From Asset Allocation to Risk Allocation - New Paradigm for active portfolio management

Learn How to Manage Risk for Protection - Allocate Risk to Improve Performance for capital market investors and risk managers

Why You Should take this Course

If you are a risk manager or a professional investor, your main goal is to increase returns in good times and protect your own or your company's assets during the bad times.

This course will teach you that traditional notions of portfolio diversification are no longer effective tools. By replacing Asset Allocation with Risk Allocation you will achieve much more effective means for managing your investment portfolio.

You know that forecasting returns is difficult and is seldom consistently accomplished. You find differentiating between your emotional reaction to the global and economic news and the relevant market reaction challenging.

As the result, you may be hesitant to act, yet ultimately you regret missing opportunities to profit.

In this course we're going to lay out a system that will teach you how to manage risk for protection and allocate risk to improve performance.

Who Is This Course For?

This course is intended to teach both risk professionals and investors practical risk tools to manage balance sheets and investment risk. You should expect to learn how to approach risk management to “control” the downside and the return potential of risk exposures.

About This Course

This course teaches the essential elements of market risk measurement, management and allocation. The discussion uniquely bridges the gap between capital/asset protection and maximization of risk adjusted return.

  • Understand how to design robust risk allocation models for all market conditions
  • Build and maintain optimal portfolio’s based on investor needs
  • Gain competitive advantage from understanding behavioural biases and how to manage them

The course format consists of 8 video modules to require roughly 15-20 minutes each with recommendations for review as needed. Each video will consist of a mixture of slides with text topics, animated video demonstrations, and lectures. You will also get the PDF transcripts to read all presented material.

At the end of the course, you will have a clear understanding of the difference between asset allocation and risk/capital allocation. You will be able to:

- evaluate exposures relative to:

o Policy

o History

o Market environment

- make recommendations to:

o control downside

o capture profit opportunities

o improve return on capital

Special Bonus: 1-month free subscription – valued $150


The Outline.

I Introduction.

Why do we care about risk? A general discussion of the contrast between a traditional Modern Portfolio Theory and investment philosophy and the risk allocation philosophy.

Why it is preferable to monitor and analyze risk and allocate dynamically.

Setting the framework for Risk Management Program

- Goal setting

- Risk management authority

- The Risk of being different

- Rules-based Imperatives

How to measure success

- Critical paths

- Transparency Mandate

- How to limit dependency on Judgment

You will learn how to set the stage for taking a risk approach to balance sheet and investment management.

II Risk and weather: Farmer’s Almanac vs. Doppler Radar analogy.

• The Picture vs the Movie

- Ex-ante vs ex-poste measures of risk

- Value At Risk strengths and weaknesses

- Importance of Liquidity

• Targeting risk

• The case for Baysian thinking

• Risk Systems

You will learn that risk analytics must be appropriate to the exposures in question and how to make exceptions for those that do not fit the framework.

III Difference between Balance Sheet Risk and Investment Risk

• Ferrell Capital Tool Kit Presentation

• Alligators

- Parabolic Curves that define the expected Range of Outcomes

• Key Drivers to distill thousands of positions to manageable factors

- Risk Contribution

- Incremental risk

• Correlation Matters

- Risk Compression

- Diversification

You learn to adjust the frequency and speed of risk measurement to the ability to effect the outcome of change.

IV More detailed discussion of the role of risk monitoring and analysis in creating an agile, dynamic investment vehicle that adapts to changing market conditions.

• Risk Allocation vs Asset Allocation

• Why Dynamic allocation is preferable to Static allocation.

• Knowing the limits of practical knowledge utilization

• How to use what you learn

- Hedge

- Reduce exposure

- Turn off the analytics and find SHELTER!

• How a good system tracks conditions market when environment is favorable.

• How to park assets in cash when conditions are difficult.

- The risk of Getting Out = Getting In

• Specific historical examples

You learn what can be done to avoid calamity when risk threatens franchise value.

V Risk Bubbles

• The relationship between volatility and correlation and range of outcome

• Bubble movie

Movie teaches the subtle to dramatic ways that changes in market conditions change over time.

VI Risk- adjusted returns are critical

• Sharpe Ratios

- Why they Matter

- Incremental Value

• Marginal Sharpe Definition

• A Bubble movie illustrating effects of market conditions on Sharpe.

