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LOMA 357 — Institutional Investing: Principles and Practices

Course Type: Course Portal, Designation
Topics: Financial Services & Financial Planning, Life Insurance
Designations: ACS, FFSI, FLMI
Language: English



Overview

LOMA 357 provides an understanding of the investment regulatory environment and investing for life insurance companies and similar institutions. This course takes investments out of the black box! You’ll learn about investment returns and risks, investment performance, and fund options for retirement products and other products with fund options.

Topics

  • Overview of Investments
  • Regulation and Standardization
  • Governance and Control
  • Risk and Return in Investments
  • Fund Options of Separate Accounts
  • Institutional Portfolio Management
  • Managing the General Account
  • Bonds and Bond-Related Investments
  • Investments Based in Real Estate
  • Stocks, Derivatives and Alternative Investments

Module 1: Institutional Investments Overview (Chapters 1–3)

Chapter 1: Overview of Investments

Investment Professionals in Financial Institutions

Organization of the Investment Function

Investment Management Data and Software

Units That Interact with the Investment Function

Treasury Operations and Cash Management

Product Development

Investment Marketing

Customer Service

Investment Types and Concepts

Equities

Bonds

Mortgages

Accounting Classifications for Assets

Capital Markets

An Overview of Capital Market Transactions

Capital Market Participants

Path of Funds in the Investment Process

General Account

Separate Accounts

Investment Goals and Investment Portfolios

Regulation Affecting the Investment Function

Corporate Alignment, Governance, and Control for Investments

Enterprise Risk Management

Asset-Liability Management

Asset Allocation

Portfolio Management

Chapter 2: Regulation and Standardization

Trends Affecting Regulation and Institutional Investors

Consolidation and Convergence

Globalization

Standardization

Elements of Governmental Regulatory Systems

Administrative Agencies in Financial Regulation

Laws and Regulations Affecting Institutional Investors

Objectives of Financial Services Regulation

Objectives of Market Conduct Regulation

Objectives of Solvency Regulation

Institutional Investors and Government Relations

Securities Regulation in the United States

Federal Securities Laws

Registration of Securities and Market Participants

Conduct Rules

Supervision and Record Keeping

Corporate Reporting and Control

Proxy Statement Filings

Forms of Investment Companies

State Securities Regulation

State Regulation of Investments of Insurance Companies

Securities Regulation in Canada

Financial System Supervision for the European Union

Nongovernmental Initiatives Affecting Institutional Investors

Organizations Based in Europe

Organizations with Roots in the United Nations

Chapter 3: Governance and Control

Corporate Governance and Alignment

Corporate Control Mechanisms

Budgets

Standing Committees of the Board

Corporate Policies

Other Elements of Internal Control

Control Mechanisms in the Investment Function

The Investment Portfolio

Performance Management

Data Governance and Data Security

Job Design and Safeguarding of Assets

Authorization Limits and Risk Limits

The Control Cycle in Portfolio Management

Abusive and Fraudulent Investment Practices

Insider Trading

Soft-Dollar Arrangements

Collusion

Theft and Fraud

Module 2: Portfolio Management Principles for Institutions (Chapters 4–7)

