The Sortino Framework for Constructing Portfolios Focusing on Desired Target ReturnT to Optimize Upside Potential Relative to Downside Risk 1st Edition by Frank Sortino 0123749921 9780123749925

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Product details:

ISBN 10: 0123749921 

ISBN 13: 9780123749925

Author: Frank A. Sortino

The most common way of constructing portfolios is to use traditional asset allocation strategies, which match the client’s risk appetite to a weighted allocation strategy of fixed income, equities, and other types of assets. This method focuses on how the money is allocated, rather than on future returns.

The Sortino method presents an innovative change from this traditional approach. Rather than using the client’s risk as the main factor, this method uses the client’s desired return.

• Only book to describe the Sortino method and Desired Target Return™ in a way that enables portfolio managers to adopt the method
• Software to implement the portfolio construction method is included free of charge to book buyers on a password protected Elsevier website. Book buyers can use the software to construct portfolios using this method right away, in real time. They can also load in their current portfolios and measure them against these measures.
• The Sortino method has been tested over 20 years at the Pension Research Institute. Portfolio managers can be confident of the success of the method, even returns in the economic crisis, in which the method has still beaten all S&P benchmarks.

Table of contents:

Part I: Building the Framework
Chapter 1 The Big Picture
Turning Points
MPT Criticism
Innovations to MPT
Hands-on Experience
The Risk of Investing
Implementation Frustration
Yes, But Does It Work?

Chapter 2 Getting All The Pieces of the Puzzle
Equity Market Composition
Evaluating Investment Managers: The Search for, and Use of, Skill
Conclusion

Chapter 3 Beyond the Sortino Ratio
The Sortino Ratio
Improvements
The Bernardo Kuan Study
Conclusion

Chapter 4 Optimization and Portfolio Selection
Introduction
Part 1: The Forsey-Sortino Optimizer
Part 2: The DTR Optimizer

Part II: Applications
Chapter 5 Birth of the DTR 401(k) Plan
Background
QDIA Options
Goals and Objectives
Potential Conflicts
QDIA Evaluation
Constructing a Participant-Driven Benefit Plan
Recommendations for Regulators
Recommendations for Plan Sponsors
Recommendations for Consultants
Performance Measurement
Summary and Conclusions

Chapter 6 A Reality Check from an Institutional Investor
Institutional Portfolio Manger’s Role is Limited
Multiple Benchmarks
Misfit Risk
Risk Statistics
Downside Risk
Identifying Bad Events is the First Step
A Picture is Worth a Thousand Words (or Statistics)
How to Adjust for the Time Frame
How Do Institutional Investors View Downside Risk?
Why Stop There?
In Summary

Chapter 7 Integrating the DTR™ Framework into a Complex Corporate Structure
Introduction
The Integration Process
The Benefits

Chapter 8 The Proper Role of Regulation in Financial Markets
Role of Regulation
Role of the Regulator
Accidents Happen
Criteria for New Rules
One Person’s Risk is Another Person’s Danger
Summary and Conclusions

Chapter 9 Sharing Downside Risk in Defined Benefit Pension Funds
Introduction
Downside Risk and the Impact on Pension Fund Participants
A Simplified Model of a Pension Fund
A Simulation Experiment
Conclusion

Chapter 10 On the Foundation of Performance Measures Under Asymmetric Returns
Introduction
The Maximum Principle and the Modified Sortino Ratio
Conclusions

Appendix: Formal Definitions and Procedures
Overview
The Desired Target Return™
Style Analysis: Determining the Style Blend of a Fund

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Tags: Frank Sortino, Sortino, Framework, Constructing, Portfolios