Partners and Chairman of the CFA Institute Board of Governors. Previously, he was head of global investment solutions at UBS Global Asset Management (formerly Brinson Partners, Inc.), responsible for asset allocation and currency strategies. Singer is also Emeritus Board Member of the Research Foundation of CFA Institute and an advisory board member of the Journal of Performance Measurement. He is a recipient of the 1991 Graham and Dodd Award and a 2001 recipient of the Dietz Award. Singer holds an MBA from the University of Chicago. GREG FEDORINCHIK is head of investor solutions at Mesirow Advanced Strategies, Inc., an institutional fund of hedge funds firm based in Chicago. Prior to joining Mesirow, he was a senior strategist with the global investment solutions team at UBS Global Asset Management (formerly Brinson Partners, Inc.) and a member of the asset allocation and currency committee. Fedorinchik holds an MBA from the Kellogg School of Management, Northwestern University.

Table of Contents

Preface xi Acknowledgments xvii Chapter 1 Characteristics of Successful Asset Management Firms 1 You Can Take the Boy Out of the Culture, but You Can't Take the Culture Out of the Boy 3 Size Matters, but Not in the Way Most People Believe 7 Governance: The Guardian of an Investment-Driven Firm 12 Fostering Collaborative Freedom: Everybody is a Peer 19 Integrity: An Unquestionable Characteristic of Success 23 Conclusion 25 Chapter 2 Building a Cathedral: A Framework for Turning the Mission into Collective Action 27 A Framework for Effective Leadership and Management 28 Establishing and Living Organizational Values 29 Creating Mission and/or Investment Philosophy Statements 31 Strategic Goals and Key Performance Indicators 33 Conclusion 37 Chapter 3 Building a Meritocracy: Understanding, Evaluating, and Rewarding Employee Contributions 39 Performance: A Deeper Dive 39 Horizon: The Fallacy of the Three-Year Track Record 40 Performance Analysis: Practically Speaking 45 Top-down and Bottom-up Approach to Determining Performance 48 Designing Your Rating System to Help Make the Difficult Decisions 51 What Does the Performance Score Really Mean? 53 Criticality: A Deeper Dive 53 Merit Zones: Putting It All Together 57 Communication of Performance and Criticality 59 Values and Compensation 64 Conclusion 67 Chapter 4 Investment Philosophy and Process: A Lofty Cathedral Needs a Deep Foundation 69 The Importance of Investment Philosophy and Process in Investment Organizations 69 Investment Philosophy: Core Beliefs 70 Investment Process: Control and Anarchy 73 Avoiding the Pitfalls of Behavioral Biases 78 Conclusion 83 Chapter 5 Investment Process in an Evolving World 85 Implementation Overview: The "How" of the Investment Process 86 Fundamental Valuation 88 Market Behavior and How It Challenges the Fundamental Investor 90 Team Behavior: Lessons for the CIO from Jelly Beans and Freud 118 Portfolio Design 127 Conclusion 129 Chapter 6 Communication for Superior Client Outcomes 131 The Problem: Human Nature 133 A Classic Tale 134 Case 1: Individual Investors, the Impact of Performance Chasing 137 Case 2: Are Institutional Investors the "Smart Money?" 137 The Reality of Investing in Equities 139 The Mathematics of Recovery 142 Dilemma: Investment Firm or Distribution Shop? 143 The Importance of Culture 145 Sales and Marketing in an Investment Firm 146 Conclusion 149 Appendix: Client Communication in Extreme Market Conditions 149 Chapter 7 Where are the Clients' Yachts?: Reasonable Fee Structures 159 The "Gamma Trade" 161 Anatomy of a Blowup 167 Catch 22 168 Faults of Existing Fee Structures 170 Our Recommendation: High Integrity Fee Structures 178 Conclusion 186 Chapter 8 Final Thoughts 187 Characteristics of Great Asset Management Firms 188 It Starts with a Shared Mission and Values 188 True Meritocracy 189 Avoiding the Pitfalls 190 For Successful Client Outcomes: Communicate, Communicate, Communicate 192 It's All about Incentives 193 Integrity 193 Notes 195 Bibliography 201 About the Authors 205 Index 207

Long Description

Praise for Investment Leadership and Portfolio Management "This short book packs a lot of wisdom about portfolio management. It demonstrates the importance of firm culture and longer time horizons to successful investing, while putting forward a truly creative approach to performance fees." Bob Pozen, Chairman, MFS Investment Management "Singer and Fedorinchik have added an important book to the library of investment leaders. They drill deep into the question of product-driven vs. investment-driven firms, covering important foundational topics like vision, mission, culture, compensation, and fee structures. When serious practitioners like these three take the time to write about best practices, the result is a book that rings true. Full of practical ideas that are supported by a deep understanding of the underlying financial theories and lots of real-world, front-line experience. A must-read for all investment professionals who are committed to getting it right in this post-crisis environment." James Ware, CFA, author of High Performing Investment Teams, founder of Focus Consulting Group "In an exceptional and decidedly unique style, Investment Leadership and Portfolio Management deserves special attention from any investor. The authors weave a wonderful mosaic of the investment management landscape that is both different from other investment books and compelling in its focus on the truly relevant issues. The case studies and references to actual experiences make this book an enjoyable read and, equally important, provide long-sought attention to the factors that really matter in the quest for investment performance." Gary P. Brinson, President, GP Brinson Investments "Singer and Fedorinchik have laid out a clear vision of the modern, post-crisis asset management firm in which the interests of the investment professionals, the firm and the end client are fully aligned. This book combines decades of practical experience with original insights from portfolio and behavior theory, in equal measures of wit and wisdom." Donald M. Raymond, PhD, CFA, Senior Vice President, Public Market Investments, Canada Pension Plan Investment Board

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