You learn how to measure risk and apply to all returns for fair comparison.

VII Market Forecasts and Market Activity

Discussion of the advantages of real-time (daily) monitoring and adaptation to the market conditions, as opposed to the set-and-forget approach of traditional portfolios.

• Picking the right benchmark

• Benchmark construction

• Cap-weighting

- Strengths

- Weaknesses

- Equal Weighting

- Uses

• Setting Risk Limits

- How to set limits

- Implementation

- The downside of over-control

- The upside of losing less

• Times of crisis

- Bear markets

- Bear market rallies

- Short squeezes

You learn the value of tactical risk allocation for investment portfolios.

VIII The Press and its Effect on Markets

• A discussion of how financial and world events in the mediaPress are reflected in the data, and how risk allocators respond.

• Financial press objectives

- Why pundits seldom add value

- What they do provide

- How to listen

- Information verification

• Difference between information and insight

- Vulnerability of Forecasting

- Why economists/money managers/journalists do it anyway

- Knowing what we DON’T know

You will learn to differentiate the media’s relentless pursuit of advertising sales vs. meaningful news.

Additional Feature #1: Course Software That Keeps You On Track

The course software is very easy to use. It tracks your progress for you, allowing you to come back right where you left off. This keeps you organized and helps you focus your time on learning.

You can access the course anytime, from any device. Watch the presentations, videos and downloadable materials on any tablet or smartphone.

Additional Feature #2: Ability to collaborate with both author and other students, ask questions and make comments.

Your Satisfaction Is Guaranteed

Our goal is to help you become a better Risk Manager so you can take your career to the next level.

We want you to use this course as a resource for continued learning. If you take the course and are not satisfied with what you learned, you can get a full refund.

Your satisfaction is guaranteed by our 100% money-back guarantee refund policy.


Your Instructor

William Goodwyn Ferrell
William Goodwyn Ferrell

William G. Ferrell came to New York with a B.A. in Economics and History from Hampden-Sydney College and a five year game plan that evolved into a life-long career in financial engineering and risk management. Upon completion of the management training program at Chemical Bank, he was introduced to capital markets where he applied his ability to create and perform music by ear to the complexities of financial analysis.

Starting on the trading floor at First National City Bank in January 1973, William Ferrell has been trading securities and derivatives and also managing teams of traders for over four decades. After eleven years at Citibank as a trader, underwriter, marketer and financial engineer, Bill joined Kidder Peabody as the manager of their Municipal Securities Group and the youngest member of their Board of Directors.

While managing one of the three largest trading operations in the industry, Mr. Ferrell participated in the firm’s management process as a member of the Operating and Inventory (Capital and Risk Allocation) Committees and ultimately, the Management Committee of the firm.

Ferrell Capital Management
In 1988, Mr. Ferrell founded Ferrell Capital Management to provide risk consulting and risk managed investments for large, money center banks. Solving capital and risk allocation issues for financial institutions resulted in the development of a comprehensive tool kit of measurement algorithms and methodologies. Bill pioneered the concept of managing trading accounts to a target volatility level and created proprietary methodologies for allocating investment capital across global trading businesses and markets.

From 2001 through 2011, he was the Chief Investment Officer for a fund of over one hundred hedge funds. Bill worked with many of the world’s finest money managers as well as the two major investors, JPMorgan and Scotiabank.

Mr Ferrell further developed capital allocation tools into dynamic risk allocation methods for equity investors. He has published numerous articles on risk management and performance optimization replacing asset allocation with risk allocation. He speaks frequently before major Investment and ETF organizations on risk allocation and management and provides market risk research to investment advisors.

Teaching and Consulting
Mr. Ferrell has enjoyed teaching classes at investment firms and graduate business schools over the years.

On a Personal Note
Bill is married, with four grown children, and resides in Greenwich, CT. He is an avid sportsman and musician. He has served as a trustee at his alma mater, an officer and board member of the Investment Association of New York and The Bond Club of New York. He is also a member of the Greenwich Roundtable and the Economic Club of New York.

Philanthropy and Legacy
Bill has been active with several philanthropic organizations, including serving on the Advisory Board of Outward Bound USA. He currently serves on the Session of The First Presbyterian Church of Greenwich. In his spare time, Bill composes and performs original music..