Chapter 4: Risk and Return in Investments

Investment Returns

Return Concepts

Total Return

Risk-Free Rate of Return

Historical Return

Future Returns

Inflation

Risk Premium

Real Rate of Return

Return Concepts Addressing the Investment Period

Volatility in Investments

Standard Deviation of Investment Returns

The Risk-Return Trade-Off

Risk in Investments

Systemic Risk

Specific Risks

Analysis of Specific Risks for Portfolio Management

Chapter 5: Fund Options of Separate Accounts

Customers and Clients of Separate Account Products

Fund Classifications

Asset Classes

Equity Funds

Fixed-Income Funds

Other Fund Classifications

Style Boxes

Market Indexes

Purposes of Fund Evaluation and Monitoring

Due Diligence

Competitive Intelligence

Analysis of Fund Options

Scorecards

Governing Policies

Portfolio Manager and Management Team

Administrative Systems and Control

External Analysts’ Opinions

Total Return Analysis of Funds

Performance Comparison to a Benchmark

Performance Comparison to a Peer Group

Applying Performance Comparisons

Analysis of Fund Risk

Standard Deviation of Returns

Beta

Risk-Return Analysis of Funds

Tracking Error

Information Ratio

Sharpe Ratio

Sortino Ratio

Analysis of Fund Expenses

Fund Selection, Evaluation, and Oversight

Style Drift

Replacing a Fund

Chapter 6: Institutional Portfolio Management

Portfolio Management Approaches

Planning for Portfolio Management

Selecting Asset Classes for the Portfolio

Peer Review Analysis

Correlation Analysis for Diversification

Mean Variance Optimization

Monte Carlo Modeling

Comparing Portfolio Analysis Methods

Setting the Strategic Asset Allocation

Performance Benchmarks

The Strategic Portfolio

Market Indexes

Adjustments to Market Index Data

Other Portfolio Benchmarks

Tactical Investment Strategies

Selecting and Purchasing Securities

Measuring, Reporting, and Evaluating Results

Chapter 7: Managing the General Account

General Account Objectives

Financial Characteristics of a General Account

Credit Risk for the General Account

Real-Estate Risk for the General Account

Interest-Rate Risk for Insurance Companies

Organizational Structures for Managing the General Account

The ALM Function

Allocating Assets and Investment Income to Liabilities

An Integrated Portfolio Benchmarking System

Actual Portfolios in the Integrated Model

Benchmarks in the Integrated Model

A Replicating Portfolio for Liabilities

Policy Limitations on Risk Taking

Risky Asset Policies

Crediting Rate Policies

Liquidity Policies

Duration Policies

Investment Strategies for Managing Debt-Based Portfolios

Duration Matching

Cash-Flow Matching and Portfolio Dedication

Interest-Rate Anticipation

Positioning a Portfolio to Match a Market Index

Portfolio Management for the General Account

Performance Attribution Factors for Debt Portfolios

ALM Process and Analysis

Internal ALM Reports

Investment Activity Report

Investment Portfolio Performance Review

Duration Gap Report

Risk Positioning Report

Hedge Effectiveness Report

Audit Steps for the ALM Function

Module 3: Investments for Institutional Investors (Chapters 8–10)

Chapter 8: Bonds and Bond-Related Investments

Terms of a Bond

Bonds by Issuer

Corporate Bonds

U.S. Government–Issued Debt Securities

Sovereign Debt Securities

Municipal Bonds

Variations on the Terms of a Bond

Bond Interest-Rate Features

Retirement or Repayment Features

Bond Covenants

Secured or Unsecured Bonds

Senior or Subordinated Bonds

Conversion Features

Bond Risks

Troubled Corporate Securities

Risk in Sovereign Debt Issues

Bond Ratings and Risk Capital Charges in the United States

Credit Ratings and Coupon Rates

Bond Markets

Primary Market for Bonds

Private Placement Bonds

Secondary Markets for Bonds

Global Bond Markets

Quoting Corporate Bond Prices

Institutional Bond Purchase Process

Bond Investment Strategies

Securitization and Structured Securities

Asset-Backed Securities

Collateralized Loan Obligations

Chapter 9: Investments Based in Real Estate

Residential, Commercial, and Agricultural Real Estate

Important Characteristics of Real Estate

Control Procedures for Income-Producing Properties

Real Estate Appraisals

Market Value Appraisal

Value-in-Use Appraisal

Investment Value Appraisal

Insurance Value Appraisal

Liquidation Value Appraisal

Types of Commercial Properties

Multifamily Properties

Office Buildings

Hotels and Resort Facilities

Light Industrial Properties

Retail Properties—Shopping Centers

Real Estate Technical Services

Real Estate Ownership

Joint Ventures

Limited Partnerships

Mortgages

Residential Mortgages

Commercial Mortgages

Mortgage Operations

Control Procedures for Mortgages

Mortgage Securities

Residential Mortgage-Backed Securities

Commercial Mortgage-Backed Securities

Real Estate Investment Trusts

Real Estate Market Indexes

Chapter 10: Stocks, Derivatives, and Alternative Investments

Stock as an Investment

Common Stock

Dividends

Analysis and Valuation of Common Stocks

Buying and Selling Stocks

Primary and Secondary Markets

Trading Orders

Stock Trading Costs

Common Stocks in the General Account

Derivative Securities

Options

Option Trades

Swaps

Futures

Restrictions on Derivatives in the General Account

Alternative Investments

Hedge Funds

Private Equity Funds

Glossary

Index

Course Format

Course Portals include the following elements:

