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Asset Management: A Systematic Approach to Factor Investing
In Asset A Systematic Approach to Factor Investing , Professor Andrew Ang presents a comprehensive, new approach to the age-old problem of where to put your money. Years of experience as a finance professor and a consultant have led him to see that what matters aren't asset class labels, but instead the bundles of overlapping risks they represent. Factor risks must be the focus of our attention if we are to weather market turmoil and receive the rewards that come with doing so.
Clearly written yet full of the latest research and data, Asset Management is indispensable reading for trustees, professional money managers, smart private investors, and business students who want to understand the economics behind factor risk premiums, to harvest them efficiently in their portfolios, and to embark on the search for true alpha.
Clearly written yet full of the latest research and data, Asset Management is indispensable reading for trustees, professional money managers, smart private investors, and business students who want to understand the economics behind factor risk premiums, to harvest them efficiently in their portfolios, and to embark on the search for true alpha.
720 pages, Hardcover
First published January 1, 2014
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608 people want to read
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Displaying 1 - 8 of 8 reviews
August 20, 2018
This is something as scarce as a readable textbook. The subtitle is A Systematic Approach to Factor Investing but the bulk of the book is really a broad, comprehensive and accessible primer on asset management that combines the basics of financial academic theory with the latest academic findings and a fair amount of real life examples and practical applications. The author Andrew Ang, currently at BlackRock and previously a celebrated finance Professor at Columbia, advises the reader to view the field through the lens of underlying factors but with the book being so broad this almost becomes a side story. First and foremost Ang wants to see better practices in institutional asset management over all.
Asset Management provides an introduction into the character of asset classes, investment strategies and factor premias. The book provides a step-by-step guide in traditional portfolio theory without expanding too much into the underlying math. Then Ang goes further and discusses new findings, extensions and critique of the established models in a good-tempered and easy-going style. Each chapter starts with an illuminating story from real world asset management, then the academic theory is presented and in the end Ang takes the – now more knowledgeable – reader back to the introductory story to discuss it in a new light. The book in a way resembles Antti Ilmanen’s Expected Returns in its breadth and in that it gives the reader a good insight into the latest thinking in finance and portfolio theory.
The book largely substitutes equations for well thought out illustrations which will make the subject more comprehensible for a larger audience. It is quite an impressive trait of the author to be able to make discussions on, for example, the use of utility functions in mean-variance optimization models this understandable and interesting. It is also symptomatic that the author during his career has been able to switch back and forth between consulting for various asset managers and having a successful career in academia.
Thus, although it sometimes shines through that Ang isn’t an experienced asset manager, he still skillfully merges academia with practical advice. Where academia often make too many unrealistic assumptions and almost have a fetish for explaining market movements with information, practical asset management can on the other hand at times be dominated by a lazy continuation of old obsolete practices and self interests.
The last quarter of the book called Delegated Portfolio Management is essentially concentrated on agency problems and discusses mutual funds, hedge funds and private equity. Ang is extremely critical towards hedge funds and private equity specifically, showing that they generally underperform risk-adjusted benchmarks composed of the factors that build up their return streams. His advice is to “walk away”. Still, this categorical statement saves Ang from engaging in a discussion that is vitally important for most portfolios; how to best construct a portfolio that combines liquid and illiquid assets, where the latter renders most of the standard risk and reward measures useless. Also, one minor irritation – how hard can it be to spell Warren Buffett’s surname with two “t’s”? Often it is too hard for the author apparently!
Andrew Ang clearly champions liquid securities and factor investing as the latter gives a deeper analytical insight into what drives the risk/reward in the portfolio. All factor returns give compensation for enduring various types of bad times. Ang wisely advices the reader to figure out which of these “bad times” that he can endure better than others because this is where his portfolio will have a competitive edge.
Asset Management will be a cornerstone of the reading list for asset management classes for years to come. For anyone wanting to gain a thorough understanding of the current best practice in institutional multi-asset, portfolio management this is the place to start.
Asset Management provides an introduction into the character of asset classes, investment strategies and factor premias. The book provides a step-by-step guide in traditional portfolio theory without expanding too much into the underlying math. Then Ang goes further and discusses new findings, extensions and critique of the established models in a good-tempered and easy-going style. Each chapter starts with an illuminating story from real world asset management, then the academic theory is presented and in the end Ang takes the – now more knowledgeable – reader back to the introductory story to discuss it in a new light. The book in a way resembles Antti Ilmanen’s Expected Returns in its breadth and in that it gives the reader a good insight into the latest thinking in finance and portfolio theory.
The book largely substitutes equations for well thought out illustrations which will make the subject more comprehensible for a larger audience. It is quite an impressive trait of the author to be able to make discussions on, for example, the use of utility functions in mean-variance optimization models this understandable and interesting. It is also symptomatic that the author during his career has been able to switch back and forth between consulting for various asset managers and having a successful career in academia.
