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Advanced Portfolio Management: A Quant's Guide for Fundamental Investors
You have great investment ideas. If you turn them into highly profitable portfolios, this book is for you.
Advanced Portfolio A Quant’s Guide for Fundamental Investors is for fundamental equity analysts and portfolio managers, present, and future. Whatever stage you are at in your career, you have valuable investment ideas but always need knowledge to turn them into money. This book will introduce you to a framework for portfolio construction and risk management that is grounded in sound theory and tested by successful fundamental portfolio managers. The emphasis is on theory relevant to fundamental portfolio managers that works in practice, enabling you to convert ideas into a strategy portfolio that is both profitable and resilient. Intuition always comes first, and this book helps to lay out simple but effective "rules of thumb" that require little effort to implement and understand. At the same time, the book shows how to implement sophisticated techniques in order to meet the challenges a successful investor faces as his or her strategy grows in size and complexity. Advanced Portfolio Management also contains more advanced material and a quantitative appendix, which benefit quantitative researchers who are members of fundamental teams.
You will learn how
Separate stock-specific return drivers from the investment environment’s return drivers Understand current investment themes Size your cash positions based on Your investment ideas Understand your performance Measure and decompose risk Hedge the risk you don’t want Use diversification to your advantage Manage losses and control tail risk Set your leverage Author Giuseppe A. Paleologo has consulted, collaborated, taught, and drank strong wine with some of the best stock-pickers in the world; he has traded tens of billions of dollars hedging and optimizing their books and has helped them navigate through big drawdowns and even bigger recoveries. Whether or not you have access to risk models or advanced mathematical background, you will benefit from the techniques and the insights contained in the book—and won't find them covered anywhere else.
Advanced Portfolio A Quant’s Guide for Fundamental Investors is for fundamental equity analysts and portfolio managers, present, and future. Whatever stage you are at in your career, you have valuable investment ideas but always need knowledge to turn them into money. This book will introduce you to a framework for portfolio construction and risk management that is grounded in sound theory and tested by successful fundamental portfolio managers. The emphasis is on theory relevant to fundamental portfolio managers that works in practice, enabling you to convert ideas into a strategy portfolio that is both profitable and resilient. Intuition always comes first, and this book helps to lay out simple but effective "rules of thumb" that require little effort to implement and understand. At the same time, the book shows how to implement sophisticated techniques in order to meet the challenges a successful investor faces as his or her strategy grows in size and complexity. Advanced Portfolio Management also contains more advanced material and a quantitative appendix, which benefit quantitative researchers who are members of fundamental teams.
You will learn how
Separate stock-specific return drivers from the investment environment’s return drivers Understand current investment themes Size your cash positions based on Your investment ideas Understand your performance Measure and decompose risk Hedge the risk you don’t want Use diversification to your advantage Manage losses and control tail risk Set your leverage Author Giuseppe A. Paleologo has consulted, collaborated, taught, and drank strong wine with some of the best stock-pickers in the world; he has traded tens of billions of dollars hedging and optimizing their books and has helped them navigate through big drawdowns and even bigger recoveries. Whether or not you have access to risk models or advanced mathematical background, you will benefit from the techniques and the insights contained in the book—and won't find them covered anywhere else.
201 pages, Kindle Edition
Published August 3, 2021
167 people are currently reading
967 people want to read
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Displaying 1 - 20 of 20 reviews
December 3, 2023
Many finance textbooks are 500-page tomes full of arcane mathematics that has very little to do with the real world. Not so for Advanced Portfolio Management. This is a short book clearly focussed on the practitioner, eschewing many of the mathematically elegant but practically dubious techniques like fancy portfolio optimisation in favour of battle-tested heuristics based on the author's extensive experience. For example, sizing bets in proportion to their alphas alone is often better than MVO due to how MVO accentuates estimation error.
The book does a better job explaining factor risk than some of the classic texts (like G&K), and also provides a nice overview of some of the main factors and proposed explanations. For example, the vol anomaly (high vol stocks underperform) could be explained by the managers' call options driving demand for volatile securities.
I like the experimental approach: e.g the author does an intuitive simulation using ex-post information to demonstrate that MVO is hurt by return misestimation, not covariance misestimation. Also, he shows how simple experiments can help with PnL decomposition. To find out how much PnL is attributable to sizing skill, you can track how the PM's portfolio performed compared to a hypothetical equal-weighted version.
Unlike other texts, the author devotes a lot of energy to discussing how you should set the value of the constraints (rather than treating them as exogenous inputs) – e.g what amount of factor vol is acceptable; what leverage should you choose.
Portfolio management books are normally lines and lines of linear algebra. While there's a time and place for this, the direct emphasis on practicality was very refreshing. Each chapter starts with the author's estimate of how often you would need to refer to the content and there are lots of neat heuristics. For example: how to estimate IR from hit rate, how to choose the single-stock weight limit, the standard error of the Sharpe ratio (a classic result from Andrew Lo).
This is a book that any risk-taker should have on their desk!
The book does a better job explaining factor risk than some of the classic texts (like G&K), and also provides a nice overview of some of the main factors and proposed explanations. For example, the vol anomaly (high vol stocks underperform) could be explained by the managers' call options driving demand for volatile securities.
I like the experimental approach: e.g the author does an intuitive simulation using ex-post information to demonstrate that MVO is hurt by return misestimation, not covariance misestimation. Also, he shows how simple experiments can help with PnL decomposition. To find out how much PnL is attributable to sizing skill, you can track how the PM's portfolio performed compared to a hypothetical equal-weighted version.
