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82-451: DoubleLine Capital ("DoubleLine") is an American investment management firm headquartered in Tampa, Florida . It is known for its focus on investing in the bond market but also invests in other asset classes such as equities and commodities . The firm is majority owned by its employees. Jeffrey Gundlach was employed at TCW Group where he managed its Total Return Bond Fund which at

164-438: A blend approach using aspects of each. Funds are often distinguished by asset-based categories such as equity , bonds , property , etc. Also, perhaps most commonly funds are divided by their geographic markets or themes . Examples In most instances whatever the investment aim the fund manager will select an appropriate index or combination of indices to measure its performance against; e.g. FTSE 100 . This becomes

246-524: A "premium" to NAV (i.e., higher than NAV) or, more commonly, at a "discount" to NAV (i.e., lower than NAV). In the United States, at the end of 2018, there were 506 closed-end mutual funds with combined assets of $ 0.25 trillion, accounting for 1% of the U.S. industry. Exchange-traded funds (ETFs) combine characteristics of both closed-end funds and open-end funds. They are structured as open-end investment companies or UITs. ETFs are traded throughout

328-583: A 14% increase in the previous year and was due both to the recovery in equity markets during the year and an inflow of new funds. As of 2011 the US remained by far the biggest source of funds, accounting for around a half of conventional assets under management or some $ 36 trillion. The UK was the second-largest centre in the world and by far the largest in Europe with around 8% of the global total. The 3-P's (Philosophy, Process, and People) are often used to describe

410-399: A defendant in the case. TCW alleged that Gundlach and the firm stole its company secrets and clients. 45 out of 65 of Gundlach's old TCW team had joined DoubleLine. Gundlach countersued TCW stating it owed him millions in unpaid compensation. By December 2011, the lawsuit was settled. TWC prevailed on the trade secret case but the jury awarded nothing for the damages. An undisclosed settlement

492-592: A garbage truck carting Hillary Clinton and Barack Obama away. The image angered some of the employees, who felt it blurred the line between politics and business. In 2019, the firm experienced a number of high level staff departures which was considered uncharacteristic. During this period DoubleLine's performance had dropped however it had over $ 140 billion in assets under management. In February 2022, DoubleLine moved its headquarters from Los Angeles to Tampa, Florida due to its tax laws. In April 2022, DoubleLine launched its first two exchange-traded funds (ETF),

574-559: A limited term with enforced redemption of shares or units on a specified date. Many collective investment vehicles split the fund into multiple classes of shares or units. The underlying assets of each class are effectively pooled for the purposes of investment management, but classes typically differ in the fees and expenses paid out of the fund's assets. These differences are supposed to reflect different costs involved in servicing investors in various classes; for example: In some cases, by aggregating regular investments by many individuals,

656-585: A painting by Piet Mondrian called Double Line. Gundlach and Barach reached out to Howard Marks who was the co-founder of Oaktree Capital Management as well as a former employee of TCW who knew them during their time there. Oaktree Capital Management invested $ 20 million in DoubleLine for a 20% stake. On 23 December, DoubleLine registered with the Securities and Exchange Commission . On 7 January 2010, TCW sued Gundlach with DoubleLine being named as

738-552: A personal and business perspective. Greater money management can be achieved by establishing budgets and analyzing costs and income etc. In stock and futures trading , money management plays an important role in every success of a trading system. This is closely related with trading expectancy: “Expectancy” which is the average amount you can expect to win or lose per dollar at risk. Mathematically: Expectancy = (Trading system Winning probability * Average Win) – (Trading system losing probability * Average Loss) So for example even if

820-514: A poor choice of benchmark. Meanwhile, it does not allow the separation of the performance of the market in which the portfolio is invested from that of the manager. The information ratio is a more general form of the Sharpe ratio in which the risk-free asset is replaced by a benchmark portfolio. This measure is relative, as it evaluates portfolio performance about a benchmark, making the result strongly dependent on this benchmark choice. Portfolio alpha

902-424: A reasonable price (GARP), market neutral , small capitalisation, indexed, etc. Each of these approaches has its distinctive features, adherents, and in any particular financial environment, distinctive risk characteristics. For example, there is evidence that growth styles (buying rapidly growing earnings) are especially effective when the companies able to generate such growth are scarce; conversely, when such growth

