FINS5541 Advanced Investment and Advanced Funds Management - 2019

FINS5541
Postgraduate
Term 1
6 Units of Credit
On Campus
Banking & Finance
This course outline is provided in advance of offering to guide student course selection. Please note that while accurate at time of publication, changes may be required prior to the start of the teaching session. You should always access the current online version of the outline when the Term commences.

1. Course Details

Summary of Course

This course covers advanced topics in investments and active funds management. Namely:
  1. equity valuation
  2. alternative investment classes; and
  3. portfolio performance measurement and management.
The equity valuation part covers security analysis based on discounted cash flow analysis.
The second part covers investments in asset classes other than bonds and currencies. These so-called alternative assets have acquired increasing relevance for institutional investors such as endowments, pension and sovereign wealth funds. They include real estate, private equity, commodities, currencies, and hedge fund strategies. To the extent these are exposed to different risk and rewards than traditional asset classes, they can be useful ways for investors to diversify their risks.
The final part focuses on advanced issues of performance measurement for active investors and optimal portfolio management. These include strategies to deal with estimation error in portfolio optimization and methods recently proposed to address this. As a postgraduate level course there is an important emphasis on discussing recent relevant research on each topic.

Teaching Times and Locations

Please note that teaching times and locations are subject to change. Students are strongly advised to refer to the Class Timetable website for the most up-to-date teaching times and locations.

View course timetable

Course Policies & Support

Course Aims and Relationship to Other Courses

The course aims to complement the training provided in FINS5513, focusing on topics either introduced in that course or not covered but still a core part of the body of knowledge for the Finance profession and Investments in particular.

One of the main aims of the course is to provide students with training in security analysis. That is methods for security analysts to search for under-valued / over-valued securities relative to some objective criteria.

Another focus of the course is alternative investments. Alternative investments refer both to asset classes other than stocks and equities and to approaches different from the conventional buy and hold passive strategy. Alternative asset classes include real estate, private equity, commodities, and currencies. To the extent these have specific risks and rewards they can offer a potential way for investors to diversify their risk. The same can apply to hedge fund strategies like liquidity provision, volatility scaling and others. This course aims to explain the essential concepts behind these alternative asset classes, with a major focus on alternative hedge fund strategies.

Finally, one essential aim of the course is to assess the performance of active managers and use that information to manage portfolios including both passive benchmarks and actively managed funds. The main empirical challenges of portfolio management are also addressed.

As most courses in finance, this course requires some basic knowledge of mathematics, statistics and accounting.

2. Staff Contact Details

Position Title Name Email Location Phone Consultation Times
Lecturer-in-chargeDrPedro BarrosoRoom 333B, UNSW Business School building – Ref E12+61 2 9385 5854TBA

​If you would like to meet the LIC it is recommended that you write previously to book an appointment during office hours. If you do not book, you can still come to the office hours but students that booked previously will have priority.

If you cannot come to the regular office hours due to other commitments related to UNSW, you can request for an alternative meeting time. In that case send a document confirming the reason of the impediment during normal office hours.

3. Learning and Teaching Activities

Approach to Learning and Teaching in the Course

We seek to create an interesting, challenging, relevant, and engaging education experience. To help achieve this objective we have a number of teaching aims:

  • Create a climate of engagement, dialogue and ongoing feedback between students and lecturers regarding the content, teaching strategies, learning experiences and outcomes;
  • Cater for a variety of learning preferences and abilities by providing a range of learning activities and teaching methods;
  • Develop independent learning skills and create an environment that provides both structure and guidance as well as encourages students to extend their learning.

Learning Activities and Teaching Strategies

The (online) lecture

The (online) lectures set out the main conceptual frameworks for each topic. They synthesize materials from various sources. You are advised to start with the (online) lectures to get the main ideas and then read the textbooks and other relevant materials. From a time management perspective, this means you will need to allocate at least 10 hours per week for the online lecture and reading. We bring current research to class. We do this by presenting and discussing recent papers on topics of interest to the course. In the lectures we will also solve exercises to facilitate the interpretation of each topic’s most important insights and develop problem-solving skills. These should also help prepare you for the exams. Please note that the course has no tutorials and the time for solving exercises in the lectures is limited. Successful preparation for the exams builds on actively going through the examples in the slides, solve problems and exercises provided by the lecturer and those in the recommended textbooks for the chapters covered. You are strongly encouraged to form a study group with colleagues to go through this active learning process.

