FINE 646 - Investments and Portfolio Management (IPM)
Winter 2022 - Course Outline
Step 1: Read this document very carefully. Think of it as a contract.
Step 2: Check the schedule online and your inbox for announcements and updates
Table of Contents:
I. Contact Information
II. Course Description
III. Course Website & Communications
IV. Required Material
V. Assignments & Grades
VI. Honour Code & Extraordinary Circumstances
I. Contact Information [back]
Instructor
Prof. Sebastien Betermier
sebastien.betermier@mcgill.ca
Teaching Assistant
Lucie Lu
yiliu.lu@mail.mcgill.ca
Sessions will take place on Thursdays from 6:05pm to 8:55pm in Armstrong 260.
Due to the pandemic, some sessions will need to take place virtually on zoom, including the first three sessions.
The zoom link is available on MyCourses and will remain the same throughout the term. Sessions will be
recorded and posted on MyCourses afterwards. I care to maintain a high level of interaction throughout the
course, so I ask that you please keep your video turned on at all times, unless you are experiencing IT issues (in
which case please let me know). I will open the zoom session at 5:45pm for those of you who want to chat with
peers. I will be absent from these pre-class sessions and they will not be recorded.
If you would like to meet, please email me to schedule a zoom chat. When you do so, please propose a couple of
time slots that work for you.
We have a fantastic T.A for this course: Lucie Lu. Lucie is currently pursuing a PhD in Finance and specializes in
the field of international investments. She will assist me during zoom lectures by managing the chat room and will
respond to questions via email.
II. Course Description [back]
The objective of FINE646 is to give you the tools to become a successful investment manager. It builds on the
knowledge that you’ve learned in the core Finance module. After FINE646 you will have enough knowledge of the
fundamental concepts to build and manage your portfolio, plan your financial future, evaluate the performance of
investment funds, and tackle some of the more advanced and specific courses such as derivatives and fixed
income. We will see that many investment concepts will carry over to other fields of finance.
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Becoming a good investment manager involves a solid understanding of investors’ objectives, the mechanics of
financial markets, and the set of available investment opportunities. It also requires the ability to make decisions
under uncertainty and to think creatively and independently. We’ll address these points via a mix of theory and
real-world applications.
The course has two parts. The first part is what I call `the theory’. We will set-up a general framework for
investment management. The second part is what I call the ‘microscope’. We will study in depth the
characteristics of stocks, bonds, and derivatives in the context of the framework.
My objective isn't to teach you a set of formulas. It is to teach you a method for thinking about IPM. We'll take an
analytical approach to model the financial world by breaking it down into its key components and studying each
effect in a simpler setting. This means that the formulas we'll derive often depend on strong assumptions. We'll
spend a considerable amount of time understanding their context, their limitations, and their real-world value from
the perspective of a portfolio manager who must make decisions on a daily basis.
Expect this course to be hard, intense, and time consuming. It is critical that you devote enough time to
understand the material and practice on a regular basis. It is the only way for you to monitor your progress,
reduce the risk of getting lost, and get something durable out of this course. The concepts we will cover are
fundamental for modern investment management. And IPM is a field where the stakes are high and you really
(really) do not want to end up on the losing side of a deal.
III. Course Website & Communications [back]
You will find all the course material on MyCourses. The material includes the course outline, the schedule which
will be continuously updated, lecture slides, additional excel spreadsheets and handouts, weekly quizzes and
solutions, additional readings, and grades. I will post the lecture slides in the evening prior to the lecture day.
For specific announcements, check your email. Expect lots of emails throughout the semester. I strongly
recommend that you create a specific folder for this course so that you don't lose track of my emails. You are
responsible for making sure that your mailbox is never full or doesn't treat my emails as spam.
If you have specific questions regarding course content or genuine administrative uncertainty please contact me
via email and I will answer you within one business day. I will be happy to help. But please check out the course
outline first -- most answers are already there.
IV. Recommended Material [back]
Textbook: Bodie Kane Marcus Switzer Stapleton Boyko Panasian -- Investments – 9th CA Edition -- McGraw Hill
Ryerson
Available at the bookstore. You can also get temporary access to the digital version (www.vitalsource.com) for a
lower fee. Copies of the full textbook are available on reserve at the library. If you prefer to buy a cheaper, older
edition that's fine, but keep in mind that I will only post solutions to the end-of-chapter problems from the latest
editions (8th and 9th).
There is a lot of information in the text, some of which isn't relevant to the course. You should view this textbook
as a dictionary and use it whenever you want to read more about a particular concept. Do not spend all your time
reading the book from A to Z. You will not be tested on material that we haven't covered in class / assignments.
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MS Excel: We will use Excel extensively for applications of the course material. Excel is fundamental for IPM.