Unlike other texts, the author devotes a lot of energy to discussing how you should set the value of the constraints (rather than treating them as exogenous inputs) – e.g what amount of factor vol is acceptable; what leverage should you choose.
Portfolio management books are normally lines and lines of linear algebra. While there's a time and place for this, the direct emphasis on practicality was very refreshing. Each chapter starts with the author's estimate of how often you would need to refer to the content and there are lots of neat heuristics. For example: how to estimate IR from hit rate, how to choose the single-stock weight limit, the standard error of the Sharpe ratio (a classic result from Andrew Lo).
This is a book that any risk-taker should have on their desk!
"Chi non risica non rosica" - those who don't take risk don't eat
December 26, 2022
Interesting book, with topics that aren't usually covered on books on the same theme.
Author says we need to check if our performance isn't just the benchmark one, by separating idiosyncratic returns from factor returns.
There are a lot of topics which although very theoretical, aren't presented on a systematic way.
Appendix has many formula deductions, and the book could present more real-life examples. The author doesn't quite show the point he is going to make in the book, but still, a different book which is worth reading, for portfolio managers, at least.
Estimated reading time: 4h30m
Author says we need to check if our performance isn't just the benchmark one, by separating idiosyncratic returns from factor returns.
There are a lot of topics which although very theoretical, aren't presented on a systematic way.
Appendix has many formula deductions, and the book could present more real-life examples. The author doesn't quite show the point he is going to make in the book, but still, a different book which is worth reading, for portfolio managers, at least.
Estimated reading time: 4h30m
December 30, 2024
A concise yet informative text on equity factor investing and risk management. The author writes as though he is talking to you from right across a table in person which I really liked. I wish that there was some information in the book pertaining to the data source(s), software(s), and or programming language(s) used to produce the backtest PnL visuals (or maybe a github link) so that readers could reproduce the results and run their own backtests. But all in all I would recommend this to anyone interested equity investing. The industry experience of the author shows in his writing, and I appreciated his bits of humor.
May 2, 2024
This stuff is way outside my wheelhouse but the book is a good primer on what these folks are up to, and it starts to fill in a knowledge gap of mine. Gets complex fast but a lot of it bottoms out to intuitive principles.
September 5, 2025
Very useful and practical especially for pod shop PMs, with some entertaining asides.
I would have liked code samples and excel spreadsheets for the diagrams and charts, but every academic leaning guy always thinks it’s better to just show a bunch of math and text.
I would have liked code samples and excel spreadsheets for the diagrams and charts, but every academic leaning guy always thinks it’s better to just show a bunch of math and text.
November 11, 2021
Found several minor mistakes across the book. It is a pretty enjoyable and informative book throughout.
November 5, 2022
Lots of learnings in just 200 pages
March 22, 2024
Could be useful one day. well written. large fundamental l/s funds might benefit from reading
May 28, 2024
An excellent book. Highly engaging and extremely important for anyone looking to use and understand factor models. Definitely a book I will have on my desk at work.
June 23, 2024
A very well written book and a must read for every trader and investor.
June 24, 2024
Easy read before going to bed.
September 22, 2024
Good explanation on running factor neutral portfolios. Good suggestions on systematic ways to size/exit positions. Probably need to reread sitting next to an excel spreadsheet
February 21, 2025
Gappy is a legend. Mathematical finance used by hedge funds. Hard to love, but insightful.
March 14, 2025
gappy!
March 26, 2025
This book is a great introduction for practitioners looking to apply a systematic framework for managing portfolios. Highly recommend
August 24, 2025
Uses simulations for demonstrations. Would be curious the results on real world PM data and more walkthroughs
Interesting look into how pods work and think
Interesting look into how pods work and think
August 22, 2024
Gappy's perspective has completely redefined my perspective to market moves. I'm am incredibly grateful I found this book when I did as I think it will serve as a launching pad for future work and inspired many questions and many ideas.
The book itself is marvelously written. He is incredibly cheeky and makes these somewhat esoteric concepts approachable. While some intermediate background in statistics and financial mathematics significantly improves the reading experience, it is by no means required.
I plan on returning to this book again when I am responsible for portfolio management but until then it will always be in the back of my head throughout my daily work and I look forward to burdening my friends with my discussions of factor risk and return during my social outings.
The book itself is marvelously written. He is incredibly cheeky and makes these somewhat esoteric concepts approachable. While some intermediate background in statistics and financial mathematics significantly improves the reading experience, it is by no means required.
I plan on returning to this book again when I am responsible for portfolio management but until then it will always be in the back of my head throughout my daily work and I look forward to burdening my friends with my discussions of factor risk and return during my social outings.
April 10, 2024
Worth re-reading for practitioners. Not designed for students who are learning theories.
January 1, 2023
This is a very worthwhile book for fundamental PMs, as it says on the tin. It covers several concepts around factor attribution that I hadn’t seen treated so decisively (eg just neutralize factor risk). Why not 5 stars? The writing is at times frustratingly unclear. I don’t mean there’s math although that too, but the explanations are sometimes just poor and confusing. He’s otherwise a good narrator but there are blurry sections.
January 27, 2025
- awesome
- need to reread chapter 6
- need to sit down and understand the formulas + fully appreciate the custom factor procedures as outlined in chapter 8
- need to reread chapter 6
- need to sit down and understand the formulas + fully appreciate the custom factor procedures as outlined in chapter 8
Displaying 1 - 20 of 20 reviews