Thus, although it sometimes shines through that Ang isn’t an experienced asset manager, he still skillfully merges academia with practical advice. Where academia often make too many unrealistic assumptions and almost have a fetish for explaining market movements with information, practical asset management can on the other hand at times be dominated by a lazy continuation of old obsolete practices and self interests.
The last quarter of the book called Delegated Portfolio Management is essentially concentrated on agency problems and discusses mutual funds, hedge funds and private equity. Ang is extremely critical towards hedge funds and private equity specifically, showing that they generally underperform risk-adjusted benchmarks composed of the factors that build up their return streams. His advice is to “walk away”. Still, this categorical statement saves Ang from engaging in a discussion that is vitally important for most portfolios; how to best construct a portfolio that combines liquid and illiquid assets, where the latter renders most of the standard risk and reward measures useless. Also, one minor irritation – how hard can it be to spell Warren Buffett’s surname with two “t’s”? Often it is too hard for the author apparently!
Andrew Ang clearly champions liquid securities and factor investing as the latter gives a deeper analytical insight into what drives the risk/reward in the portfolio. All factor returns give compensation for enduring various types of bad times. Ang wisely advices the reader to figure out which of these “bad times” that he can endure better than others because this is where his portfolio will have a competitive edge.
Asset Management will be a cornerstone of the reading list for asset management classes for years to come. For anyone wanting to gain a thorough understanding of the current best practice in institutional multi-asset, portfolio management this is the place to start.
January 19, 2019
Solid examples and explanations of concepts. I skipped the math though.
February 23, 2015
Andrew Ang combines readability, sincerity, and rigor in this excellent book on factor investing. I found many of the themes familiar though refreshing all the same to see expanded and explained so clearly.
Focus on bad times, avoid mistakes such as neglecting survivorship bias, and don't assume asset classes such as hedge funds or private equity exist just because they are given names -- factors matter; focus on them as you focus on ingredients in food rather than labels on boxes. All in all, an excellent book worth reading.
Focus on bad times, avoid mistakes such as neglecting survivorship bias, and don't assume asset classes such as hedge funds or private equity exist just because they are given names -- factors matter; focus on them as you focus on ingredients in food rather than labels on boxes. All in all, an excellent book worth reading.
July 12, 2017
A very good, comprehensive reference text. I felt like I was getting a personal tour through the past couple decades of finance and asset management theory and I find the factor story to be very plausible. There is a quirky sense of humor throughout and a fresh, honest take on many issues in asset management such as whether managers (and we as an industry) really add value. He has plenty of opprobrium for CalPERS, hedge funds and private equity – all of which is grounded fairly well in facts rather than pure mud-slinging.
My main criticism might be that this really is more of a reference than a book to read cover-to-cover to learn about asset management. I "know about" factor investing now, but I'm dubious that I'd be able to actually implement a factor strategy or decomposition for my own investing. I think I'll come back to this book in the future more for its bibliography than for the content itself.
Chapter 1's overview of asset owners had some interesting snippets about sovereign wealth funds and pensions. Chapters 7 and 14 have the most detail on factors and thus were most interesting to me. Chapters 2-5 are a review of what you might have seen in a first year graduate course in economics or finance or maybe an advanced undergraduate course. Part III highlights some interesting agency issues for delegating your investing to others such as hedge funds or private equity.
My main criticism might be that this really is more of a reference than a book to read cover-to-cover to learn about asset management. I "know about" factor investing now, but I'm dubious that I'd be able to actually implement a factor strategy or decomposition for my own investing. I think I'll come back to this book in the future more for its bibliography than for the content itself.
Chapter 1's overview of asset owners had some interesting snippets about sovereign wealth funds and pensions. Chapters 7 and 14 have the most detail on factors and thus were most interesting to me. Chapters 2-5 are a review of what you might have seen in a first year graduate course in economics or finance or maybe an advanced undergraduate course. Part III highlights some interesting agency issues for delegating your investing to others such as hedge funds or private equity.
January 18, 2020
This book is a monster, but it has some good stuff in it. If you are looking for an easy to read introduction to investing, keep moving, because this is not it. However, if you are interesting in a very comprehensive romp through the weeds of a whole medley of topics, Ang's book might be for you. While much of it felt like a huge literature review with some of his own research thrown in there, it had some great and very interesting tidbits, anecdotes, and perspectives. All things considered, I think it was relatively readable for what it is.
July 18, 2022
Wow, what a behemoth of a book. With that said it was very readable for a financial tome - info was fantastic and very data centric. I would absolutely recommend, however, with the Texas-sized caveat that you'll require a MBA level understanding of financial arithmetic to grasp the depths of concepts communicated. If you don't, the read is still fantastic and concepts thoroughly explained. This will become a reference on my bookshelf.
February 19, 2021
Comprehensive study of investment factors (broad drivers of returns), risk management and diversification for investors. It is a call to change the traditional way of investment via diversification of assets into diversification of factors. As Ang states: "Asset management is not really about the management of assets. It is all about factors".
5 stars.
5 stars.
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January 1, 2021Wealth of knowledge and very readable.
Displaying 1 - 8 of 8 reviews