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984-508: A retirement plan (such as a 401(k) plan ) may qualify to purchase "institutional" shares (and gain the benefit of their typically lower expense ratios ) even though no members of the plan would qualify individually. Some of the fund classes: One of the main advantages of collective investment is the reduction in investment risk ( capital risk ) by diversification . An investment in a single equity may do well, but it may collapse for investment or other reasons (e.g., Marconi ). If your money

1066-411: A specialist bachelor's degree , with title in "Investment Management" or in "Asset Management" or in "Financial Markets". Increasingly, those with aspirations to work as an investment manager, require further education beyond a bachelor's degree in business, finance, or economics. There is much discussion as to the various factors that can affect the performance of an investment manager, including

1148-428: A three-factor model to describe portfolio normal returns ( Fama–French three-factor model ). Carhart (1997) proposed adding momentum as a fourth factor to allow the short-term persistence of returns to be taken into account. Also of interest for performance measurement is Sharpe's (1992) style analysis model, in which factors are style indices. This model allows a custom benchmark for each portfolio to be developed, using

1230-405: A trading system has 60% losing probability and only 40% winning of all trades, using money management a trader can set his average win substantially higher compared to his average loss in order to produce a profitable trading system. If he set his average win at around $ 400 per trade (this can be done using proper exit strategy) and managing/limiting the losses to around $ 100 per trade; the expectancy

1312-402: A whole. Another example of passive management is the " buy and hold " method used by many traditional unit investment trusts where the portfolio is fixed from outset. Additionally, some funds use a hybrid management strategy of enhanced indexing , in which the manager minimizes costs by broadly following a passive indexing strategy, but has the discretion to actively deviate from the index in

1394-576: A wide range of investment aims either targeting specific geographic regions ( e.g., emerging markets or Europe) or specified industry sectors ( e.g., technology). Depending on the country there is normally a bias towards the domestic market due to familiarity, and the lack of currency risk. Funds are often selected on the basis of these specified investment aims, their past investment performance, and other factors such as fees. The first (recorded) professionally managed investment funds or collective investment schemes, such as mutual funds , were established in

1476-788: A winning or losing trading system, such as %Loss probability > %Win probability). Investment funds An investment fund is a way of investing money alongside other investors in order to benefit from the inherent advantages of working as part of a group such as reducing the risks of the investment by a significant percentage. These advantages include an ability to: It remains unclear whether professional active investment managers can reliably enhance risk adjusted returns by an amount that exceeds fees and expenses of investment management. Terminology varies with country but investment funds are often referred to as investment pools , collective investment vehicles , collective investment schemes , managed funds , or simply funds . The regulatory term

1558-627: Is undertaking for collective investment in transferable securities , or short collective investment undertaking (cf. Law ). An investment fund may be held by the public, such as a mutual fund , exchange-traded fund , special-purpose acquisition company or closed-end fund , or it may be sold only in a private placement , such as a hedge fund or private equity fund . The term also includes specialized vehicles such as collective and common trust funds, which are unique bank-managed funds structured primarily to commingle assets from qualifying pension plans or trusts. Investment funds are promoted with

1640-653: Is a strategic technique to make money yield the highest interest-output value for any amount spent. Spending money to satisfy cravings (regardless of whether they can justifiably be included in a budget) is a natural human phenomenon. The idea of money management techniques has been developed to reduce the amount that individuals, firms, and institutions spend on items that add no significant value to their living standards, long-term portfolios, and assets. Warren Buffett , in one of his documentaries, admonished prospective investors to embrace his highly esteemed "frugality" ideology. This involves making every financial transaction worth

1722-441: Is a systematic risk that all the shares could be affected by adverse market changes. To avoid this systematic risk investment managers may diversify into different non-perfectly-correlated asset classes. For example, investors might hold their assets in equal parts in equities and fixed income securities. If one investor had to buy a large number of direct investments, the amount this person would be able to invest in each holding

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1804-415: Is around: Expectancy = (Trading system Winning probability * Average Win) – (Trading system losing probability * Average Loss) Expectancy = (0.4 x 400) - (0.6 x 100)=$ 160 - $ 60 = $ 100 net average profit per trade (of course commissions are not included in the computations). Therefore, the key to successful money management is maximizing every winning trades and minimizing losses (regardless whether you have