The equity research project

A fundamental part of the course is about stock valuation. So you will be asked to value a stock. This is the “equity research project.” This should be a real example of an actively traded stock and you should be able to produce a recommendation to buy or sell the stock. You should be able to do this using the methods learned in class (possibly complemented with others you find through your own independent research). The equity research project is a teamwork assignment. You should make an effort from the start to meet your colleagues in the course and find a team of 3-4 members you feel comfortable working with. Note that for the assignment (and in general) you should make yourself familiar with the School's policy on plagiarism. Assignments showing signs of plagiarism are strongly penalised and are subject to disciplinary actions. Examples of plagiarism include (but are not limited to): i) using text from internet sources or other assignments without referencing the source; ii) using spreadsheets made by other groups or persons unrelated to the course. If you need any assistance in managing your time you will find the UNSW Business School’s Education Development Unit (EDU) a useful resource.

The online quiz

The online quiz aims to provide early feedback on the students progress in the course. It has no weighting in the final grade.

5. Course Resources

The website for this course is on Moodle.

There is no fixed textbook requirement for this course.

However, much of the course relies on materials from three books:

  • Anson, M., Black, K., Chambers, D., Kazemi, H., 2015, CAIA level I: An introduction to core topics in alternative investments, 3rd edition, Wiley and Sons. [CAIA]
  • Bodie, Z., Kane, A., Marcus, A., 2014, Investments, 10th edition, McGraw-Hill Irwin. [BKM]
  • Damodaran, A., 2012, Investment valuation, 3rd edition, Wiley and Sons. [D]

The powerpoint presentations and practice questions will be posted on moodle and those should be the core elements of your study materials. The books are an additional, complementary, reference for your study. Copies of the books are available for purchase at the UNSW Book Store but you may also just borrow the books from the UNSW Library. If your budget is limited the (decreasing) order of importance of the books for this course is D, BKM, CAIA.

Other books that are related to the content of the course are:

  • Brown, K., and Reilly, F., 2012, Investment analysis and portfolio management, 10th edition, South-Western Cengage Learning.
  • Damodaran, A., 2006, Damodaran on valuation, 2nd edition, Wiley and Sons.
  • Pedersen, L. , 2015, Efficiently inefficient: How smart money invests and market prices are determined. Princeton University Press. [P]

The course puts a major emphasis on relevant, recent research in financial markets. The exams can include questions on the papers presented in class. You should be able to refer its main findings and discuss how they fit in the global picture of the course contents. Below is a list of relevant papers that we will present and discuss (note this list is not exhaustive, other papers can be presented and discussed as well):

  • Asness, C., Krail, R., and Liew, J., 2001, Do hedge funds hedge?, Journal of Portfolio Management, 28(1), 6-19.
  • Asness, C., Frazzini, A., Israel, R., & Moskowitz, T. (2014). Fact, Fiction, and Momentum Investing. The Journal of Portfolio Management Portfolio Management, 75-92.
  • Asness, C., Frazzini, A., Israel, R., & Moskowitz, T. (2015). Fact, Fiction, and Value Investing. The Journal of Portfolio Management Portfolio Management, 34-52.
  • Asness, C., Frazzini, A., and Pedersen, L., 2014, Quality-minus-junk, working paper.
  • Barroso, P., and Santa-Clara, P., 2012, Beyond the carry trade: optimal currency portfolios, Journal of Financial and Quantitative Analysis, forthcoming.
  • Barroso, Pedro, Lest we forget: Using Out-Of-Sample Errors in Portfolio Optimization (June 13, 2017). Available at SSRN: https://ssrn.com/abstract=2771664 or http://dx.doi.org/10.2139/ssrn.2771664
  • Brandt, M., Santa-Clara, P., Valkanov, R., 2009, Parametric portfolio policies: Exploiting characteristics in the cross section of equity returns, Review of Financial Studies, 22, 3411-3447.
  • DeMiguel, V., Garlappi, L., Uppal, R., 2009, Optimal versus Naive Diversification: How Inefficient Is the 1/N Portfolio Strategy?, Review of Financial Studies, 22(5), 1915-1953.
  • Edelen, R., Ince, O., Kadlec, G. (2016). Institutional Investors and Stock Return Anomalies. Forthcoming in the Journal of Financial Economic
  • Frazzini, A., Kabiller, D., Pedersen, L., 2013, Buffett’s alpha, working paper.
  • Malkiel, B., and Saha, A., 2005, Hedge funds: risk and return, Financial Analysts Journal, 61(6), 80-88.

