With the active port folio strategies it concerns an aspect of the port folio theory and with the active investment strategies is tried to achieve by a certain choice of suitable securities at the before compiled optimum purchase or sales time a yield which is higher than with a comparative index. Dependent of whether it concerns rather short-term Daytrading investments or long-term investment possibilities can be also used the right timing be more or less vital. Basically the aim can be described by active strategies as follows: It is with the active management about the fact that the market port folio is excelled with the help of information not indicated in the market in view of the Sharp Ratio. With the Sharp Ratio it concerns the yield of the respective arrangement which can be gained per Risikoeinheit, in addition.
The right port folio management choose
Basically it is considered with the so-called port folio management in which way an investor the available financial means can be introduced thus in the capital market that they are increased at last suitably. Of course it depends, primarily, on the individual preferences of the investor which investment possibilities are judged as optimum, however, basically different strategies can be applied which influence on the one hand the yield, on the other hand, own also a bigger or lower risk degree. Thus can be invested, for example, in securities poor in risk – as for example state loans – but also risk-afflicted investments – as for example shares – can seem in the port folio. In the active port folio management a decision-making process which exists of three different steps is used:
- an active port folio with maximised information Ratio is fixed
- the port folio is combined with the market port folio and the Sharp Ratio is maximised
- depending on the risk aversion or risk ability of the investor the port folio is so adapted that the Sharp Ratio is maximised
With the active investment strategy a port folio manager exists who reacts to new expectations in the capital market and the port folio accordingly of the default of the investor restack. Besides, the port folio is compared to a Benchmark of the same investment style and then the port folio weightings are raised by undervalued titles in comparison to the respective Benchmark, while the port folio is reduced with the overrated titles. Then this provides in the optimum case for the fact that an above-average yield – a so-called positive alpha – can be achieved. Depending on the elective weighting of the different arrangements the manager can introduce his expectations in the port folio and achieve a good yield when his opinion of right manner deviates from the market. If he lies in his expectation or analysis on average properly, a yield lying about the Benchmark (the positive alpha) can be achieved and the active strategy is looked as successful.
Of course it is very important for this investment form that the manager can fix right expectations concerning the capital market which leads then to very suitable risk and yields appraisals. This is valid above all for the single investment classes which are used beside the investment restrictions and investment aims with the construction of the respective strategical Asset allocation. If the so put together port folio is efficient just concerning the risk and the yields, a maximum yield can be expected for a given risk.
The practical uses of active strategies
As a basic aim an active port folio strategy should always deliver a better performance than suitable standards of comparison – otherwise investors reach of course to the methods which throw down a better yield with the same risks. In case of the consideration of the capital-theoretical frame it is implied that the yield adjusted by the risk of the active strategies will be higher than those of the Benchmark. So that this statement must can also prove to be true the Benchmark, however, very extensively and be specified in detail. This provides in practice often for problems, because it are used in many cases of comparative clue which can correspond, nevertheless, to the demands of investors insufficiently. Should a port folio place, in addition, also on international investment forms, suitable currency aspects must be considered if necessary. Therefore, a good Benchmark port folio should show on the one hand a very real alternative and also be diversified very well, nevertheless, on the other side it must be also accessible for not for high price and be available before the investment decision.
Besides, the essential technologies of an active port folio management are a floor Picking or share selection: Nevertheless, these methods require on the one hand forecast abilities which go after the average, on the other hand, a good timing is also necessary for the different decisions of the investment. It is for a manager who uses active port folio strategies, from essential meaning that projections exist towards the other investors. These concern areas of the information as well as areas of the interpretation and a good manager can work in both areas of Advantages. That's why concerning timing, but also with the Chartanalyse it is spoken also of „temporal diversification“. Moreover, the branch rotation also counts to the different applied technologies with the strategies of the active port folio management.
Other use methods
Also is often used the so-called floor Screening which shows an other quantitatively straightened method with the active port folio strategies. This method uses the idea of a point value procedure with which different shares of the investment universe are valued. The most important assessment points or indicators are relevant:
- Profit growth
- Dividend yield
- Course profit relation
Depending on the weighting of the single points a firm score can be ascribed thus to every share. If a before agreed value is reached then, the share is bought and added to the port folio. With the help of a so-called Tilted of finding can be also excelled the Benchmark: In addition an index is fixed first and copied, while different single values of the port folio übergewichtet become. These Übergewichtungen are selected as a rule after growth rates, but also after branches or enterprise dimensions.
An other technology of the managers who use active port folio strategies is founded in the forecast of the factor education. This method is already applied with the construction of an investment port folio: Then this is so conceived that it shows a sensitivity which was cut especially on the elective criterion to be forecast. Besides, above all the changes are vital for the expected share yields with the risk premiums, the, among the rest, unexpected inflation adaptations, state loans, corrections of the overall economic growth, yield of an index as well as changes of the yield structure with loans concern. This method is used above all with speculative investment strategies which refer, besides, to single basic events without accepting, nevertheless, systematic risks. This provides for the fact that the success of the manager depends at last only of the quality of the self-put forecast – of course always concerning the well-chosen risk sign.
