How are you guys approaching Portfolio management ?

Hi guys ,

I am stuck with the chapter on analysis of active PM , there are just so many formulas and the examples in the curriculum are so tricky . Currently stuck with fundamental law of active management . god dam ! can someone kindly explain that !?

Thanks ,

Freaking out ,


i am focusing on the fundamental law and its calc for the equation part

I still rely on my L1 knowledge (CML, CAL, SML, Sharpe, risk and return etc). I have no idea what is going on with the economics section and active return section. Hoping to address it this month.

I will quick read again entire topic in Schweser (i think is not longer than 70 pages) and expect to improve overall confidence. On L1, for me PM session was the easiest one. I cannot prove it on L2. It’s conceptual a quite harder. I recommend same, repeat once again whole session, then take EOCs and portal tests.

It has nothing to do with level 1 unfortunately… no sure it would help to rely on your L1 knowledge…

Try Schweser maybe. A few rounds of questions will clarify everything (and eventually tell you what formulas are important to remember - there are not that many actually).

Hope it helps!

I think they removed all the CML, CAL, SML stuff from 2016 L2.

After banging my head against it for a long time, I took apart the triangle. I don’t think it’s really a triangle – it’s two bro’s working side-by-side. You’ve got Transfer Coefficient as the “muscle”, and Information Coefficient as the brains. It’s like Arnold Schwertenegger and Stephen Hawking. Hawking is trying to predict theoretical stuff – super smart, but totally useless unless brought into reality. That’s when Arnold gets involved. He does the heavy lifting – he shifts the weights around so Hawking’s bets have real substance to them, and a real payoff if they’re correct.


Best analogy ever! I too have been getting my butt handed to me by this year’s PM. This image will help - thanks for sharing.

Risk and return dominates through topic and it’s really refreshment from valuation, a dominant thesis through entire Level 2 curriculum. Quants topic understanding helps to understand PM formulas and ratios.