The courses “Active Portfolio Management I (APMI)” and “Active Portfolio Management II (APM II)” are closely linked and students should take both. Both courses together cover the main concepts underlying modern active portfolio management. Active portfolio management can be delivered via two dimensions: (i) via active asset allocation and (ii) via security selection. The course APM I mainly covers active asset allocation. 

After a review of the concept of market efficiency, we will discuss issues that arise when investors delegate the management of their portfolios to external managers. We will then cover concepts for responsible investing. In a further step, we will develop a framework allowing the portfolio manager to include his/her return and risk expectations into an optimization framework. The basic model we will use was originally developed by Black and Litterman. Finally, we will develop models to analyze and forecast the risk premia for stocks, bonds and commodities, and currencies. 

Students who have successfully completed this class will have acquired the following skills:

• understand the role and possibility of active portfolio management within the framework of modern capital market theory.

After completing this class the student will have the ability to:

• distinguish between asset allocation and security selection in active portfolio management
• know about return and risk from historical records and its implications for forecasts
• appreciate the interplay between risk aversion and optimal capital allocation
• understand the fundamentals of sustainable investing
• associate primary theories of return drivers and asset pricing models with the different asset classes
• master the Black-Litterman method to incorporate views in an optimized asset class allocation
• understand agency problems in delegated asset management and institutional details of mutual funds, ETFs, hedge funds, private asset funds etc.

Moreover, this course will contribute to the students’ ability to:

• analyze and solve complex portfolio problems individually and as a member of a group and to develop solutions by functioning as a valuable and cooperative team member
• summarize and professionally present solutions in class
• adequately communicate and participate in in-class discussions
• solve and present a case study in small groups

Attendance is mandatory! Students may miss no more than 2 classes.

This course consists of a mix of regular lectures, class room discussions and analyses of assignments. The lectures will be largely based on the instructor’s lecture notes and selected additional readings. In class, the theoretical frameworks will be introduced to the students. There will be assignments to practice important concepts developed during the lectures.

• Mid term exam (30%)
• Group assignment (30%)
• Final Exam (40%)

Students need at least 50% in total (mid term exam + final exam + group assignment) to pass the course. 

• Completion of the assessment phase

• Successful completion of 8 courses within the subject "GrundlagenFinanzwirtschaft, Rechnungswesen und Steuern" ("Basics in Finance,Accounting and Taxes")

• Allocation to the elective

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