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May 12 - 13, 2025

Active Portfolio Construction

MPT Approaches from Treynor/Black to Black/Litterman and Beyond

Register Now Agenda Program Online
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Location
Prague, NH Hotel Prague
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Price
€ 1,400 + VAT
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Lecturer
Andreas Steiner
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Language
English
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Evaluation
New
Hybrid Training
Hybrid
Both classroom and online training available
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Price for online training
€ 1,050
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Review of "Passive" MPT Portfolio Construction
Treynor/Black: Implementing Non-Zero Alpha Information
Treynor, Roll, Grindold/Kahn: Taking into Account Alpha Forecast Risk
Black/Litterman Model and the Intuitions Behind It
Bayesian Approach to Forecasting
Implementing Absolute, Relative and Basket Forecasts Across Portfolio
Course Description
While Modern Portfolio Theory (MPT) is well known for its passive and factor recommendations, information on the active portfolio construction methodologies is less available and scattered. This course provides an overview of the methods proposed since the early work of Markowitz and Sharpe to build and manage active portfolios based on private alpha information subject to forecast risk. This program is suitable for junior and advanced investment professionals as well as non-technical stakeholders in the investment process who require a top-down overview. Formulas and models will be presented in a summarized form, but the spirit of this course is application-oriented, leaving room for discussions and participant questions.

Target Audience
Junior up to advanced investment professionals, risk managers, investment analysts, investment committee members, senior management, relationships and sales professionals.

Materials
Participants will receive the slides presented, spreadsheets containing example calculations for all models and concepts discussed and important papers in PDF format.
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PDF brochure with all details about the Active Portfolio Construction seminar is available on request.

Program of the seminar: Active Portfolio Construction

The seminar timetable follows Central European Time (CET).

09.00 - 09.15 Welcome and Introduction

09.15 - 12.30 Review of "Passive" MPT Portfolio Construction

  • Markowitz Optimization: Problems Type I, II and III
  • Sharpe Portfolio Construction: Equilibrium, Market-Cap Weighted Market Portfolio, Two-Fund Separation, Diagonal Model
  • Efficient Set Mathematics: Merton, Roll Parametrization of Problem Type II
  • Moving Beyond the CAPM: Fama’s Multifactor Equilibrium and Multifactor Portfolio Construction
  • What Means “Active” Portfolio Management?

12.15 - 13.15 Lunch break

13.15 - 17.00

Treynor/Black: Implementing Non-Zero Alpha Information

  • Alpha as an Intercept: Return without Risk?
  • Analytical T/B Solution Assuming that Residuals are Uncorrelated
  • T/B Solution for Correlated Residuals
  • The Portfolio Factory: Implementing Alpha Expectations Consistently Across Client Investment Portfolios and the Product Portfolio
  • Why Treynor/Black is Ignored by Practitioners for the Right and Wrong Reasons

Treynor, Roll, Grindold/Kahn: Taking into Account Alpha Forecast Risk

  • Alpha Estimation Using Scores, IC and Residual Risk
  • Scoring Approaches to Forecasting
  • IC and Shrinkage
  • Targeting the Information Ratio: Benchmark-Relative Optimization as Long/Short Optimization

09.00 - 12.30

The Roll and Jorion Critique: Why Relative Active Managers Should Not Loose Sight of Absolute Risk and Return

  • IR Frontier in Mean-Variance Space: Excessive Risk Taking
  • Solutions: TE, Volatility and/or Beta Restrictions, Bringing Back Risk Aversion (Roll, Jorion and Betrand’s Suggestions)
  • Targeting Absolute and Risk Goals Simultaneously: Two-Covariance Matrix Optimization (Wang)
  • Dual Linear Goals: Building Portfolios which Target Both Financial and Sustainability Goals

Black/Litterman, Part I: Bayesian Approach to Forecasting

  • The Origin of Black/Litterman: Theil/Goldberger Estimator for Combining Data and Non-Data Information
  • General Introduction to Bayesian Models: Aggregating Two Sources of Information by Taking into Account Their Credibility
  • Implied Returns: Assumed MV Efficiency in Order to Derive Tilted Portfolios Relative to a Benchmark Independent of Market Efficiency

12.15 - 13.15 Lunch break

13.15 - 17.00

Black/Litterman, Part II: Implementing Absolute, Relative and Basket Forecasts Across Portfolio Constituents and Segments

  • View Portfolios: Modelling absolute, relative & basket views
  • Forecasts as Payoff of Portfolios
  • Forecast Risk: Volatility of View Payoffs
  • Combining Top-Down and Bottom-Up Forecasts (Sefton et.al.)
  • The Joint Hypothesis Problem When Backtesting Black/Litterman

What's Next?

  • Summary
  • Plenum Discussion
  • Latest and Creative Applications in Research and the Industry
  • AI, ML, Data Sciences?
  • Alpha-Ignorant Solutions: Equal-Weighting, Risk Parity & Risk Budgeting?

Conclusion of the Seminar

Location and Registration

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Venue

Prague

The seminar will be held in an attractive destination in the very heart of Europe.

More Information
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Hybrid

Hybrid Training Seminar

The seminar will also be held globally online on the same dates as the in-class event.

Online
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Registration

Registration Deadline

April 28, 2025

Register Now
Training catalogue in PDF
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