prmia montreal career day charles vanasse
TRANSCRIPT
PRMIA Montreal Career Day
Charles VanasseVice-President and Director
5 November 2009
TD ASSET MANAGEMENT
GESTION DE PLACEMENTS TD
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Agenda
TDAM in general. Assets Structure Institutional Products
Focusing on Quantitative Portfolio Management Quant strategies Philosophy, processes, roles. Products cycle. Tasks and tools Skills
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Alternative Investments/
Other$0.5 B0.3%
Int'l Equities$8.1 B4.7%
U.S. Equities$13.6 B
7.9%
Passive Bonds$28.9 B16.7%
Global Bonds$7.7 B4.4%
Short Term / Money Market
$35.0 B20.3%
Overlay$13.2 B
7.6%
Active Bonds$35.2 B20.4%
Canadian Equities$30.5 B17.7%
TD Asset Management Inc. ASSETS
Expertise, track record and risk-management focus
1 “The Top 40 Money Managers (as of December 31, 2008)” Benefits Canada, May 20092 As of September 30, 2009Note: Numbers may not add due to rounding.
Established in 1987: Long and distinguished history
One of Canada’s largest asset managers1, with C$172.7 billion2 in assets under management
(over C$106 billion in fixed income)
Culture of operational and risk management excellence
Broad and diversified client expertise
Strength and stability of TD Bank
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Investment Management DivisionOrganizational Structure
7-10 Research
Professionals
Notes: In addition to the above areas, we also have a division that focuses on high net worth clients and an Internal Distribution Management Team.TD Asset Management includes TD Asset Management Inc. and TDAM USA Inc.TD Asset Management Inc. and TDAM USA Inc. are wholly-owned subsidiaries of The Toronto-Dominion Bank (TD Bank).TDAM USA Inc. is an affiliate of TD Asset Management Inc. TD Asset Management Inc. leverages the experience of TDAM USA Inc. employees.
15-20 Portfolio
Managers and Traders
8 Credit
Research Professionals
INVESTMENT MANAGEMENT
Passive, Quantitative and
Quantitative-ActiveFundamental Active
Investment Grade Credit ResearchFixed Income
Index / QuantResearch
FundamentalFixed Income
FundamentalEquities
20 Portfolio Managers
and Analysts
DISTRIBUTIONMANAGEMENT
13 Relationship
Managers
External Distribution &Institutional Relationship
Management
President
3 Portfolio Managers
High Yield
Hedge Fund & Quantitative Risk
Investment Risk
Policy & Operational Risk
RISK MANAGEMENT
Chief Risk Officer
15-20 Portfolio
Managers and Traders
Index / QuantInvestment Management
25 Professionals
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Institutional Products
Institutional Pooled Fund Trusts Equity Fixed Income Balanced Alternative
Customized Solutions Policy Management (Currencies, Asset-Mix,…) Liability Driven Investment (LDI) Transition Management Segregated Portfolios
Canadian, US and Global Assets
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Quantitative Strategies
Equities (Canada, US, Global) Passive (indexing) Long-only quantitative active (benchmarked on indices)
Some are currency hedged Quantitative Active Extensions (“130/30”, benchmarked on indices) Low volatility and managed volatility Long-Short Market-Neutral
Fixed Income (Canada, US, Global) Passive (Indexing) Long-only quantitative active (benchmarked on indices)
Some are currency hedged Liability Driven
Min Surplus Risk Duration extension Portable alpha
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Quantitative Portfolio Management Group Philosophy, Processes and Roles
Delivering Optimal Risk-Adjusted Returns
Risk
Trading
Transaction Costs
On-going Research
Portfolio Construction/Optimization
Risk Management And Compliance
Alpha
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Quantitative Portfolio Management Group … RISK
Different types of risk: Total risk Market risk Benchmark risk (Index, Policy mix, …) Surplus risk Currency risk
We use risk models for all quantitative investment strategies To measure various forms of risk To understand risk sources. To control risk To manage risk
The Quantitative Portfolio Management Group has expertise in using and producing customized risk models.
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Quantitative Portfolio Management Group … ALPHA
Alpha is central to any form of active management.
Ex-Ante alpha is the predicted risk-adjusted return of an investment strategy. Single security level forecasts Tilts (Value/Growth, Gov/Corp,…) Market direction forecast …
Forecasts might have different horizons.
Ex-Ante alpha is an input to quantitative active portfolio management.
At TDAM, the Quantitative Research group is responsible for producing forecasts used in quantitative active strategies.
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Quantitative Portfolio Management Group … Transaction Costs
Transaction costs are a reality. Commissions Stamp duties Market impact
Market impact is a function of liquidity, urgency and size of trades.
At TDAM: We use market impact models to balance ex-ante risk-adjusted returns with cost of
trading over desired horizon. The Quantitative Research Group calibrates predicted trading costs according to
the horizon of predicted risk-adjusted alpha and investment horizon.
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Quantitative Portfolio Management Group … Optimal Portfolio Construction
Passive and quasi-passive investment strategies.
Min (σ2 + transaction costs) subject to constraints (policy, compliance…)
Active quantitative investment strategies.
Max (alpha – λσ2 – transaction costs) subject to constraints (policy, compliance…)
At TDAM: Quantitative Research Group is responsible for the R&D regarding optimization tools we use. Final portfolio construction is performed either by the Portfolio Managers or the Research
group. Portfolios are rebalanced according to horizon of forecasts, evolution of risk and policy
constraints.
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Quantitative Portfolio Management Group … Implementation-Trading
The Portfolio Manager controls the implementation phase: He observes market activity, he monitors news and corporate actions, he observes
current liquidity… He manages cash flows. He instructs Trading Team on how he would like to implement changes when
rebalancing the portfolio. He monitors trading in real time. He monitors portfolio performance in real time . He monitors compliance with investment policy of all portfolios and accounts in
real time. The Trading Team performs trades according to trading strategies discussed
with the portfolio manager. The Trading Team provides feedback to PM and Research on liquidity and
market impact.
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Product Cycle
R&D Investment ideas-strategies Tests of strategies
Historical data Simulations/backtests Stress-testing
Development of production tools Audit
Deploy Risk Management, Compliance, Legal… Migration to Portfolio Management Group Seeding Maintenance (Production of forecasts, risk models etc…) Performance attribution. Enhancements
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Quantitative Portfolio ManagementTasks and Tools
Research Data Group. Electronic external feeds
Numerous sources C# and various customized web based applications
Database Structuring Maintenance & synchronization C#, SQL
Quality control C#, SQL
Research analysts. Investment ideas… Testing of strategies
Matlab, SQL Development of tools: daily management and performance attribution.
Matlab, SQL Presentations (to colleagues and clients)
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Quantitative Portfolio ManagementSkills
TEAM PLAYER (multi-disciplinary group) Programming (Matlab, SQL, C#, …) Knowledge and understanding of financial strategies. Sound quant skills (financial econometrics, operations research, maths, stats,
engineering, computer science…) Ability and willingness to work with data Knowledge of financial data (Compustat, Worldscope, IBES, Reuters…) Understanding of financial statements (Accounting, CFA…) Communication and presentation skills. Result oriented