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AIM 12 Course review

Highlights key topics/issues.

AIM 08 Performance measurement

Performance evaluation is one of the most critical areas of applied investment management. Investors and institutions use it to assess how well funds perform relative to benchmarks and identify reasons for the under/overperformance. 

AIM 08.1 Tracking performance

Each ETP has a well-defined benchmark index. Tracking performance measures how well the ETP does relative to the benchmark by examining the difference between the returns of the fund and the index. 

AIM 08.2 Risk-adjusted performance -- Single factor

Oftentimes individuals/institutions are encouraged to deviate from the passive index stock portfolio investment strategy to capture alpha (i.e., abnormal returns). Doing so means that residual risk is assumed. A range of commonly-applied single-factor performance measures and their relation to the CAPM are considered.

AIM 08.3 Risk-adjusted performance -- Multi-factor

Oftentimes individuals/institutions are invest in funds that have more than one source of market risk. A convertible bond fund, for example, has market exposures to both stocks and bonds. Performance evaluation  measures must account for all of these exposures.

AIM 09 Thematic ETPs

Thematic ETFs provide exposures to narrowly-based benchmark indexes whose components are clustered with a specific purpose in mind  (e.g., industry or sector, social concern). Such products create  incremental risk exposure (i.e., residual risk) in the hope of higher return. In contrast, total market ETFs have no residual risk by definition.

AIM 09.1 Stocks

Theory suggests that investors should hold total stock market index products such as VTI or ITOT. Thematic ETFs are benchmarked to subsets of stocks based on a particular categorization or theme  (e.g., industry or sector, social concern). 

AIM 09.2 Bonds

Theory suggests that investors should hold total bond market index products such as BND or AGG. Thematic ETFs are benchmarked to subsets of bonds based on a particular categorization or theme  (e.g., industry or sector, social concern). 

AIM 10 Bitcoin products

AIM 11 Volatility products 

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AIM 12 Course peview

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