Hedge Fund Manager Blueprint
Portfolio construction, short selling, risk management and the operational, regulatory and commercial requirements of managing an investment fund.
Security selection is only one component of investment fund management. The remainder comprises portfolio construction, risk management, liquidity management, the operation of a short book, conduct during drawdowns, and the operational and regulatory infrastructure required to manage third-party capital.
This Blueprint addresses each of these subjects and is designed to be studied alongside the simulated fund, so that portfolio decisions are made on a live portfolio.
Scope: this Blueprint is educational material on the management of investment funds. Managing an investment fund is a regulated activity in most jurisdictions, including Canada. Nothing in this Blueprint constitutes legal advice, and nothing in it should be read as indicating that third-party capital may be managed without the appropriate registration or a confirmed exemption.
By the end you will be able to
- Construct a portfolio in which position sizes reflect downside risk and correlation as well as conviction
- Operate a short book with risk controls appropriate to the asymmetric payoff of short positions
- Measure and manage exposure by factor, sector and liquidity
- Establish a drawdown protocol in advance and apply it under adverse conditions
- Understand the operational and regulatory infrastructure required to manage an investment fund
Curriculum
The aggregation of individual positions into a portfolio, and the reasons portfolio risk differs from the sum of position-level risks.
The mechanics, costs and risks of short selling, and the reasons short positions cannot be managed as the inverse of long positions.
The definition of risk for a fundamental portfolio, its principal sources, and the management of drawdowns.
Fund structure, regulation, investor relations and operations, which together determine whether an investment process can be implemented.