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Led by Benjamin Graham Simulacrum
Eight tutorials on the theory and practice of investment and portfolio construction, drawing on the four foundational voices of twentieth-century investment thinking. Benjamin Graham Simulacrum leads — the father of value investing, on intrinsic value and security analysis. He is joined by Harry Markowitz Simulacrum (Modern Portfolio Theory and the efficient frontier), William Sharpe Simulacrum (CAPM and the Sharpe ratio), and John Bogle Simulacrum (the empirical case for index investing and the cost discipline). Stage 3 of the Accounting & Finance (UK) programme.
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Led by Benjamin Graham Simulacrum
The question
An introduction to value investing as Benjamin Graham developed it. Graham Simulacrum covers the three foundational propositions — intrinsic value, margin of safety, and the Mr Market metaphor — and the two investor categories Graham identified (the defensive investor working from quantitative criteria; the enterprising investor pursuing more ambitious strategies). The module covers Graham's defensive-investor screen (size, financial condition, earnings stability, dividend record, moderate multiples), the Graham Number as a back-of-envelope intrinsic-value indicator, and the integration with modern UK markets.
Outcome
The student can articulate the three Graham principles (intrinsic value, margin of safety, Mr Market); can apply the defensive-investor quantitative criteria to a list of UK-listed equities; can calculate the Graham Number for a hypothetical security; and can distinguish investment from speculation in Graham's terms. (Value investing foundations)
Practice scenarios
You take Graham's defensive-investor criteria and apply them to a 5-year extract of FTSE 100 fundamentals — size, financial condition, earnings stability, dividend record, moderate multiples — to produce a shortlist of names passing all five tests. The work tests whether you can apply a disciplined quantitative screen and resist a growth-portfolio-manager's challenge to *why have you excluded all the technology names*.
Your goals
Led by Benjamin Graham Simulacrum
The question
Security analysis at depth — moving from Graham's screen to a justified estimate of intrinsic value for a specific UK-listed equity. The module covers discounted-cash-flow modelling end-to-end (free-cashflow definition, explicit forecast period, terminal value, WACC), comparable-company analysis with appropriate peer selection, asset-based valuation including Graham's net-net concept, and the forensic reading of accounts for quality-of-earnings concerns. The Beneish M-Score, Altman Z-Score, and Piotroski F-Score are introduced as quantitative screens.
Outcome
The student can build a 5-year DCF for a UK-listed company including terminal value and WACC; can perform a comparable-company analysis with a defensible peer group; can read a set of accounts forensically for quality-of-earnings concerns; and can produce a one-page investment thesis with a defensible target price. (Security analysis at depth)
Practice scenarios
You produce an equity research note on a fictional UK mid-cap industrial firm, Stannary Engineering plc, with declining margins and trading at a P/E of 9× against a sector median of 12×. The work tests whether you can build a 5-year DCF, cross-check with comparable multiples, conduct forensic reading of the accounts for quality-of-earnings concerns, and frame a defensible buy/hold/sell recommendation under sceptical-portfolio-committee challenge.
Your goals
Led by Harry Markowitz Simulacrum, with Benjamin Graham Simulacrum on the limits
The question
Modern Portfolio Theory as Markowitz developed it. Markowitz Simulacrum covers the mathematical structure of portfolio risk and return, the role of covariance in driving portfolio variance, the efficient frontier as the locus of optimal portfolios, the minimum-variance portfolio, the tangency portfolio when a risk-free asset is available, and Tobin's separation theorem. The practical limits of mean-variance optimisation (the Markowitz curse, instability of inputs, the Black-Litterman and resampled-frontier responses) close the module.
Outcome
The student can calculate portfolio expected return and variance from constituent estimates and a correlation matrix; can identify the efficient frontier conceptually for a small set of candidate securities; and can articulate Tobin's separation theorem and its practical implication for asset allocation. (Modern Portfolio Theory)
Practice scenarios
You construct an efficient frontier for a three-asset portfolio (UK equity, gilts, corporate bonds) given expected returns, standard deviations, and correlations, and identify the minimum-variance portfolio plus the tangency portfolio at a 3.5% risk-free rate. The work tests whether you can apply mean-variance optimisation in practice and respond to a CIO's reasonable scepticism about input-estimate sensitivity.
Your goals
Led by William Sharpe Simulacrum
The question
The Capital Asset Pricing Model and the Sharpe ratio. Sharpe Simulacrum covers the CAPM equation in detail, the calculation and interpretation of beta, the security market line, the difference between systematic and idiosyncratic risk, and the practical use of CAPM for cost-of-equity estimation in DCF and for portfolio performance attribution. The Sharpe ratio, Treynor ratio, Jensen's alpha, and information ratio are introduced; the Fama-French and Carhart factor extensions and their empirical motivation close the module.
Outcome
The student can calculate beta from a return regression; can apply CAPM to estimate cost of equity for a UK-listed firm; can calculate Sharpe ratio for a portfolio against a benchmark; and can articulate the Fama-French factor extension and its empirical motivation. (CAPM and Sharpe ratio)
Practice scenarios
You estimate cost of equity for Halberd plc using CAPM with five years of regression data, then evaluate the performance of a fund holding Halberd against the FTSE All-Share including Sharpe ratio comparison and Jensen's alpha calculation. The work tests whether you can link CAPM theory to the practical attribution work that drives institutional fund-allocation decisions.
