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Second Training Course in Investment Management

Santiago, Chile November 24 – 25, 2005

UTIMCO . Expected Return Components Definitions and Concepts Historical Evidence Measuring Expected Returns & Return Components - - The Equity Risk Premium: U. UTIMCO consultants - Fundamental Estimates - - - Economic Estimates - - Survey Estimates - Topic Two – Asset Allocation: Decisions & Strategies - The Asset Allocation Decision: Overview & Importance Examples of Strategic Allocation Policies: - UTIMCO.S. Ennis-Knupp Associates managers. Teachers Retirement. Tactical. Global. and Chilean Experience Methods for Measuring Equity Risk Premiums: Historical Estimates - Ibbotson Associates. Ennis Knupp Associates Examples: CFO surveys.Outline of Course Topics Topic One – Expected Returns & Measuring the Risk Premium - Two Important Concepts in Investment Management - Investor Role & Compensation.. Global Capital Markets Sharpe’s Integrated Asset Allocation Model: Strategic. Texas Teachers Retirement System. Arnott-Bernstein Economic Approach to Risk Premium Estimation Example: Black-Litterman. Claus-Thomas. Insured Asset Allocation & Building Investment Portfolios - Measuring Gains from Tactical Asset Allocation - Examples: Fidelity Investments. Fidelity Investments/Global Financial Markets Fundamental Approach to Risk Premium Estimation Examples: Fama-French.

Lower-Partial Moments: Examples - Advanced Risk Analytics - - Measuring Portfolio Downside Risk - Topic Four – Portfolio Optimization: Analytical Techniques - Overview of the Portfolio Optimization Process - Developing the Efficient Frontier: Notion & Analytical Solution Unconstrained & Constrained Optimization - Mean-Variance Portfolio Optimization - Measuring the Cost of Constraint Examples: Black-Litterman Forecasts. CLP & USD Pension Investing Portfolio Risk & How Much to Invest in Foreign Assets? Adjusting Threshold Risk Levels & Power Coefficient Example of Unconstrained & Constrained Optimization : CLP & USD Portfolio Notion of Relative Optimization Problem Benchmark vs. Marginal Asset Risk Within a Portfolio Marginal Contribution to Risk Portfolio Risk-Tracking Example: Chile Pension Sistema Semi-Variance vs.Outline of Course Topics (cont. Peer Group Comparison Example of Unconstrained & Constrained Optimization: CLP & USD Portfolio - Mean-Downside Risk Optimization - - Alpha-Tracking Error Optimization - .) Topic Three – Portfolio Risk Analysis - Tracking Error: Concept & Examples – Mutual Funds & Chile AFPs Risk & Expected Return Within a Portfolio - Multi-Asset Class Examples Diversification & Portfolio Size Total Portfolio Risk vs.

Public Endowment Fund: University of Texas System - Topic Six – Measuring Superior Investment Performance - Estimating Expected Returns & Superior Returns (“Alpha”) Measuring Alpha in Practice: CAPM vs.S.Outline of Course Topics (cont.S. Cross-Sectional. Passive Portfolio Management - The Right Answer to the Wrong Question: Concept & Lessons from Prior Research Historical and Forecasted Evidence on Superior Mutual Fund Performance - Identifying Superior Active Management: Data & Methodology Empirical Analysis: Time Series. Factor Models Comparing Active vs.) Topic Five – Portfolio Optimization: Case Studies - U. Logit. Economic - The Role of Performance Persistence & Fund Expenses The Benefit of Selecting Good Managers & Avoiding Bad Ones . Public Pension Fund: Texas Teachers’ Retirement System - Background & Investment Problem Initial Allocation & Overview of Mean-Variance Optimization Process Simulation-Based Forecasted Process: How Much Equity in Portfolio? Optimization Outcome: Strategic Asset Allocation Background & Investment Problem Base Case Economic Assumption Adjusted Mean-Variance Analysis: Notion of Resampled Efficient Frontier Strategic Asset Allocations: Unconstrained & Constrained Portfolios Background & Investment Problem Initial Allocation & Overview of Mean-Downside Risk Optimization Process Economic Assumptions & Notion of Potential Value-Added (PVA) Decision Factors: Selecting From a Set of Optimal Candidate Portfolios - Chilean Pension System - - U.