Benchmark as well as ex ante Tracking Error define
The Benchmark should be always fixed at the beginning of the investment. Besides, basically it concerns a comparative index or a mixture of different indexes. The investment universe itself should be chosen with the fact in such a way that it resembles possibly the port folio which is managed with an active port folio strategy. If such a Benchmark was found, then comes of the ex ante Tracking Error into play: This fixes first how near (or far) in the elective Benchmark the respective port folio should be managed. Besides, the proportional divergence of the respective fund is expressed with the help of the Tracking Errors by the representative Benchmark. The higher the potential divergence of the port folio of the comparative index could be, the more significantly will fall out possibly the Underperformance when the market expectations do not enter in such a way as this was forecast by the manager. There is really a huge number of port folios which own a rather low Tracking Error and which are managed at the same time actively, indeed, developments even close to index are to be expected with these versions of course – moreover, the fee structure should be accordingly "passive".
The failures and losses include
Beside the "active" management of the port folio there are still "passive" strategies: These refuse putatively very attractive securities to select, but also courses are not forecast and one renounces the timing – the managers of passive port folios get not only at certain time or from. The aim lies not like with active strategies in it the yield of the Benchmark to excel, but to copy this so cost-effective as possible and to achieve a comparable yield with a similar risk. This method is substantially surer on the one hand, on the other hand, passive funds offer a reflexion of the market or a market segment. Nevertheless, the active strategies on the financial market dominate what lies with some factors – among the rest, in the psychology of the Investierens: Up to a certain point many investors would like to take risks and increase thereby her property. Moreover, an accordingly successful investment is also very important for the ego – an absolutely human reaction.
However, also human are also mistakes which can happen over and over again and lead then to losses. Active port folio strategies have corresponded on the flag to place against the instantaneous trend: The managers hope the market to be able to estimate better than most other investors and place for it on suitable analyses and information which just do not correspond to the topical trend. Indeed, this strategy can go off every now and then also to the back and the forecast turn in the available downward trend is missing – who has invested then in the wrong loans, that must just count on losses. Exactly that's why it very makes sense if a diversification is used and the property on different investment forms is split – a possible complete loss can be thereby avoided.
Active and passive port folio management compare
As a main difference between active and passive investment strategies the efficiency market hypothesis can be looked: Active strategies go out from an ineffective market, while the passive methods assume from the fact that the market works efficiently. The efficiency market hypothesis works with the assertion that all participants in the financial market decide rationally and on grounds of the same information and reflect aggregated the course course. This leads to the fact that the investors who want to achieve a higher yield can only create this if accordingly higher and more specific risks are taken. Indeed, this hypothesis also owns some weak points as for example unexpected quarter results or risk premiums. In addition, investors not always decide completely rationally and can state different reasons for her action. Thus the markets themselves are not already completely efficient – for the purposes of the efficiency market hypothesis – and the continuous out performance of the Benchmark is not possible even for good port folio managers. On the one hand the problem lies with the transaction costs which do not flow in, nevertheless, with the performance measurement of active funds with, on the other side there is of course a constant competition with the other investors who pursue the same investment aims.
Although in the theory active port folio strategies cannot operate generally positively, nevertheless, the practise shows enough documents that there are absolutely completely excessive yields. The best example of it is Warren Buffet whose holding company of Berkshire Hathaway can achieve an average Überrendite for over 50 years. Besides, of course it concerns an extreme case and only one isolated case, however, this shows clearly that active port folio strategies can also function in the long term. Nevertheless, it should not be forgotten that a participation is required with such investment methods – just as with Hedge fund – an impact in price which precipitates with index certificates, nevertheless, more slightly.
A combination of the different strategies
All economic experts point out to the fact that it is very difficult all market movements regularly to be able to foresee – if not even a thing of the impossibility. That's why a hybrid form which also falls back on methods of the passive investment strategy has developed from the active port folio strategy: Thus, for example, the "Core Satellite beginning" which is also known under the name "Portable alpha strategy" was created. With this method the main core passive ones which defines then also the strategical component of the port folio is managed. Indeed, the other arrangements are held active by which either the yield should be raised, or the risk be reduced. For this technology the arrangements are split even depending on the degree of the market efficiency and then for the forecast efficient part, for example, state loans, Generous Caps, index certificates or derivatives are bought – of course a mixture of the different investment forms is also possible.
The passive part is as a rule risk heads and should thereby offer a certain stability. Indeed, the core area brings only one low yield with itself, which is why the active part of the strategy invests fund (from the area the private Equity) or Small Caps increasingly in Emerging of market, Hedge to be able to compensate the low yield. Whether then an investment manager a certain market segment can hit at last depends on his knowledge and his skill – also the effected expenditure of information plays a big role.
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