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BOOKREVIEW
Title:
Portfolio Representations
Subtitle:
A Step-by-step Guide to
Representing Value, Exposure
and Risk for Fixed Income,
Equity, FX and Derivatives
Author:
Jem Tugwell
ISBN:
9781906659899
Price:
£75.00
Publisher:
Harriman House
About the author:
Jem Tugwell is a specialist investment
management consultant, focusing on
institutional investment management
strategy and analytics. Jem’s 20-year track
record in the investment management sector
includes founding a successful multi-million
pound software business, identifying an
opportunity for a new generation of buy-
side asset management solutions. He is the
founding director of Jem Tugwell Associates.
Jem has published articles in the Journal
of Asset Management and the Journal of
Performance Measurement, amongst others.
A Step-by-step Guide to Representing Value, Exposure and Risk for Fixed Income, Equity, FX and Derivatives
Portfolio Representations
By Jem Tugwell
The credit crunch provided the
asset management community
with a brutal reminder of the
importance of having genuine
knowledge of portfolio structures
and the risks embedded within
them. More so than ever, fund
managers need a clear and
consistent way of separating
value from exposure in their
portfolios, allowing a complete
“look-through” to the real risks
contained in derivatives and
pooled/structured products.
Simple portfolios no longer
exist. And, as fund managers
are driven to find risk-adjusted
rather than just raw returns, it is
imperative that the risk measures
and the understanding derived
from them are applied to the
total portfolio, as opposed to
just particular asset classes or
sections.
In “Portfolio Representations”,
author Jem Tugwell, a specialist
investment management
consultant, provides practical
and sophisticated insight into
each asset type and how the
different risks and exposures they
involve should be combined and
represented.
A Deep Look at Risk
This book is not meant to be
a detailed work on pricing
mathematics; there are numerous
good books out there already
covering the detail of each pricing
model for each asset type.
Instead, pricing of each asset
type is discussed only in general,
using an example model to draw
out the relevant risk factors.
Uniquely, it looks at what the risk
factors are for each asset type,
how to calculate them and how to
combine them in a portfolio view.
As portfolios cover global
markets and multiple asset types,
“Portfolio Representations”
covers equity, fixed income,
credit, inflation, and currency
assets and their derivatives all
in one book. The writing style is
straightforward, ensuring that the
key points are fully understood.
A Book for (almost) Everybody
The book is designed to be
usable by a wide cross-section
of readers. It should be of great
use, for instance, to the heads of
different business areas within
an investment management
organisation, who wish to assess
the business implications of
different portfolio representations.
It should also be helpful for fund
managers and their assistants
interested in the practical and
strategic impact of their decision-
making; as well as business
analysts and programmers. Such
fund managers, for instance,
should be able to use the book
to explain exactly what they want
from programmers or business
analysts, who will be able to use
it to understand clearly what it is
they are being briefed to create.
Structure
The first chapter of the book
provides an introduction to the
representation of assets in a
portfolio. This is an essential
starting point for readers new
to the area, and covers the
aspects of a portfolio that are
common across all asset types
and strategies. The book is then
split into parts by broad asset
type. Part 2 covers equities and
their derivatives. This is followed
by Part 3 on money markets
and derivatives. After this it
looks at fixed income, credit and
inflation assets and derivatives.
Currency management, a hugely
important topic, is dealt with
in the subsequent section on
covering currency trade types
and derivatives. The next section
is devoted to fund-of-fund
structures. And the final section
deals with Cross-Asset-Type
Issues. It is worth highlighting that
it is assumed that the reader is
familiar with the basic terms and
constructs used in the portfolio
management industry, i.e. what
a portfolio is, that a portfolio is
made up of holdings in different
assets/securities, that assets
have prices and that assets in
different currencies need to be
converted to a single currency to
calculate a total portfolio value.
Conclusion
Overall, Portfolio Representations
is a carefully constructed,
thorough and extremely
readable guide to the sometimes
complicated areas of asset
management. Its easy-to-read
style allows beginners to use
the book as a learning guide,
while the depth and detail of the
coverage will enable practitioners
to use it as a reference text.