1886-467: Is because equities are riskier (more volatile) than bonds which are themselves riskier than cash. Against the background of the asset allocation, fund managers consider the degree of diversification that makes sense for a given client (given its risk preferences) and construct a list of planned holdings accordingly. The list will indicate what percentage of the fund should be invested in each particular stock or bond. The theory of portfolio diversification

1968-458: Is built into the vehicle. Often referred to as commission or load (in the U.S. ) this charge may be applied at the start of the plan or as an ongoing percentage of the fund value each year. While this cost will diminish your returns it could be argued that it reflects a separate payment for an advice service rather than a detrimental feature of collective investment vehicles. Indeed, it is often possible to purchase units or shares directly from

2050-412: Is equitably divided into shares which vary in price in direct proportion to the variation in value of the fund's net asset value . Each time money is invested, new shares or units are created to match the prevailing share price; each time shares are redeemed, the assets sold match the prevailing share price. In this way there is no supply or demand created for shares and they remain a direct reflection of

2132-419: Is invested in such a failed holding you could lose your capital. By investing in a range of equities (or other securities) the capital risk is reduced. This investment principle is often referred to as spreading risk . Collective investments by their nature tend to invest in a range of individual securities. However, if the securities are all in a similar type of asset class or market sector then there

2214-514: Is likely to be small. Dealing costs are normally based on the number and size of each transaction, therefore the overall dealing costs would take a large chunk out of the capital (affecting future profits). An investor that chooses to use an investment fund as a way to invest his or her money does not need to spend as much personal time making investment decisions, doing investment research, or performing actual trades. Instead, these actions and decisions will be done by one or more fund managers managing

2296-418: Is obtained by measuring the difference between the return of the portfolio and that of a benchmark portfolio. This measure appears to be the only reliable performance measure to evaluate active management. we have to distinguish between normal returns, provided by the fair reward for portfolio exposure to different risks, and obtained through passive management, from abnormal performance (or outperformance) due to

2378-422: Is often used to refer to the management of investment funds , most often specializing in private and public equity , real assets , alternative assets , and/or bonds. The more generic term asset management may refer to management of assets not necessarily primarily held for investment purposes. Most investment management clients can be classified as either institutional or retail/advisory , depending on if

2460-404: Is plentiful, then there is evidence that value styles tend to outperform the indices particularly successfully. Large asset managers are increasingly profiling their equity portfolio managers to trade their orders more effectively. While this strategy is less effective with small-cap trades, it has been effective for portfolios with large-cap companies. Fund performance is often thought to be

2542-630: Is that the financial "products" that are sold to the public are sufficiently transparent, with full disclosure about the nature of the terms. In the United Kingdom, the primary statute is the Financial Services and Markets Act 2000 , where Part XVII, sections 235 to 284 deal with the requirements for a collective investment scheme to operate. It states in section 235 that a "collective investment scheme" means "any arrangements with respect to property of any description, including money,

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2624-437: Is that the investment manager prefers a closer, more open, and honest relationship with a company's management team than would exist if they exercised control; allowing them to make a better investment decision. The national context in which shareholder representation considerations are set is variable and important. The USA is a litigious society and shareholders use the law as a lever to pressure management teams. In Japan, it

2706-557: Is the case when a large active manager sells his position in a company, leading to (possibly) a decline in the stock price, but more importantly a loss of confidence by the markets in the management of the company, thus precipitating changes in the management team. Some institutions have been more vocal and active in pursuing such matters; for instance, some firms believe that there are investment advantages to accumulating substantial minority shareholdings (i.e. 10% or more) and putting pressure on management to implement significant changes in

2788-422: Is to report the after-tax position of some standard taxpayer. Performance measurement should not be reduced to the evaluation of fund returns alone, but must also integrate other fund elements that would be of interest to investors, such as the measure of risk taken. Several other aspects are also part of performance measurement: evaluating if managers have succeeded in reaching their objective, i.e. if their return

2870-439: Is traditional for shareholders to be below in the 'pecking order', which often allows management and labor to ignore the rights of the ultimate owners. Whereas US firms generally cater to shareholders, Japanese businesses generally exhibit a stakeholder mentality, in which they seek consensus amongst all interested parties (against a background of strong unions and labor legislation ). Conventional assets under management of

2952-413: Is what investment management firms are paid for. Asset classes exhibit different market dynamics, and different interaction effects; thus, the allocation of money among asset classes will have a significant effect on the performance of the fund. Some research suggests that allocation among asset classes has more predictive power than the choice of individual holdings in determining portfolio return. Arguably,