  • PDFs of the assigned course materials that can be printed or read online
  • The same interactive Practice Questions and Sample Exams currently found in LOMA Test Preparation Guides (TPGs)
  • Recommended study plans to help learners set goals and manage their study schedule
  • A variety of additional media-oriented features designed to enhance the study and review process

Exam Format

The LOMA 357 exam has 60 questions and a time limit of 2 hours. It is available in I*STAR, Prometric and Paper exam formats.

Study Materials

Institutional Investing: Principles and Practices (LOMA, 2013)
ISBN 978-1-57974-420-5

Test Preparation Guide for LOMA 357 (LOMA, 2013)
ISBN 978-1-57974-419-9

Optional printed textbook (not included in bundled fee)

Institutional Investing: Principles and Practices (LOMA, 2013)
ISBN 978-1-57974-418-2
PBD Order # 357-10-13

Ordering printed study materials

Most Course Portals include online access to the course’s study materials and do not require purchase of additional printed study materials. However, you can order printed study materials for some designation courses (for an additional cost) via LOMA’s learning system, or by using the textbook order form and information below:

For the United States and Canada, you can order study materials for designation courses through PBD by using the form and information below:

2015
2016

PBD Worldwide
P.O. Box 930108
Atlanta, Georgia 31193-0108
Tel: 1-800-887-3723 or 770-280-4178
Fax: 770-280-4150
Email: LNH@pbd.com
Website: www.lomabookstore.com

Additional textbook order forms

Forms include applicable mailing and contact information

2015
2016

How to Enroll

Enrolling in Courses with Proctored Exams

LOMA requires proctored examinations for many of its professional designation courses. Study materials for these courses are delivered via online Course Portal, and enrollment in the Course Portal also includes enrollment in one of our proctored exam options for the course. Proctored exams are administered in LOMA member organizations and in independent testing locations around the globe. LOMA exams vary in length from two–three hours. Consult the Designation Study Materials Roadmap for specific information about the length of your exam.

Proctored examinations can take one of three forms:

Enrollment Step-by-Step

  1. Log in to your LOMA Learning account using your login ID and password.
  2. Browse the Learning Catalog for the course for which you would like to enroll.
  3. Select ADD TO CART next to the items for which you would like to enroll.
  4. Choose Exam Type — you must choose between Prometric, I*STAR, or Paper Exam enrollment.
    • Select Exam Site — your company’s primary exam site (if applicable) will appear on the screen. To see other available exam sites, click “Search.”
    • Note for Independent Students: Click “Include 3rd party exam sites” to find open exam sites offered by other companies. More information on Independent Student enrollment.
    When you have selected an exam site, click “Save.”
  5. Return to the catalog to continue searching for courses and add additional items to your shopping cart, or click the shopping cart to check out.
    • If you have not already done so, you will be prompted to log in to the LOMA learning system at this time. Once you have successfully logged in, click the shopping cart again to begin the checkout process.
     
  6. Review your shopping cart. Click CHECK OUT to proceed.
  7. If you are purchasing a physical product (example: a textbook), complete the SHIPPING information screen.
  8. Enter payment information
    • If your company has set up direct billing with LOMA, an account code will appear next to the “Bill My Company” field.
    • If you are using direct-to-company billing method, ensure that the radio button next to the “Bill My Company” field is selected and then click “Next” to continue.
    • If you are paying for your enrollment by credit card, enter all of the required fields for a credit card transaction. Once you have provided all of the required information, click “Next” to continue.
  9. Review your order, accept LOMA’s Terms and Conditions, and click BUY NOW. An enrollment confirmation will be emailed to you.

See the LOMA 357 video

LOMA 357