[3] Jack Treynor (1961,[4] 1962[5]), William F. Sharpe (1964[6]), John Lintner (1965[7]) and Jan Mossin (1966[8]) later build the Capital Asset Pricing Model (CAPM) on the theory of Markowitz.
The formula calculates the potential return percentage of an investment vehicle based on its vested risk appetite.
This return can be monitored by investors through weekly, monthly, quarterly, or yearly performance reports that are shared by the PM.
The manager may set up a performance benchmark or track their investment strategy alongside an index.
Portfolio management is about strengths, weaknesses, opportunities, and threats in the choice of debt vs. equity, domestic vs. international, growth vs. safety, and other trade-offs encountered in the attempt to maximize return at a given appetite for risk.
[11][12] In the case of mutual and exchange-traded funds (ETFs), there are two forms of portfolio management: passive and active.
A portfolio manager risks losing his past compensation if he engages in insider trading; in fact, lawyers at the law firm Davis & Gilbert wrote in an article in a 2014 article in Financial Fraud Law Report that: "Based upon courts current application of New York's faithless servant doctrine, it is virtually certain that if ... hedge fund ... managers engage in wrongdoing ... those .. managers will be forced to disgorge all compensation received during the period the wrongdoing occurred".
2013), applying New York's faithless servant doctrine, the court held that a hedge fund's PM engaging in insider trading in violation of his company's code of conduct, which also required him to report his misconduct, must repay his employer the full $31 million his employer paid him as compensation during his period of faithlessness.
"[16] The judge also wrote: ""In addition to exposing Morgan Stanley to government investigations and direct financial losses, Skowron's behavior damaged the firm's reputation, a valuable corporate asset.