3034-454: The CAPM , allowing a better description of portfolio risks and a more accurate evaluation of a portfolio's performance. For example, Fama and French (1993) have highlighted two important factors that characterize a company's risk in addition to market risk. These factors are the book-to-market ratio and the company's size as measured by its market capitalization. Fama and French-, therefore proposed

3116-858: The Dutch Republic . Amsterdam-based businessman Abraham van Ketwich (also known as Adriaan van Ketwich) is often credited as the originator of the world's first mutual fund. The term "collective investment scheme" is a legal concept deriving initially from a set of European Union Directives to regulate mutual fund investment and management. The Undertakings for Collective Investment in Transferable Securities Directives 85/611/EEC , as amended by 2001/107/EC and 2001/108/EC (typically known as UCITS for short) created an EU-wide structure, so that funds fulfilling its basic regulations could be marketed in any member state. The basic aim of collective investment scheme regulation

3198-607: The benchmark to measure success or failure against. The aim of most funds is to make money by investing in assets to obtain a real return (i.e. better than inflation). The philosophy used to manage the fund's investment vary and two opposing views exist. Active management —Active managers seek to outperform the market as a whole, by selectively holding securities according to an investment strategy . Therefore, they employ dynamic portfolio strategies, buying and selling investments with changing market conditions, based on their belief that particular individual holdings or sections of

3280-797: The DoubleLine Opportunistic Bond ETF and the DoubleLine Shiller CAPE US Equities ETF. Prior to that, DoubleLine served as sub-advisor to ETFs offered by State Street Global Advisors and AdvisorShares . In April 2023, one year after its ETF debut, DoubleLine moved into the real estate ETF market, launching the DoubleLine Commercial Real Estate ETF and the DoubleLine Mortgage ETF. Investment management Source: Venture

3362-583: The DoubleLine Opportunistic Credit Fund which was managed by Gundlach himself. By November 2012, DoubleLine was managing $ 50 billion. In January 2013, DoubleLine established a new division that would manage equity portfolios called DoubleLine Equity LP. It was reported that after the 2016 United States presidential election , Gundlach who voted for Donald Trump and predicted his victory forwarded an email to DoubleLine employees with an image of Trump smiling in front of

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3444-545: The US or BI-SAM in Europe) compile aggregate industry data, e.g., showing how funds in general performed against given performance indices and peer groups over various periods. In a typical case (let us say an equity fund ), the calculation would be made (as far as the client is concerned) every quarter and would show a percentage change compared with the prior quarter (e.g., +4.6% total return in US dollars). This figure would be compared with other similar funds managed within

3526-526: The United States and less so in Europe. However, as of 2019, the lines were becoming blurred. Money management is used in investment management and deals with the question of how much risk a decision maker should take in situations where uncertainty is present. More precisely what percentage or what part of the decision maker's wealth should be put into risk in order to maximize the decision maker's utility function . Money management can mean gaining greater control over outgoings and incomings, both in

3608-545: The United States, refers to both a firm that provides investment management services and to the individual who directs fund management decisions. The five largest asset managers are holding 22.7 percent of the externally held assets. Nevertheless, the market concentration, measured via the Herfindahl-Hirschmann Index , could be estimated at 173.4 in 2018, showing that the industry is not very concentrated. The business of investment has several facets,

3690-429: The acid test of fund management, and in the institutional context, accurate measurement is a necessity. For that purpose, institutions measure the performance of each fund (and usually for internal purposes components of each fund) under their management, and performance is also measured by external firms that specialize in performance measurement. The leading performance measurement firms (e.g. Russell Investment Group in

3772-655: The board includes expertly overseeing speculation portfolios for the benefit of clients to accomplish their monetary objectives. This incorporates key resource designation, developing broadened portfolios, and effectively observing execution while relieving gambles. Speculation administrators use exploration and examination to recognize valuable open doors and pursue informed choices, guaranteeing portfolios line up with client targets and hazard resilience. In addition, successful investment management requires adherence to ethical standards, compliance with regulations, and effective communication with clients. The term investment management

3854-467: The business. In some cases, institutions with minority holdings work together to force management change. Perhaps more frequent is the sustained pressure that large institutions bring to bear on management teams through persuasive discourse and PR. On the other hand, some of the largest investment managers—such as BlackRock and Vanguard —advocate simply owning every company, reducing the incentive to influence management teams. A reason for this last strategy

