A Guide to Fund Management - Risk Books
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A Guide to Fund Management

By Daniel Broby


To capture revenue opportunities, senior executives in fund management companies have to apply best practice and understand operational issues. This is not as easy as it sounds. Executives have numerous calls on their time and their core focus should always be investment performance. This guide allows senior executives to manage their time as effectively as possible and maximise its effectiveness.

This book gathers together accepted industry best practice for structure, operations and procedures. With A Guide to Fund Management you the reader can spend less time rummaging through industry white papers and more time on the strategic direction of the firm adding more value to your clients.

Check out Daniel Broby’s latest interview about Best Practices in Fund Management here

Publish date: 6 Aug 2010

Availability: In stock

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Book - A Guide to Fund Management

Book description

The fund management industry manages and administers investment assets on behalf of their clients. In 2010 some US$62 trillion of assets were under management, generating fee revenues of over US$500bn illustrating how large and important this financial industry segment is.

In order to capture the revenue opportunity senior officers in fund management companies have to apply best practice and understand operational issues. This is not as easy as it sounds. They have numerous calls on their time and their core focus should always be investment performance. It was to address the resultant time optimisation dilemma that this guide was compiled.

This book gathers together accepted industry best practice, structure, operations and procedures. As a result, readers can spend less time rummaging through industry white papers and more time on the strategic direction of the firm.

The guide is up to date, which is something that immediately makes it more relevant than the multitude of papers and operational notes that senior management is confronted with. It aims to offer one stop shopping on how to run a firm, addressing such issues as:

1. The different approaches to fund management

Book details

Book 9781906348182 / EBook 9781906348960
Publish date
6 Aug 2010

Author biography

Daniel Broby

As a senior figure in the asset management industry, Daniel Broby is a champion of capital markets. His focus on high level principals, integrity and best practice underlie his professional success.

Daniel built his career on the back of a strong grounding in finance theory. He has an MPhil in economics and an MSc in investment analysis. He was elected an individual member of the London Stock Exchange in 1990; is a Fellow of Chartered Institute of Securities and Investment; a Fellow of CFA UK; and a Visiting Fellow at Durham University. He was presented with the CFA Institute’s Society Leader Award in 2006.

Daniel has had a number of C’ level positions at the largest asset managers in Scandinavia and Russia. These include chief executive officer, chief investment officer and chief portfolio manager. His career, however, has revolved around the London market. He was a board member of CFA UK, and it predecessor, for over 10 years.

Daniel’s focus has always been active asset management. His success in investment performance was recognised by Morningstar who rated the flagship fund he managed for eight years with five stars

Daniel has pioneered a number of investment solutions. He introduced the first regulated hedge fund and pioneered structured products in the Danish market. He has launched various investment funds, including a number focused on frontier markets such as Africa.

Daniel has written two highly recognised books on the profession and numerous articles for industry journals. He was commissioned by the Financial Times to write The Changing Face of European Fund Management.

Daniel has also contributed to the body of financial knowledge by writing A Guide to Equity Index Construction for Risk Books. Securities & Investment Review observed that it “explores in intricate detail the various workings of modern portfolio theory, choosing a benchmark, measuring risk and sampling and selection procedures.“ Professional Investor magazine opinioned that “rarely does a book genuinely represent a first in its field."

