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Study Session 12: Equity Portfolio Management

Equity reading 22

section 4.2- securities lending income.. I do not understand this concept. When a security is lent, borrower pays a fee and ownership is retained. Short sellers borrow normally. Now, how does that work? If short seller needs to sell the security then he cannot give it back-right? .

Short sale on the box

In the short sale on the box strategy in equity monetization, do we borrow twice, once for short selling and another time to utilize the loan in other investments?

Buffering Vs Packeting

I do understand the two terminologies however I am confused during practicing to identify the difference.

In CAFI Mock 1, I do not get why did not we pick packeting as the right answer, is it because in case of packeting the transfer would be a portion hence it won’t be refelected as an increase in number of stocks?

Exhibit 2 S&P 500 Index Funds

 
Manager A
Manager B
Manager C

Benchmark
S&P 500
S&P 500
S&P 500

Eoc error?

Hey, just want to make sure I am not missing something but it looks like the solution to the last eoc question #15 in equity part 4 is an error. Seems like it answers a different question than was asked. Can someone confirm I am correct?

CFAI Equity item set

This is a question in CFAI Equity item sets. 

My question is regarding the correct answer, as Manager B supposed to have lower excess return due to high tracking error!

Why was it considered luck not a skill, is it because Manager B’s holding number indicates that he is an active manager. So in that case he should have low excess return and low tracking error?

 
Manager A
Manager B
Manager C

Benchmark
S&P 500
MSCI EAFE
Russell 3000

R24 P163: "Partial PVBP" Epiphany

This formula from Reading 24, page 163 (underneath Exhibit 33) seems to be giving everyone fits:

Predicted change = Portfolio par amount × Partial PVBP × (–Curve shift)

First off, the confusion surrounding this topic is (as are most things) directly related to poor wording on the part of the CFA curriculum writers.

Question on Active Share

Hi, in the curriculum, Book 4, Reading 29, Section 3.1.4 Active Share and Active Risk, there was a closing paragraph for Active Share (just before the reading starts for Active Risk):

“If two portfolios are managed against the same benchmark (and if they invest only in securities that are part of the benchmark), the portfolio with fewer securities will have a higher level of Active Share than the highly diversified portfolio. A portfolio manager has complete control over his Active Share because he determines the weights of the securities in his portfolio.”

Securities Lending

Hello,

When a passively managed fund lends a security, the borrower is liable to pay any dividends to the lender during this period. But what about any capital appreciation that takes place during this time? Because technically speaker, the lender does not have the shares as of now. 

Can anyone clarify? Thanks.