3936-514: The client is an institution or private individual/ family trust . Investment managers who specialize in advisory or discretionary management on behalf of (normally wealthy) private investors may often refer to their services as money management or portfolio management within the context of " private banking ". Wealth management by financial advisors takes a more holistic view of a client, with allocations to particular asset management strategies. The term fund manager, or investment adviser in

4018-472: The companies in which they hold shares (e.g., to hold managers to account, to ensure Board's effective functioning). Such action would add a pressure group to those (the regulators and the Board) overseeing management. However, there is the problem of how the institution should exercise this power. One way is for the institution to decide, the other is for the institution to poll its beneficiaries. Assuming that

4100-441: The companies via the voting rights the shares carry and the consequent ability to pressure managements, and if necessary out-vote them at annual and other meetings. In practice, the ultimate owners of shares often do not exercise the power they collectively hold (because the owners are many, each with small holdings); financial institutions (as agents) sometimes do. Institutional shareholders should exercise more active influence over

4182-528: The day on a stock exchange. An arbitrage mechanism is used to keep the trading price close to net asset value of the ETF holdings. At the end of 2018, there were 1,988 ETFs in the United States with combined assets of $ 3.3 trillion, accounting for 16% of the U.S. industry. Unit investment trusts (UITs) are issued to the public only once when they are created. UITs generally have a limited life span, established at creation. Investors can redeem shares directly with

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4264-616: The employment of professional fund managers, research (of individual assets and asset classes ), dealing, settlement, marketing, internal auditing , and the preparation of reports for clients. The largest financial fund managers are firms that exhibit all the complexity their size demands. Apart from the people who bring in the money (marketers) and the people who direct investment (the fund managers), there are compliance staff (to ensure accord with legislative and regulatory constraints), internal auditors of various kinds (to examine internal systems and controls), financial controllers (to account for

4346-800: The expense: 1. avoid any expense that appeals to vanity or snobbery 2. always go for the most cost-effective alternative (establishing small quality-variance benchmarks, if any) 3. favor expenditures on interest-bearing items over all others 4. establish the expected benefits of every desired expenditure using the canon of plus/minus/nil to the standard of living value system. These techniques are investment-boosting and portfolio-multiplying. There are certain companies as well that offer services, provide counseling and different models for managing money. These are designed to manage grace assets and make them grow. Wealth management , where financial advisors perform financial planning for clients, has traditionally served as an intermediary to investment managers in

4428-554: The fund at any time (similar to an open-end fund) or wait to redeem them upon the trust's termination. Less commonly, they can sell their shares in the open market. Unlike other types of mutual funds, unit investment trusts do not have a professional investment manager. Their portfolio of securities is established at the creation of the UIT. In the United States, at the end of 2018, there were 4,917 UITs with combined assets of less than $ 0.1 trillion. Some collective investment vehicles have

4510-546: The fund. Each fund has a defined investment goal to describe the remit of the investment manager and to help investors decide if the fund is right for them. The investment aims will typically fall into the broad categories of Income (value) investment or Growth investment. Income or value based investment tends to select stocks with strong income streams, often more established businesses. Growth investment selects stocks that tend to reinvest their income to generate growth. Each strategy has its critics and proponents; some prefer

4592-479: The global fund management industry increased by 10% in 2010, to $ 79.3 trillion. Pension assets accounted for $ 29.9 trillion of the total, with $ 24.7 trillion invested in mutual funds and $ 24.6 trillion in insurance funds. Together with alternative assets (sovereign wealth funds, hedge funds, private equity funds, and exchange-traded funds) and funds of wealthy individuals, assets of the global fund management industry totalled around $ 117 trillion. Growth in 2010 followed

4674-478: The growth achieved a net loss is achieved. This can greatly increase the investment risk of the fund by increased volatility and exposure to increased capital risk. Gearing was a major contributory factor in the collapse of the split capital investment trust debacle in the UK in 2002. Collective investment vehicles vary in availability depending on their intended investor base: Some vehicles are designed to have

4756-577: The heart of the investment management industry are the managers who invest and divest client investments. A certified company investment advisor should conduct an assessment of each client's individual needs and risk profile. The advisor then recommends appropriate investments. The different asset class definitions are widely debated, but four common divisions are cash and fixed income (such as certificates of deposit), stocks , bonds and real estate . The exercise of allocating funds among these assets (and among individual securities within each asset class)