Popular / classical / non-technical books related to the course content (not strictly required but always good reading material):

  • Bernstein, P., 1996, Against the Gods: The Remarkable Story of Risk, Wiley and Sons.
  • Cuningham, L., 2014, The Essays of Warren Buffet, 4th edition, Wiley and Sons.
  • Graham, B., and Dodd, D., 2009, Security Analysis, 6th ed. New York: McGraw-Hill (first published in 1934).
  • Lewis, M., 2010, Liar’s poker, W.W. Norton (first published in 1989).
  • Lowenstein, R., 2001, When Genius Failed: the rise and fall of long term capital management, Fourth Estate.
  • Malkiel, B., 2015, A random walk down Wall Street, 15th edition, W.W. Norton (first published in 1973).
  • Taleb, N., 2007, The Black Swan: The Impact of the Highly Improbable, New York: Random House.


6. Course Evaluation & Development

Feedback is regularly sought from students and continual improvements are made based on this feedback. At the end of this course, you will be asked to complete the myExperience survey, which provides a key source of student evaluative feedback. Your input into this quality enhancement process is extremely valuable in assisting us to meet the needs of our students and provide an effective and enriching learning experience. The results of all surveys are carefully considered and do lead to action towards enhancing educational quality.

​Previous feedback has informed decisions to change the delivery of the course and enhance student experience. Examples of such changes include: creation of a discussion forum to extend peer-to-peer communication, creation of material as end-of-chapter practice questions (with solutions), creation of an online quiz to provide early feedback, move the midterm to week 6 and increase its weighting. These are sensible changes that have been suggestions of previous students in feedback surveys. So, providing feedback on these surveys closes the loop in your learning experience and fosters continuing improvement for your future colleagues.  

7. Course Schedule

Week Activity Topic Assessment/Other
Week 1: 18 FebruaryLecture

Introduction to valuation

References: D2-3, D9-10

Week 2: 25 FebruaryLecture

The dividend discount model

References: D11-13

Week 3: 4 MarchLecture

FCFE and relative valuation

References: D14, D17-18

Week 4: 11 MarchLecture

FCFE and relative valuation (cont.)

References: D14, D17-18

Week 5: 18 MarchLecture

Private Equity

References: D24, CAIA 22-24

Week 6: 25 MarchLecture

Real estate

References: D26, CAIA 10, 14-15

Mid-Session Exam

Week 7: 1 AprilLecture

Commodities and currencies

References: CAIA 11-12, P11

Week 8: 8 AprilLecture

Portfolio performance evaluation

References: BKM24

Equity research report

Assignment due on April 12 at 23H00.

Week 9: 15 AprilLecture

Hedge funds

References: BKM26, P1 and introduction.

Week 10: 22 AprilLecture

Active portfolio management and advanced topics in portfolio management

References: BKM27-28, Brandt et al. (2009), DeMiguel et al. (2009), Barroso and Santa-Clara (2012).

 

Term Break: 29 April
Exams: 6 May
Exams: 13 May

8. Policies and Support

Information about UNSW Business School protocols, University policies, student responsibilities and education quality and support.