V. Assignments & Grades [back]
Final Grade
Your final grade is a risky outcome of how much time and effort you invest in this course. The grading scheme is
designed to eliminate some of this risk via diversification of assignments and also to give you enough time and
options to best prepare for the non-diversifiable part. Your final grade consists of:
5% Problem of the week
15% Participation
40% Group work
40% Exam
40% of the final grade is based on group work. As soon as the Add/Drop deadline is over you will be assigned
groups of 4 or 5 students. Each group will include members who have had previous experience in finance, are
comfortable with math, and are good at writing and delivering presentations.
Problem of the week
Each week, I will give you a problem due the following Wednesday at 11:59PM EST. It will be available on
MyCourses in the quizzes tab. The problem will come from a past exam and give you a good sense of what to
expect on the real exam. It will be graded on a pass/fail basis and you will get full points if you give the problem a
genuine attempt. That is, you will get full points irrespective of your answer, as long as you give it a real try. The
objective is to incite you to study the material on a weekly basis and prepare you for the exam. In total, there will
be 13 problems-of-the-week and I will only count the top ten marks.
Participation
Class Participation (7.5%) I expect each of you to be fully involved in the course and contribute to the discussions.
This goes beyond asking questions during class – I look at your overall engagement in the course, including
whether you act with professionalism and integrity. Note that I care more about the quality of the questions you
ask than the quantity.
Group Participation (7.5%) Group work makes up a large share of your grade, so it is critical that everyone fully
contributes to his or her group. After the last assignment, you will be asked to submit peer evaluations for each
group.
Group Work
There will be 3 case studies during the semester. You will have plenty of time to complete each assignment so I
WILL NOT ACCEPT LATE ASSIGNMENTS under any circumstances.
Case 1 (10%) The first case study is “Thomson Asset Management” You will be asked to prepare an active
portfolio strategy for Thomson Asset Management and prepare a 3-page report.
Case 2 (15%) The second case study is “Dimensional Fund Advisors (DFA)’s Entry Into the Retirement Market”
You will be asked to design a portfolio of Exchange Traded Funds that will compete with existing robo-advisors,
and then present your business case in class.
Case 3 (15%) The third case study, “BNSF: UK Launches New Sovereign Wealth Fund to Promote Economic
Equality and Independence,” was written by the students of my course on Managing Pension and Retirement
Funds in Winter 2020. This was the case given at the McGill International Portfolio Challenge (MIPC) in Fall 2020.
MIPC is the world’s premier buy-side asset management competition. You will be asked to integrate social impact
into the portfolio of a large institutional fund and present your findings in class.
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If one member of the group is free-riding or not cooperating, then the other members should build a case and inform
me ASAP (i.e., they should not wait until the peer evaluations). Make sure to keep a written trail of all
communications and record any evidence of free-riding or non-cooperation. If I deem the evidence to be sufficiently
strong then I reserve the right to reduce the student’s grade on the project by up to 100%. These decisions will be
dealt on a case-by-case basis.
Exam
The final exam will be cumulative and last three hours. I will provide on MyCourses clear guidelines about the
material you are expected to know for the exam. The logistics of the exam will be determined later as a function of
the state of the pandemic.
I will post on MyCourses a sample exam so that you know what to expect. Some of the problems may be more
challenging than the end-of-chapter problems from the book. Keep in mind, however, that the level of difficulty of
the exams does not affect your grade. I will ultimately impose a curve so that the average grade on each exam
will be roughly similar. What matters is your performance relative to that of your peers.
Regrades
I have a strict policy for re-grades. Exam re-grades must be requested within two weeks of the day the copies are
made available to you. You must submit the exam along with a written and precise explanation of why you think
the exam was incorrectly graded. The entire exam will be re-graded and the final mark may go up or down.
VI. Honour code & Extraordinary Circumstances [back]
McGill University values academic integrity. Therefore, all students must understand the meaning and
consequences of cheating, plagiarism and other academic offences under the Code of Student Conduct and
Disciplinary Procedures (see www.mcgill.ca/integrity for more information)
My personal view:
I view cheating as theft. Because grades are determined competitively you are literally stealing somebody else's
grade. So it is disrespectful and unfair to all the students who actually work hard in this course. I have zero
tolerance for it. By cheating I do not mean just copying someone else's exam. It also includes plagiarism on an
assignment, making up fake information on a project, coming up with a fake excuse to avoid an assignment,
etc.... Since it has too often been a serious issue in the past, I will not consider any medical conditions or
emergency situations without formal documentation.
Note about copyrighted material:
Some students anonymously upload copyrighted course material on websites such as CourseHero. These
students are not only committing something illegal and disrespectful to the authors but they are also sabotaging
McGill’s educational value. Once this material is posted online everybody can use it.
I realize that sometimes it is tempting to use these websites because some Professors keep using the same
exams over and over. This is not the case here. I will post on MyCourses a sample exam and lots of additional
material for you to study and practice.
Please respect the copyrights. I have spent hundreds of hours preparing material for this course. It is not meant to
be distributed outside of class.
Extraordinary Circumstances:
Please note that, in the event of extraordinary circumstances beyond the University’s control, the content and/or
evaluation scheme in this course is subject to change.
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