4838-420: The hopes of earning modestly higher returns. An example of active management success When analysing investment performance, statistical measures are often used to compare 'funds'. These statistical measures are often reduced to a single figure representing an aspect of past performance: Depending on the nature of the investment, the type of 'investment' risk will vary. A common concern with any investment

4920-410: The influence of the business cycle. This can be difficult however and, industry-wide, there is a serious preoccupation with short-term numbers and the effect on the relationship with clients (and resultant business risks for the institutions). One effective solution to this problem is to include a minimum evaluation period in the investment management agreement, whereby the minimum evaluation period equals

5002-566: The institution (for purposes of monitoring internal controls), with performance data for peer group funds, and with relevant indices (where available) or tailor-made performance benchmarks where appropriate. The specialist performance measurement firms calculate quartile and decile data and close attention would be paid to the (percentile) ranking of any fund. It is probably appropriate for an investment firm to persuade its clients to assess performance over longer periods (e.g., 3 to 5 years) to smooth out very short-term fluctuations in performance and

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5084-414: The institution polls, should it then: (i) Vote the entire holding as directed by the majority of votes cast? (ii) Split the vote (where this is allowed) according to the proportions of the vote? (iii) Or respect the abstainers and only vote the respondents' holdings? The price signals generated by large active managers holding or not holding the stock may contribute to management change. For example, this

5166-413: The institutions' own money and costs), computer experts, and "back office" employees (to track and record transactions and fund valuations for up to thousands of clients per institution). Key problems include: Institutions often control huge shareholdings. In most cases, they are acting as fiduciary agents rather than principals (direct owners). The owners of shares theoretically have great power to alter

5248-424: The investment fund. The fund manager managing the investment decisions on behalf of the investors will of course expect remuneration. This is often taken directly from the fund assets as a fixed percentage each year or sometimes a variable (performance based) fee. If the investor managed their own investments, this cost would be avoided. Often the cost of advice given by a stockbroker or financial adviser

5330-485: The investment manager's investment horizon. An enduring problem is whether to measure before-tax or after-tax performance. After-tax measurement represents the benefit to the investor, but investors' tax positions may vary. Before-tax measurement can be misleading, especially in regimens that tax realised capital gains (and not unrealised). It is thus possible that successful active managers (measured before tax) may produce miserable after-tax results. One possible solution

5412-454: The linear combination of style indices that best replicate portfolio style allocation, and leads to an accurate evaluation of portfolio alpha. However, certain research indicates that internet data may not necessarily enhance the precision of predictive models. At the undergraduate level, several business schools and universities internationally offer "Investments" as a subject within their degree; further, some universities, in fact, confer

5494-548: The manager's qualifications. Some conclude that there is no evidence that any particular qualification enhances the manager's ability to select investments that result in above-average returns. But see also Chartered Financial Analyst § Efficacy of the CFA program re related research. Money management is the process of expense tracking, investing, budgeting, banking and evaluating taxes of one's money, which includes investment management and wealth management . Money management

5576-413: The manager's skill (or luck), whether through market timing , stock picking , or good fortune. The first component is related to allocation and style investment choices, which may not be under the sole control of the manager, and depends on the economic context, while the second component is an evaluation of the success of the manager's decisions. Only the latter, measured by alpha, allows the evaluation of

5658-515: The manager's true performance (but then, only if you assume that any outperformance is due to the skill and not luck). Portfolio returns may be evaluated using factor models. The first model, proposed by Jensen (1968), relies on the CAPM and explains portfolio returns with the market index as the only factor. It quickly becomes clear, however, that one factor is not enough to explain the returns very well and that other factors have to be considered. Multi-factor models were developed as an alternative to

5740-411: The market will perform better than others. Passive management —Passive managers stick to a portfolio strategy determined at outset of the fund and not varied thereafter, aiming to minimize the ongoing costs of maintaining the portfolio . Many passive funds are index funds , which attempt to replicate the performance of a market index by holding securities proportionally to their value in the market as