Table of contents


About the Author



1 The Business Model


How the fund management industry evolved

The drivers of growth

The threats to growth

The profit dynamics

The cost dynamics

The productivity dynamics

Overcoming the downward pressure on fees

Taking advantage of the economies of scale

Delivering ?value added’ to clients

Implementing structured decision making

Developing strong distribution capabilities

Starting up a new fund management venture


2 The Industry


Recent evolution

Growth markets

The Alpha industry

Active return

The Beta Industry

Systemic return

The Asset Class Spectrum

Examples of different house styles

Segregated funds

Comingled, Pooled or Collective funds

Industry codes and standards

Asset Manager Code of Professional Conduct

Research Objectivity Standards

Trade Management Guidelines

3 The client spectrum


Targeting the right segment

Overview of Institutional investors

Pension funds

Investment goals

Endowments and Foundations

Investment goals

Insurance companies

Investment goals

Private Investors

Investment goals

Safeguarding client assets


4 Legal and regulatory landscape


Rules versus principles based compliance

Regulatory trade-offs

Self regulation versus government regulation

How to operate and maintain adequate compliance functions and procedures

Understanding the key regulatory concepts


Skill, care and diligence

Fiduciary responsibility


Market conduct

Money laundering

Chinese Walls

Fit and Proper

The geographic differences in regulation




Far East

Offshore domiciles

Compliance, operations and procedure manuals

What should be included in an operations manual?

The importance of adequate capital


5 Investment process and philosophy


Stating the investment Philosophy

Defining an investment process

The Investment Policy Checklist

Understanding the mathematical relationship between risk and return (CAPM)

Alternatives to CAPM

Active or passive management?

Accommodating style tilts and factors

Implementation of the investment process

Incorporation of models into the investment process

How to Index an investment fund


6 Skills and Structure in the front office (Portfolio construction and support)


Setting a vision

Team or star manager approach

Avoiding groupthink

Incorporating the process driven value proposition into daily activities



Quantitative analysis

Qualitative analysis

What systems are required by the front office?

Front office systems providers

What Skills does a portfolio manager require?


Ethics and Standards of Professional Conduct

How the chain of command works in practice

Personality type


Composition and role of the trading team


7 Skills and structure in the middle office (Risk and oversight)


Integrating the structure of the middle office with the rest of the firm

Risk oversight policy implementation

Middle office Risk and Performance systems

Monitoring style drift

Staff, Skills and Shared Values

Responsibility for operational risk

Responsibility for business continuity risk

Preparing a Business Continuity Plan

Counterparty risk

Portfolio Risk Control

Backtesting and stress-testing portfolios

Using factor models and optimization software

Undertaking competitor and peer group analysis

Monitoring fund leverage


8 Skill and structure in the back office (Operations and support)


Having robust systems and database

Handling derivative instruments

Handing day to day fund accounting

Ensuring efficient pre and post trade processing

Trade processing vendors

Implementing Straight-Through Processing (STP)

Establishing a records retention policy

Integrating the accounts function


Fund administrators

Prime brokerage

Adapting to accommodate short selling and securities lending

Back-office personnel issues


9 Job functions


How to write internal and external job descriptions

Criteria for ’good’ and ’bad’ remuneration policies

How to decide on compensation

Performance-related compensation

The Chief Executive Officer

Transitioning to a New Chief Executive

The Chief Operating Officer

The Chief Financial Officer

The Chief Investment Officer

The Head of Trading

The Head of Technology

The Compliance Officer

The Risk manager

The Marketing manager

The relationship manager

Head of Performance

Establishing and employee review process

Maintaining an employee handbook

How to build a team spirit


10 Client acquisition


Business development as a means to win new clients

Basic Foundations of client relationships

Communicating the right message

The role of Investment Consultants

Answering Request for Proposals

Writing Fact Sheets

Equity fact sheets

Debt fact sheets

Lead management and the importance of monitoring client contact

Marketing analytics

How to undertake systematic brand management

Building reputation

Addressing poor performance from a communications perspective

Having a public relations strategy

Employing third party marketeers

Drafting investment mandates

Adding constraints to an investment mandate

The internets role in client acquisition.

How to ensure efficient ?Client on-boarding’


11 Client retention


Communicating with clients

Communicating with Consultants

Using open architecture as a distribution channel

Understanding core-satellite asset allocation and its implications for client retention