Your goals
Led by William Sharpe Simulacrum and John Bogle Simulacrum jointly, with Benjamin Graham Simulacrum on the dissent
The question
The Efficient Markets Hypothesis and the active-vs-passive debate. Sharpe Simulacrum and Bogle Simulacrum cover the three forms of market efficiency (weak, semi-strong, strong) and the empirical evidence for each, the major documented anomalies (value, small-cap, momentum, low-volatility, post-earnings-announcement drift), the Grossman-Stiglitz paradox of perfect efficiency, and Bogle's cost-arithmetic case for passive investing. The SPIVA evidence and the practical implications for institutional and retail investors close the module.
Outcome
The student can articulate the three forms of EMH and the empirical evidence for each; can identify the major documented anomalies and their persistence; and can structure a coherent position in the active-vs-passive debate appropriate to a specific investment context. (Efficient markets hypothesis)
Practice scenarios
You brief the trustee board of a £2bn UK DB pension fund considering a shift from active to passive UK equity, given a 10-year underperformance of 1.2% per year against the index. The work tests whether you can structure the SPIVA evidence into a defensible recommendation and navigate the resistance of a board chair who has championed active management for 15 years.
Your goals
Led by John Bogle Simulacrum
The question
John Bogle's case for index investing — the empirical, mathematical, and structural argument that has reshaped global investment practice. Bogle Simulacrum covers the cost-arithmetic of fee differentials over multi-decade horizons (a 1.5% fee differential compounds to ~30% of terminal wealth over 30 years), survivorship bias, the behaviour gap between investor and fund returns, Vanguard's mutual-ownership innovation, and the design of a core-and-satellite portfolio that operationalises the index investing case while leaving room for active management in defensible niches.
Outcome
The student can perform the cost-arithmetic of fee differentials over multi-decade horizons; can identify the Bogle structural arguments (cost compounding, survivorship bias, behaviour gap); and can construct a core-and-satellite portfolio that operationalises the index investing case while leaving room for selective active management in defensible niches. (The index investing case)
Practice scenarios
You design a £100k 30-year retirement portfolio for a 35-year-old UK professional, minimising lifetime cost while delivering an appropriate risk-return profile. The work tests whether you can apply Bogle's principles in practice — asset allocation, vehicle selection, weighted-average expense ratio, rebalancing protocol — and defend the recommendation against an active-fund-advisor brother-in-law's predictable challenge.
Your goals
Led by Benjamin Graham Simulacrum
The question
Bonds and fixed-income strategy — the larger half of capital markets and the dominant institutional asset class. The module covers bond pricing and yield-to-maturity, duration and convexity as sensitivity measures, the yield curve and what its shape signals about economic expectations, credit spreads and credit ratings, the major bond types (gilts, corporate IG, high-yield, EM, index-linked, FRNs), portfolio strategies (bullet, barbell, ladder, immunisation), and liability-driven investment for UK DB pension funds. The September 2022 UK gilt crisis runs as a case study in LDI structural risk.
Outcome
The student can price a vanilla coupon bond given a target yield, calculate duration and modified duration, interpret a yield-curve shape, and design a bond portfolio appropriate to a stated objective (income, immunisation, total return). (Fixed income)
Practice scenarios
You design the bond allocation for a £1bn UK DB pension fund seeking to immunise £30m/year of inflation-indexed liabilities for 30 years, including consideration of LDI leverage and collateral structure. The work tests whether you can construct a duration-matched portfolio, design a credible LDI structure that survives a 2022-style gilt crisis, and brief a sceptical trustee through the design.
Your goals
Led by Benjamin Graham Simulacrum, with all four host simulacra contributing
The question
Asset allocation and portfolio construction — the highest-level investment decision, empirically explaining ~90% of return variability. The closing module integrates the previous seven into the practical work of building portfolios for three reference investor profiles (the young accumulator, the pre-retirement individual, the institutional endowment). All four host simulacra contribute: Markowitz on the framework, Sharpe on the factor structure, Bogle on the cost discipline, Graham on the bottom-up. Strategic vs tactical allocation, rebalancing protocols, and tax-aware asset location close the course.
Outcome
The student can design a strategic asset allocation appropriate to a stated investor profile (age, horizon, objective, risk tolerance); can select appropriate vehicles (active or passive) within each allocation bucket; can specify a rebalancing protocol; and can articulate the integration of value-investing security analysis, MPT diversification, CAPM cost of capital, and indexing cost discipline. (Asset allocation and portfolio construction)
Practice scenarios
You design strategic asset allocations for three reference investor profiles — a 32-year-old professional, a 58-year-old pre-retirement couple, and a £1.5bn perpetual endowment — and frame each as an investment policy statement. The work tests whether you can integrate value-investing, MPT, CAPM, and indexing principles into coherent portfolios appropriate to materially different objectives, horizons, and risk tolerances.
Your goals