USD Investment - - Currency (FX) Hedging & Global Portfolio Management - Hedged vs. Strategic Responses of Winners Three Additional Questions: - Topic Eight – Currency Hedging & Using Derivatives in Portfolio Management - Developing the Hedging Principle Hedging Downside Equity Price Risk - Synthetic T-Bill. Fund Age How Risk is Altered Fund Objective Misclassification. Protective Put. Window-Dressing. Fund Size. Equity Collar Protective Put Position - Example: Chile IPSA Index Collar - Yield Enhancement: Covered Call Position FX Hedging: Theory & Practice Conceptual Thinking on FX Hedging in Portfolio Management Example: CLP vs.Outline of Course Topics (cont. Unhedged Chilean Pension Investments - Discussion with Professor Eduardo Walker - Overview of Issues Current Research .) Topic Seven – Investment Tournaments & Manager Compensation - Notion of Investment Tournaments & Incentive Compensation The Research Premise: - Portfolio Risk Adjustments for “Winning” & “Losing” Managers Tournaments & Temptations: Data & Methodology Developing the Risk Change Hypotheses Empirical Results: Full Sample & Various Sub-Samples Developing Secondary Hypotheses - Extreme Events.

He currently serves as an advisor to the Board of Trustees of Teacher Retirement System of Texas and to the Board of Directors of University of Texas Investment Management Company. Keith is the co-founder and Senior Partner of Fulcrum Financial Group. . and Ph. Keith is also a co-author of two textbooks. and spent thirteen months with a San Diego. The Beacon Group. and Derivatives courses at the MBA and Ph. 7e (with Frank K. University of Texas at Austin. Journal of Restructuring Finance. and business valuation firm located in Austin.Biographical Sketch of the Course Instructor Keith Christopher Brown currently holds the position of Fayez Sarofim Fellow and Professor of Finance at the McCombs School of Business. Journal of Fixed Income. L. In 1987 and 1988. Review of Economics and Statistics. Chemical Bank. USAA Investment Management. Texas and Atlanta. California-based financial planning firm. Merrill Lynch. Journal of Financial and Quantitative Analysis.D. Lehman Brothers.S. Security Commission of Malaysia. he has specialized in teaching Investment Management. Financial Management. Since leaving school in 1981. in Financial Economics from the Krannert Graduate School of Management at Purdue University. Smith) and Investment Analysis and Portfolio Management. investment advisory. Chase Bank of Texas. levels and has received thirteen awards for teaching innovation and excellence. and Journal of Investment Management and formerly held the position of Research Director for the Research Foundation of the Association of Investment Management and Research. a private capital appreciation fund managed by students at the University of Texas. Financial Analysts Journal. Keith was based in New York as a Senior Consultant to the Corporate Professional Development Department at Manufacturers Hanover Trust Company. He received his M. He has also lectured extensively in the global Executive Development programs for companies such as J. Keith received his charter from the CFA Institute. Journal of Portfolio Management. Journal of Investment Management. Journal of Applied Corporate Finance. Georgia.. Journal of Financial Economics. In August of 1988.C. he also served as President and Chief Executive Officer of The MBA Investment Fund. Review of Financial Studies. Morgan Chase Bank. For eleven years. Halliburton. and Advances in Futures and Options Research.D. Association for Investment Management and Research. Portfolio Management and Security Analysis. Fidelity Investments. a portfolio management. He received a Graham and Dodd Award from the Financial Analysts Federation as a co-author of one of the best articles published by Financial Analysts Journal in 1990 and a Smith-Breeden Prize from the Journal of Finance in 1996. Capital Markets. Union Bank of Switzerland. BMO Nesbitt Burns. Motorola. Interest Rate and Currency Swaps: A Tutorial (with Donald J. P. Chase Securities. He also serves as Associate Editor for Journal of Behavioral Finance. Keith's publications have appeared in such journals as Journal of Finance.L. Chase Manhattan Bank. Reilly).

utexas.Access to Course Materials and Instructor  You can download electronic copies of many of the course materials (e.edu .utexas..htm  You can contact Keith Brown by e-mail at the following address: kcbrown@mail.g. course outline.mccombs. course notes.brown/chilecourse2. Excel spreadsheets) from the following website: http://www.edu/faculty/keith.