Portfolio Management CFA Level 2

Portfolio management is the investment management or asset management in which investor or his fund manager takes the decisions relating to his investment for getting maximum return at minimum risk. It has included in CFA level 2 course because an certified financial analyst may part of key role for making good portfolio of his individual, companies and other organisational clients. First of all, he check his clients total investment amount. Then he will check in which securities or assets he  invested his total amounts. He may invest his amount in shares, bonds, real estate and other businesses. After this, he will try to know the optimum investment level in different securities and assets.


Learning Points in Portfolio Management

1st Point of Learning : Capital Market Theory


This is useful for making optimum portfolio. We make the graph of portfolio by taking return and risk as its main factor. Where efficiency frontier will touch the capital market line that point will be optimum portfolio. Here, you should know that efficiency frontier represents all assets which have certain level of risk. Non of asset will be risk free. If we will increase risk, our return will increase, but we have to fix our certain level of risk where we will get optimum return. CFA Mr. Steve Bic has explained capital market theory in following simple video tutorial.



2. Track  the Trends of Stocks and  bonds Prices 

To track the trends of stocks and bonds prices  in report and graph are useful in portfolio management. CFA analyze each day's stock and bond's price in which his investor invested or is interested to invest. Portfolio management is just the way of decisions for doing investment trading profitable.

3. Performance Measurement Analysis

A fund manager who has large number of funds of same institution, will have to measure the performance. Only performance of investment will be useful for taking new decisions. There may be following results which a fund manager can find

a) Above Average Performance

It is good sign and investment fund may increase in such projects.

b) Average Performance 

CFA may tries to increase all the funds which are providing just average performance for covering the cost of funds plus earn some money.

c) Below Average Performance 

This will be risky. Its trend should be analyzed with different angle. For example, we also see that fund's overall performance, long term performance and annual performance before taking decisions regarding this.

4. Hedge Fund Strategies 

In portfolio management, hedge fund strategies handles the risk of loss of below average performance funds. In hedge fund strategy, we try to diversify our return from below average performance securities to above average performance securities.

Related : Corporate Finance CFA Level 2

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Accounting Education: Portfolio Management CFA Level 2
Portfolio Management CFA Level 2
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