Program Learning Outcomes

The Business School places knowledge and capabilities at the core of its curriculum via seven Program Learning Outcomes (PLOs). These PLOs are systematically embedded and developed across the duration of all coursework programs in the Business School.

PLOs embody the knowledge, skills and capabilities that are taught, practised and assessed within each Business School program. They articulate what you should know and be able to do upon successful completion of your degree.

Upon graduation, you should have a high level of specialised business knowledge and capacity for responsible business thinking, underpinned by ethical professional practice. You should be able to harness, manage and communicate business information effectively and work collaboratively with others. You should be an experienced problem-solver and critical thinker, with a global perspective, cultural competence and the potential for innovative leadership.

All UNSW programs and courses are designed to assess the attainment of program and/or course level learning outcomes, as required by the UNSW Assessment Design Procedure. It is important that you become familiar with the Business School PLOs, as they constitute the framework which informs and shapes the components and assessments of the courses within your program of study.

PLO 1: Business knowledge

Students will make informed and effective selection and application of knowledge in a discipline or profession, in the contexts of local and global business.

PLO 2: Problem solving

Students will define and address business problems, and propose effective evidence-based solutions, through the application of rigorous analysis and critical thinking.

PLO 3: Business communication

Students will harness, manage and communicate business information effectively using multiple forms of communication across different channels.

PLO 4: Teamwork

Students will interact and collaborate effectively with others to achieve a common business purpose or fulfil a common business project, and reflect critically on the process and the outcomes.

PLO 5: Responsible business practice

Students will develop and be committed to responsible business thinking and approaches, which are underpinned by ethical professional practice and sustainability considerations.

PLO 6: Global and cultural competence

Students will be aware of business systems in the wider world and actively committed to recognise and respect the cultural norms, beliefs and values of others, and will apply this knowledge to interact, communicate and work effectively in diverse environments.

PLO 7: Leadership development

Students will develop the capacity to take initiative, encourage forward thinking and bring about innovation, while effectively influencing others to achieve desired results.

These PLOs relate to undergraduate and postgraduate coursework programs.  Separate PLOs for honours and postgraduate research programs are included under 'Related Documents'.

Business School course outlines provide detailed information for students on how the course learning outcomes, learning activities, and assessment/s contribute to the development of Program Learning Outcomes.

RELATED DOCUMENTS

 

UNSW Graduate Capabilities

The Business School PLOs also incorporate UNSW graduate capabilities, a set of generic abilities and skills that all students are expected to achieve by graduation. These capabilities articulate the University’s institutional values, as well as future employer expectations.

UNSW Graduate CapabilitiesBusiness School PLOs
Scholars capable of independent and collaborative enquiry, rigorous in their analysis, critique and reflection, and able to innovate by applying their knowledge and skills to the solution of novel as well as routine problems.
  • PLO 1: Business knowledge
  • PLO 2: Problem solving
  • PLO 3: Business communication
  • PLO 4: Teamwork
  • PLO 7: Leadership development

Entrepreneurial leaders capable of initiating and embracing innovation and change, as well as engaging and enabling others to contribute to change
  • PLO 1: Business knowledge
  • PLO 2: Problem solving
  • PLO 3: Business communication
  • PLO 4: Teamwork
  • PLO 6: Global and cultural competence
  • PLO 7: Leadership development

Professionals capable of ethical, self-directed practice and independent lifelong learning
  • PLO 1: Business knowledge
  • PLO 2: Problem solving
  • PLO 3: Business communication
  • PLO 5: Responsible business practice

Global citizens who are culturally adept and capable of respecting diversity and acting in a socially just and responsible way.
  • PLO 1: Business knowledge
  • PLO 2: Problem solving
  • PLO 3: Business communication
  • PLO 4: Teamwork
  • PLO 5: Responsible business practice
  • PLO 6: Global and cultural competence

While our programs are designed to provide coverage of all PLOs and graduate capabilities, they also provide you with a great deal of choice and flexibility.  The Business School strongly advises you to choose a range of courses that assist your development against the seven PLOs and four graduate capabilities, and to keep a record of your achievements as part of your portfolio. You can use a portfolio as evidence in employment applications as well as a reference for work or further study. For support with selecting your courses contact the UNSW Business School Student Centre.




