Course Methodology

This course utilizes presentations with abundant opportunities for collective exercises and discussions of the topics raised. Modelling tools in Excel will also be offered to participants and several case studies and research material will be provided.

Course Objectives

By the end of the course, participants will be able to:

• Demonstrate a deep understanding of equities as an asset class
• Determine the “fair value” of equities through analyzing the different models that have been used for deriving corporate valuations
• Apply analytical skills to the value of fundamental analysis of corporate performance and equity valuation using financial statements
• Recognize the key principles and lessons from different styles of asset allocation and portfolio management, including innovative approaches following the 2007/8 financial crisis
• Demonstrate competence with equity-based derivatives and know how to benefit from their use as hedging tools

Target Audience

The course is ideal for those who are engaged in both the buy side and sell side of asset management and trading, and who wish to expand and refine their knowledge of global equities, the markets/platforms upon which they are traded and techniques for portfolio construction and management.  It is also highly useful for fund managers whose mandate entails a significant risk exposure to emerging market equities.

Target Competencies

• Analytical Skills
• Portfolio Management
• Asset Allocation
• Portfolio Construction

Overview of Equities as an Asset Class

• How does equity ownership compare to other financial claims?
• Position of equity vis à vis other elements in corporate capital structure
• Review of equity capital from an accounting perspective
• Characteristics of ordinary, bearer and registered shares
• Cumulative, participating, and convertible preference shares
• Ranking for dividends and liquidation
• Overview of the primary issuance of Equity Securities
• Equity Markets and Trade Execution
• Order driven/quote driven platforms
• Warrants and Covered warrants
• Contracts for Difference (CFD’s)
• Overview of equity based collective investment vehicles

Primary Issuance, Clearing, Custody and Trading Of Equity Securities

• Listing securities – the regulatory framework, investor disclosures
• Structure and stages of an initial public offering (IPO)
• Alternative routes for going public - direct listings, SPAC's
• Role of intermediaries, book building, pricing
• Benefits for the issuer and investors
• Underwritten versus best efforts
• Oversubscribed issues and greenshoe options
• Role of exchanges in providing secondary market facilities, platforms
• Alternative Trading Venues
• Multilateral Trading Facilities and dark pools
• The meaning of ‘books closed’, ‘ex-div’ and ‘cum div’, cum, special ex, special cum, and ex rights
• Explanation of the nature and objectives of High Frequency Trading (HFT)
• Principles of Delivery versus Payment (DVP) and Free Delivery
• International Central Securities Depositories (ICSD)
• Examination of the role of Custodians/Nominees
• Purpose, requirements and implications of securities lending SBLI’s
• Short selling, collateral management, re-hypothecation etc.

Global Equities Markets/Indices

• Principal indices/exchanges
• Emerging and frontier markets
• Classification systems of global equity markets – MSCI, FTSE
• Historical survey of performance of main global equity indices
• Historical P/E ratios
• Regulatory and supervisory environment
• Shareholder protections etc.
• Structure and size of markets, volumes
• Liquidity and transparency
• Trading characteristics e.g. prevalence of off exchange activities

Financial Statement Analysis

• Purpose, structure and use of balance sheets, income statements and cash flow statements
• Key classes of financial ratios:
• Profitability, Liquidity, Asset turnover, Gearing
• Key Investor ratios
• Earnings Per Share (EPS), P/E Ratios (historic and prospective), Price/Earnings-to-Growth (PEG) ratio
• Dividend yield, Dividend/interest cover
• Advantages and challenges of performing financial analysis
• Comparing companies across and within sectors
• Accounting for Corporate Actions
• Stock and cash dividends
• Rights issues, open offers, offers for subscription and for sale
• Calculation of theoretical effect on the issuer’s share price of bonus/scrip, consolidation, rights issues

Corporate Valuation Methods

• Fundamental equity valuation – Discounted Cash Flow (DCF) techniques
• Models based on calculating the Present Value of future dividend flows
• Simple Model
• Multi-stage model
• Comparing valuations across different sectors
• What discount rate should be used in DCF models?
• Determining the Weighted Average Cost of Capital (WACC)
• What multiples should be used for individual companies, for overall market?
• How to value high growth enterprises with no dividends
• Sustainability of profits and commercial disruptions
• Relationship of corporate valuations to underlying interest rate environment
• Return on Equity (ROE) measurements – including risk-adjusted return on capital (RAROC)
• Risk Adjusted valuations – incorporating beta into valuation methods
• Importance of changes in the regulatory environment on valuation forecasting

Equity Allocation and Performance Attribution

• Criteria for determining the relative allocations for equities, fixed income, alternative assets etc.
• Contribution of each to overall portfolio return