| The portfolio management process is the second of the
five parts of our Asset Management value chain. Portfolio
managers take the analyst’s research insights and their
valuation rankings of the attractiveness of individual stocks
and use this information to help construct portfolios.
For both equity and fixed income portfolio management, proprietary
research is a key input into portfolio management, but one
of the portfolio manager’s primary responsibilities
is to challenge the assumptions going into analysts’
models. Portfolio managers are ultimately held responsible
for the final portfolio construction. This includes any sector
or industry decision, individual security position sizes,
timing of purchases and sales, and the overall responsibility
to manage the portfolio in line with the individual client’s
risk and return objectives.
Risk management is another key aspect of the portfolio management
process. As well as monitoring risk internally, our Asset
Management function also uses three external sources to analyze
the risk factors in model portfolios. In addition, Charles
Fleming Asset Management has an independent product control
function, which uses the predicted tracking error to identify
risks for funds. Each fund is assigned a tracking error target.
Predicted tracking errors are then calculated for all portfolios
on a weekly basis. These predicted tracking errors are then
compared to their respective limits.
While these two input streams, research and risk management,
are critically important, so is the individual know how of
the portfolio manger who is constantly balancing macroeconomic
data, stock and sector specific information to deliver the
performance that our clients have come to expect.
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