What Others Are Saying

"My key takeaways from this course were the following:

Overall, this course teaches those with allocation responsibilities how risk should be the primary driver in the allocation process, not potential returns or diversification for the sake of diversification. It provides the analytical framework using widely accepted quantitative tools to make better allocation decisions. In addition, it highlights the fact that the character of the market is constantly changing and static allocations offer the potential for greater loss of capital.

Some specific points made in this course are:

First, whoever views this course must have the authority to make allocation decisions and be willing to move to the sidelines (cash) during financial turmoil. The content of the course clearly demonstrates that cash can be an advantageous position when the character of the market has turned negative. At the same time, the course correctly captures the opportunity costs associated with premature defensive positioning. Both of these points are based on proven, quantitative tools in everyone’s analytical tool kit.

Specifically, these tools are correlation, volatility, pace of change, and a different way of thinking about returns in risk adjusted terms by including the Sharpe ratio and the marginal Sharpe ratio when it comes to portfolio allocation driven by risk assessment. It is critical to understand how to use not only correlation analysis, volatility analysis, and marginal Sharpe in assessing expected behavior, but also how they can be used in concert with one another to improve the allocation decision making process. This type of analysis clearly helps not only with the decisions related to defensive posturing, but also with the decision regarding when to once again become more aggressive (less defensive) in one’s allocations to various asset classes.

By understanding that quantitative assessment of risk is the language of allocation and that the market is not a static environment, one can go a long way toward improving allocation decisions and beating their benchmark.

In summary, leveraging his extensive experience and willingness to think dynamically about market behavior, Mr. Ferrell has identified a better way to use existing quantitative tools in concert with one another to improve the allocation process and related returns.!"

- Peter Pierce, President of Atlantic Venture Management, Inc. - a research firm focusing on creating tools to help asset managers generate superior risk adjust returns using predictive analytics.

What Others Are Saying

"I have known Bill for approximately ten years. I have seen him present at several different investment conferences on the topic of tail risk management. He has superb presentation skills, is extremely knowledgeable about the subject matter, and has the ability to make complex material easy to understand by adding a touch of humor to help you remember his ideas. I was so impressed by Bill that I invited him to the University of Ottawa to present a class on tail risk management to my MBA seminar in Portfolio Management"

Dr. William F. Rentz, Ph.D., Licensed Inrternational Financial Analyst

Professor of Financial Economic, Telfer School of Management

University of Ottawa

Author of "Financial Management - Theory and Practice"

Frequently Asked Questions

What if I am unhappy with the course?
We would never want you to be unhappy! If you are unsatisfied with your purchase, contact us in the first 30 days and we will give you a full refund.
When does the course starts and finish?

Once you join, you'll have lifetime access to a completely self-paced online course available on any device. You can decide what content you want to start with, when you'd like to start and when you'd like to finish. You will also get all future updates that we will regularly provide.

What is Recommended Reading?
Against the Gods -Peter Bernstein Possibly the best book to read before the course Pensions & Investments - Risk Allocation Must Replace Asset Allocation 8/14 WGF Standard Deviations - Diversification – Not having to be Right All the Time Douthit and Ferrell Ides of March – 3/2017 WGF Future of Risk Analysis and Allocation The ending credits will include web references as well as hard-copy books and papers.
Do you diversify by using bonds and cash?
These are the traditional means of reducing or managing risk. However, it can be shown that diversification doesn't work when markets become highly correlated or the relationships between markets change. And today, with low interest rates, an investor needs an alternative to safe-havens with zero or negative real returns. We will use bonds and cash but only when our model cannot find more attractive risk-adjusted equity investments
Managing investment through risk is transformational. How big is the idea and what will be the impact on the industry?
Investors care about investment risk first and foremost. To determine a client's risk tolerance - we ask how much the client is willing to lose. Markets and the risk profile of investments change daily. Static portfolios do not adjust - they simply take a beating when environments becomes hostile. Investing doesn't have to be done this way. Technology enables us to understand and track market characteristics at a much deeper level. We are tactical with investment exposures to stay in tune with the times. To use an analogy, think of the difference between using a Farmers' Almanac to predict the weather versus the dynamic display of Doppler Radar. We don't rely upon short, medium or long-term forecasts to determine our allocations. Instead, our decisions are dependent upon daily risk-centric monitoring, facilitating an agile and adaptive methodology.

Get started now!