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In the first video of this two-part video series, Elisa introduces us to sustainability. She begins by looking at the difference between sustainability and corporate social responsibility, two terms that can be easily confused.

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Banking Essentials - Part I

This pathway will walk us through the basics of banks, starting with some of the different types and their main functions, then starting to look at the regulation faced by the banks, both before and after the Global Financial Crisis.

Greenwashing

Greenwashing is the act of distributing false information about something being more environmentally friendly than it actually is.

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Expert led content

+1,000 expert presented, on-demand video modules

Learning analytics

Keep track of learning progress with our comprehensive data

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Testing & certification

Gain CPD / CPE credits and professional certification

Managed learning

Build, scale and manage your organisation’s learning

Integrations

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Tackling the Cost of Living Crisis

In this video, Max discusses the cost-of-living crisis currently enveloping the UK. He examines its impact on households as well as the overall economy.

CSR and Sustainability in Financial Services

In the first video of this two-part video series, Elisa introduces us to sustainability. She begins by looking at the difference between sustainability and corporate social responsibility, two terms that can be easily confused.

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Book a demo

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The Discretionary Portfolio Management Framework II

The Discretionary Portfolio Management Framework II

Faisal Sheikh

25 years: Wealth and risk management specialist

In the previous video, Faisal outlined the role of a portfolio manager and started talking about a framework they can use to manage portfolios. In this video, he carries on exploring this framework, starting with the importance of diversification.

In the previous video, Faisal outlined the role of a portfolio manager and started talking about a framework they can use to manage portfolios. In this video, he carries on exploring this framework, starting with the importance of diversification.

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The Discretionary Portfolio Management Framework II

10 mins 8 secs

Key learning objectives:

  • Understand the importance of portfolio diversification

  • Understand how selection of investments can dictate portfolio performance

  • Understand the importance of a holistic assessment

  • Outline the need for monitoring and rebalancing a portfolio

Overview:

This video builds on the introduction to the portfolio management framework and discusses the remaining 4 out of the 5 stages in the framework : Portfolio diversification, monitoring and rebalancing, selecting individual investments and finally holistic assessments. These components all go hand in hand and help portfolio managers perform to the best of their ability and deliver satisfactory results to their clients. It also helps clients understand the portfolio management process and know that their money is being handled in a thorough manner.

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Summary

What is the need for diversification?

Empirical evidence shows that investment risk management is best achieved through an appropriate level of investment diversification. Volatility of international markets during events such as the global financial crisis, geopolitical conflicts and a global pandemic have explained the need for a well-diversified portfolio. Diversification best practice is to include investments that have a low or even negative correlation with each other such as equities and bonds or traditional asset classes with alternatives and also mix exposures to different groups including governments. This reduces the systematic risk of the portfolio failing and provides an inbuilt level of hedging. 

Monitoring and rebalancing of a portfolio

As markets shift due to various global events, so will portfolio asset allocations. This will require a portfolio rebalancing or asset allocation plan to ensure that investors do not become gradually over-exposed to risks. To do this, firms will create a rebalancing policy where portfolios are rebalanced according to a set schedule (usually monthly, quarterly or after major market moves) to ensure the portfolio does not stray away from original goals.

Selection of investments

For a client to fully trust the people making individual investment selections in their portfolio, they need to know who is part of the team managing the portfolio and capabilities of the team and the portfolio manager. Clients also need to comprehend the philosophy being followed by the portfolio managers and this philosophy has to match the client’s personal goals. Only after this strategy is chosen, the portfolio manager can choose an appropriate selection of underlying investments. In choosing investments, consideration will also be given to expected performance (expected returns versus the risk taken) to determine under which market conditions this strategy would likely underperform or outperform the overall market. Two different investments within a single portfolio may have very different performance and hence this shows why the selection process is crucial to ensure top performing assets are included. 

Holistic Assessment of Portfolios

Holistic evaluation of performance involves more than looking at recent returns (annualised performance). Other assessments include consistency of performance, risk management and performance relative to benchmarks and peers. Statistical measures such as Sharpe ratios indicate how much more or less risk has been taken by the portfolio manager in achieving their performance and again, allow comparison across other portfolios and benchmarks. Historical performance is even more important as a portfolio could have a one-off on one given year but may have performed poorly over 5 years.

 

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Faisal Sheikh

Faisal Sheikh

Faisal is a wealth management professional has spent almost 30 years working in the field of risk management, risk control, internal auditing in the financial services and public sector. Most recently, Faisal was the Head of Risk for the Wealth Management business of UBS in the UK. He has also extensive international experience across Europe, the Americas, Asia and Africa. He has also a served as CISI operational risk expert panel member.

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