Academic Integrity and Plagiarism

Academic Integrity is honest and responsible scholarship. This form of ethical scholarship is highly valued at UNSW. Terms like Academic Integrity, misconduct, referencing, conventions, plagiarism, academic practices, citations and evidence based learning are all considered basic concepts that successful university students understand. Learning how to communicate original ideas, refer sources, work independently, and report results accurately and honestly are skills that you will be able to carry beyond your studies.

The definition of academic misconduct is broad. It covers practices such as cheating, copying and using another person’s work without appropriate acknowledgement. Incidents of academic misconduct may have serious consequences for students.

Plagiarism

UNSW regards plagiarism as a form of academic misconduct. UNSW has very strict rules regarding plagiarism. Plagiarism at UNSW is using the words or ideas of others and passing them off as your own. All Schools in the Business School have a Student Ethics Officer who will investigate incidents of plagiarism and may result in a student’s name being placed on the Plagiarism and Student Misconduct Registers.

Below are examples of plagiarism including self-plagiarism:

Copying: Using the same or very similar words to the original text or idea without acknowledging the source or using quotation marks. This includes copying materials, ideas or concepts from a book, article, report or other written document, presentation, composition, artwork, design, drawing, circuitry, computer program or software, website, internet, other electronic resource, or another person's assignment, without appropriate acknowledgement of authorship.

Inappropriate Paraphrasing: Changing a few words and phrases while mostly retaining the original structure and/or progression of ideas of the original, and information without acknowledgement. This also applies in presentations where someone paraphrases another’s ideas or words without credit and to piecing together quotes and paraphrases into a new whole, without appropriate referencing.

Collusion: Presenting work as independent work when it has been produced in whole or part in collusion with other people. Collusion includes:

  • Students providing their work to another student before the due date, or for the purpose of them plagiarising at any time
  • Paying another person to perform an academic task and passing it off as your own
  • Stealing or acquiring another person’s academic work and copying it
  • Offering to complete another person’s work or seeking payment for completing academic work

Collusion should not be confused with academic collaboration (i.e., shared contribution towards a group task).

Inappropriate Citation: Citing sources which have not been read, without acknowledging the 'secondary' source from which knowledge of them has been obtained.

Self-Plagiarism: ‘Self-plagiarism’ occurs where an author republishes their own previously written work and presents it as new findings without referencing the earlier work, either in its entirety or partially. Self-plagiarism is also referred to as 'recycling', 'duplication', or 'multiple submissions of research findings' without disclosure. In the student context, self-plagiarism includes re-using parts of, or all of, a body of work that has already been submitted for assessment without proper citation.

To see if you understand plagiarism, do this short quiz: https://student.unsw.edu.au/plagiarism-quiz

Cheating

The University also regards cheating as a form of academic misconduct. Cheating is knowingly submitting the work of others as their own and includes contract cheating (work produced by an external agent or third party that is submitted under the pretences of being a student’s original piece of work). Cheating is not acceptable at UNSW.

If you need to revise or clarify any terms associated with academic integrity you should explore the 'Working with Academic Integrity' self-paced lessons available at: https://student.unsw.edu.au/aim.

For UNSW policies, penalties, and information to help you avoid plagiarism see: https://student.unsw.edu.au/plagiarism as well as the guidelines in the online ELISE tutorials for all new UNSW students: http://subjectguides.library.unsw.edu.au/elise. For information on student conduct see: https://student.unsw.edu.au/conduct.

For information on how to acknowledge your sources and reference correctly, see: https://student.unsw.edu.au/referencing. If you are unsure what referencing style to use in this course, you should ask the lecturer in charge.


Student Responsibilities and Conduct

Students are expected to be familiar with and adhere to university policies in relation to class attendance and general conduct and behaviour, including maintaining a safe, respectful environment; and to understand their obligations in relation to workload, assessment and keeping informed.

