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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.

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

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Tackling the Cost of Living Crisis

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CSR and Sustainability in Financial Services

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

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Engage with our video hotspots and knowledge check-ins

Testing & certification

Gain CPD / CPE credits and professional certification

Managed learning

Build, scale and manage your organisation’s learning

Integrations

Connect Finance Unlocked to your current platform

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More featured content

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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The Key Pillars of Portfolio Construction

The Key Pillars of Portfolio Construction

Trevor Pugh

20 years: Trading & hedge funds

In this video, Trevor introduces the basics of portfolio construction, outlining how the core portfolio is assembled and then explains how the portfolio can be modified due to changes in the economic environment. He finishes with an example of how a portfolio might look once it has been constructed.

In this video, Trevor introduces the basics of portfolio construction, outlining how the core portfolio is assembled and then explains how the portfolio can be modified due to changes in the economic environment. He finishes with an example of how a portfolio might look once it has been constructed.

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The Key Pillars of Portfolio Construction

12 mins 46 secs

Overview

Investment portfolio construction is the process of selecting securities optimally, by taking minimum risk to achieve maximum returns. However, establishing a portfolio isn’t as simple as just buying securities. Objectives of the fund first need to be defined as well as developing an understanding of how different asset classes, funds and weightings impact each other.

Key learning objectives:

  • Understand the importance of setting financial objectives

  • Outline the strategic asset allocation (SAA)

  • Outline the tactical asset allocation (TAA)

  • Understand the importance of benchmarks

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Summary

What should the objectives of the fund be?

What is the objective of a pool of available funds? Who is the Investor or Asset Owner? What is their investment horizon?

Once we have a good and clear understanding of the purpose of the investment as well as some underlying characteristics of the asset owner, then we can start putting together their broad risk/return profile which will help us identify the appropriate asset allocation strategy.

What is the strategic asset allocation (SAA)?

This is the core structure of a portfolio, it is put together based on the objectives of the fund, which should have already been established. 

It is a long-term decision, with adjustments made on the asset allocations every 3-5 years as underlying considerations change.

Traditionally, the SSA would follow a format of 40% bonds and 60% equities, the idea being that equities do well when the market rallies and bonds provide protection when the economy weakens. 

Due to current economic conditions, this traditional split of 60/40 has changed, with alternatives now typically being included in the SAA. 

What is the tactical asset allocation (TAA)?

The SAA establishes the long-term investment plan, however during the more medium term geopolitical, economic and business cycles impact financial markets and therefore the underlying asset classes. The purpose of the TAA is to capture some of those interim market moves and adjust the portfolio to reflect those views. 

What is the purpose of benchmarks?

A benchmark is a standard against which the performance of a security, fund or portfolio manager can be measured. They guide the portfolio manager and allow for sponsors to assess how well the PM has done. 

The portfolio is compared against its benchmark to assess the risk/return characteristics and differences between the two. 

There is a benchmark available for every type of investment strategy or asset class. For example, the S&P 500, the FTSE 100, or even cash indices such as SONIA. 

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Trevor Pugh

Trevor Pugh

Trevor has worked in finance since 1995. He started his career in investment banking after studying Law at Cambridge and taking a Masters Degree in Financial Services from University College Dublin. Trevor spent 18 years at Barclays investment bank where he became a Managing Director and head of Gilt trading. He currently works as Chief Operating Officer for a hedge fund.

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