5822-486: The notion of rewarding risk and produced the first performance indicators, be they risk-adjusted ratios ( Sharpe ratio , information ratio) or differential returns compared to benchmarks (alphas). The Sharpe ratio is the simplest and best-known performance measure. It measures the return of a portfolio over above the risk-free rate, compared to the total risk of the portfolio. This measure is said to be absolute, as it does not refer to any benchmark, avoiding drawbacks related to

5904-411: The power to borrow money to make further investments; a process known as gearing or leverage . If markets are growing rapidly this can allow the vehicle to take advantage of the growth to a greater extent than if only the subscribed contributions were invested. However this premise only works if the cost of the borrowing is less than the increased growth achieved. If the borrowing costs are more than

5986-445: The providers without bearing this cost. Although the investor can choose the type of fund to invest in, they have no control over the choice of individual holdings that make up the fund. If the investor holds shares directly, he has the right to attend the company's annual general meeting and vote on important matters. Investors in a collective investment vehicle often have none of the rights connected with individual investments within

6068-445: The purpose or effect of which is to enable persons taking part in the arrangements (whether by becoming owners of the property or any part of it or otherwise) to participate in or receive profits or income arising from the acquisition, holding, management or disposal of the property or sums paid out of such profits or income". Collective investment vehicles may be formed under company law , by legal trust or by statute . The nature of

6150-471: The reasons why the manager can produce above-average results. Ethical or religious principles may be used to determine or guide the way in which money is invested. Christians tend to follow the Biblical scripture . Several religions follow Mosaic law which proscribed the charging of interest . The Quakers forbade involvement in the slave trade and so started the concept of ethical investment . At

6232-639: The skill of a successful investment manager resides in constructing the asset allocation, and separating individual holdings, to outperform certain benchmarks (e.g., the peer group of competing funds, bonds, and stock indices). It is important to look at the evidence on the long-term returns to different assets, and to holding period returns (the returns that accrue on average over different lengths of investment). For example, over very long holding periods (e.g. 10+ years) in most countries, equities have generated higher returns than bonds, and bonds have generated higher returns than cash. According to financial theory, this

6314-758: The time was one of the top performing funds in the last 10 years that invested in intermediate-term bonds. It produced returns that exceeded those that were managed by Bill Gross . On 4 December 2009, he was fired by TCW and was alleged to be engaged in gross misconduct by plotting to take TCW's clients and trade secrets to establish his own rival firm. It was noted that the relationship between Gundlach and senior members such as Marc Stern and Robert Addison Day had deteriorated before then. In December 2009, shortly after leaving TCW, Gundlach, Philip Barach and 14 senior members of their team set up DoubleLine Capital in Los Angeles, California . The name DoubleLine came from

6396-466: The underlying assets. A closed-end fund issues a limited number of shares (or units) in an initial public offering (or IPO ) or through private placement. If shares are issued through an IPO, they are then traded on a stock exchange . or directly through the fund manager to create a secondary market subject to market forces . The price that investors receive for their shares may be significantly different from net asset value (NAV); it may be at

6478-526: The vehicle and its limitations are often linked to its constitutional nature and the associated tax rules for the type of structure within a given jurisdiction. Typically there is: Please see below for general information on specific forms of vehicles in different jurisdictions. The net asset value (NAV) is the value of a vehicle's assets minus the value of its liabilities. The method for calculating this varies between vehicle types and jurisdiction and can be subject to complex regulation. An open-end fund

6560-413: Was originated by Markowitz (and many others). Effective diversification requires management of the correlation between the asset returns and the liability returns, issues internal to the portfolio (individual holdings volatility), and cross-correlations between the returns. There is a range of different styles of fund management that the institution can implement. For example, growth , value, growth at

6642-478: Was reached between Gundlach and TCW. Gundlach prevailed on the unpaid compensation case and the jury awarded him and three other former TCW employees $ 66.7 million in unpaid wages. On 6 April 2010, DoubleLine started accepted investor money and launched its own Total Return Fund which was managed by Gundlach himself. By December that year, the firm had over $ 7 billion in assets under management . In July 2011, DoubleLine launched its first closed-end fund ,

6724-527: Was sufficiently high to reward the risks taken; how they compare to their peers; and finally, whether the portfolio management results were due to luck or the manager's skill. The need to answer all these questions has led to the development of more sophisticated performance measures, many of which originate in modern portfolio theory . Modern portfolio theory established the quantitative link that exists between portfolio risk and returns. The capital asset pricing model (CAPM) developed by Sharpe (1964) highlighted

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