LBS Active Invest – Blog post by Elisa Alabaster
At London Business School participants in the Strategic Investment Management course gather in groups of 5 or 6 in their breakout rooms. They discuss whether the information they have received from market analysts indicates that the recession is ending or is still likely to continue for awhile and what that would mean for bond prices. They argue over whether it is time to increase their investment in developing markets or to diversify more into commodities. They consider their risk appetite and the benchmark for their return objective.
These leaders and managers in financial services businesses are here to learn to think more broadly and with different tools about their investment strategies from professors such as Narayan Naik. As part of the course, they use the new LBS Active Invest simulation, developed jointly by London Business School and Ososim in 2017, to practice the concepts learned in class and apply them to an investment portfolio. The simulation uses 15 years of monthly real historical data from 27 different assets to challenge participants with actual economic scenarios and investment options. Each group plays the role of a manager for a UK pension fund whose portfolio they need to invest, keeping in mind their objectives and pay out requirements. They receive analyst information in the form of press releases and reports, can simulate any number of alternative allocations and see graphical analyses of possible return outcomes.
As the simulation end screen appears on one group’s computer, a banker from Brazil, fund manager from Singapore and analyst from London congratulate each other on their results. Their portfolio return has beaten the benchmark with an acceptable level of volatility. Now they must prepare their presentation to the board of the fictional fund, explaining their strategy and choices. They will face tough questions and see how they performed compared to the other groups, viewing graphs of their allocations and performance outcomes. No matter who has ‘won’, everyone has learned a lot through their hands-on engagement with portfolio investment in the simulation.