The ?Know your client’ requirement

Handling tracking error and investment constraints

Understand and surpassing expectations

Obtaining feedback from existing clients

Fostering good press and media relations

Goals and Objectives when dealing with the media

Crisis management when things go wrong

Managing client functions

Preparing performance reviews and client visits

How to treat the competition

Buying a fund management company7

Due diligence: Organization and Good Standing

Due diligence: Financial Information

Due diligence: Physical Assets

Due diligence: Employees and Employee Benefits

Due diligence: Mandates and funds

Due diligence: Taxes

Due diligence: Material Contracts

Due diligence: Open Ended Funds and Closed Ended Funds

Due diligence: Customer Information

Due diligence: Litigation

Due diligence: Incidentals


12 Performance reporting and valuation


Choosing appropriate benchmarks

Understanding attribution analysis

The Brinson Hood Beebower Model

Building a Reporting interface

Fair reporting

Accurate reporting

Timely reporting

Utilising factor models in reporting

Value at Risk as a tool to understand risk

The performance report format

The asset allocation report format

The transaction report format

Pricing and valuation

Global Investment Performance Standards

Soft Dollar Standards


13 Product design


Building the Product

Composition and structure of the product team

Establishing a timeline for product intorduction

Determining fee levels for new products

When to use performance fees.

Choosing the legal structure for new products

Open ended

Closed ended

Master feeder funds

Multi-Class Funds

Taking taxation into consideration

Design considerations

When to incorporate leverage

Handling the liquidity of the underlying instruments

Taking capacity into account

Clearly stating fees

What to put in the ?Prospectus’

Recent product innovations

How to structure solutions for clients

Wrap funds

Offshore products

How to design Index Funds

How to address investment fund board independence


14 Alternatives


Socially Responsible Investment (SRI)

Shari’ah Compliant Investment

The use of leverage

The use of derivatives

Structured products

Hedge funds

Counterparty credit risk exposure

Trading practices of hedge funds

Hedge fund fees

Commitment Period (lock-ups)

The use of side letters

Selecting a Maximum Fund Size

Imposing redemption terms (gates)

Types of hedge fund

Convertible Arbitrage funds

Distressed Securities funds

Fixed Income Arbitrage funds

Long/Short funds

Macro funds

Risk/Merger Arbitrage funds

Private Equity

The role of Limited Partnerships


Closed-ended funds

Open-ended funds

Investment trusts



Customer Reviews

Average customer reviews for A Guide to Fund Management

Passionate about Fund Management......This is for Your Library

This book is a must have for anybody passionate about Fund Management. It is not just a book that you enjoy absorbing from cover to cover, but most importantly its like a "condensed fund Management encyclopaedia." It is especially useful for a quick day to day reference of the Investment process.

The author takes a very concise and practical approach to explaining what normally would be volumes of books (which can be noisy and tedious), giving the reader precise starting points (points of reference) to expand a theme in the way that personally suits.

Fund management is complex to explain in a concise text and l must admit my initial thought was a degree of scepticism (is it VALUE FOR MONEY??). This thought was quickly dispelled after just two hours of sampling what is an intelligently structured (step by step)and effective guide to fund management.

l highly recommend ownership of this book as an invaluable asset to a fund management library.
Review by M. S. Charangwa , 11/11/2013

A great read

I found Daniel Broby's book very interesting. In today's transitioning market, the task of finding a fund manager, who is consistent (relative to its process), can achieve the expected investment targets and outperforms peers and benchmarks, requires that a manager selection team has a high level of detailed knowledge, in-depth research process, and can successful balance logic (data) vs. reason (why). Often things are not reasonable but something that Daniel Broby captures nicely in his book.

I liked Daniel Broby's coverage of technology issues. It is certain that technological advancements have been instrumental in shorten the time needed to generated comprehensive assessments, but numbers alone do not tell the full story when the action seems illogical. For example, drivers know the speed limit (the data), but why do the average person drives in excess of the limit. It is the why, which is important and should be examined in order to predicate a behaviour and establish campaigns to warn against speedy.

Another thing I think came over well was the qualitative/intuition/psychology process. In order to truly understand the investment manager, I believe one must investigate the reasoning and rationale behind the data, uncover what's driving the investment team, find the glue which holds the team together, etc. This is essential in establishing a feel - intuition - about the psychology behind the investment decisions and potentially could softening the impact of surprises.

I think the key take away of a book like this is that the right mix of reasoning to an analytical process could be key to success and recommend it as a good read.
Review by Priscilla Hardison , 11/11/2013

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