Information and policies on these topics can be found on the 'Managing your Program' website.

Workload

It is expected that you will spend at least ten to twelve hours per week studying for a course except for Summer Term courses which have a minimum weekly workload of twenty to twenty four hours. This time should be made up of reading, research, working on exercises and problems, online activities and attending classes. In periods where you need to complete assignments or prepare for examinations, the workload may be greater. Over-commitment has been a cause of failure for many students. You should take the required workload into account when planning how to balance study with employment and other activities.

We strongly encourage you to connect with your Moodle course websites in the first week of semester. Local and international research indicates that students who engage early and often with their course website are more likely to pass their course.

View more information on expected workload

Attendance

Your regular and punctual attendance at lectures and seminars or in online learning activities is expected in this course. The Business School reserves the right to refuse final assessment to those students who attend less than 80% of scheduled classes where attendance and participation is required as part of the learning process (e.g., tutorials, flipped classroom sessions, seminars, labs, etc.).

View more information on attendance

General Conduct and Behaviour

You are expected to conduct yourself with consideration and respect for the needs of your fellow students and teaching staff. Conduct which unduly disrupts or interferes with a class, such as ringing or talking on mobile phones, is not acceptable and students may be asked to leave the class.

View more information on student conduct

Health and Safety

UNSW Policy requires each person to work safely and responsibly, in order to avoid personal injury and to protect the safety of others.

View more information on Health and Safety

Keeping Informed

You should take note of all announcements made in lectures, tutorials or on the course web site. From time to time, the University will send important announcements to your university e-mail address without providing you with a paper copy. You will be deemed to have received this information. It is also your responsibility to keep the University informed of all changes to your contact details.



Student Support and Resources

The University and the Business School provide a wide range of support services and resources for students, including:

Business School Education Quality and support Unit (EQS)
The EQS offers academic writing, study skills and maths support specifically for Business students. Services include workshops, online resources, and individual consultations.
Level 1, Room 1033, Quadrangle Building.
bschoolconsults@unsw.edu.au
02 9385 7577 or 02 9385 4508

Business School Student Centre
The Business School Student Centre provides advice and direction on all aspects of admission, enrolment and graduation.
Level 1, Room 1028 in the Quadrangle Building
02 9385 3189

UNSW Learning Centre
The UNSW Learning Centre provides academic skills support services, including workshops and resources, for all UNSW students. See their website for details.
Lower Ground Floor, North Wing Chancellery Building.
learningcentre@unsw.edu.au
02 9385 2060

Educational Support Service
Educational Support Advisors work with all students to promote the development of skills needed to succeed at university, whilst also providing personal support throughout the process. Check their website to request an appointment or to register in the Academic Success Program.
John Goodsell Building, Ground Floor.
advisors@unsw.edu.au
02 9385 4734

Library services and facilities for students
The UNSW Library offers a range of collections, services and facilities both on-campus and online.
Main Library, F21.
02 9385 2650

Moodle eLearning Support
Moodle is the University’s learning management system. You should ensure that you log into Moodle regularly.
externalteltsupport@unsw.edu.au
02 9385 3331

UNSW IT
UNSW IT provides support and services for students such as password access, email services, wireless services and technical support.
UNSW Library Annexe (Ground floor).
itservicecentre@unsw.edu.au
02 9385 1333

Disability Support Services
UNSW Disability Support Services provides assistance to students who are trying to manage the demands of university as well as a health condition, learning disability or who have personal circumstances that are having an impact on their studies. Disability Advisers can arrange to put in place services and educational adjustments to make things more manageable so that students are able to complete their course requirements. To receive educational adjustments for disability support, students must first register with Disability Services.
Ground Floor, John Goodsell Building.
disabilities@unsw.edu.au
02 9385 4734

UNSW Counselling and Psychological Services
Provides support and services if you need help with your personal life, getting your academic life back on track or just want to know how to stay safe, including free, confidential counselling.
Level 2, East Wing, Quadrangle Building.
counselling@unsw.edu.au
02 9385 5418


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