Dedicated Portfolio

DEFINITION of 'Dedicated Portfolio'

A passive form of portfolio management that involves the matching of future cash inflows with future liabilities. The process of dedicating a portfolio may be used as an alternative to multiperiod immunization, which reduces the level of interest rate risk to which a portfolio is exposed.

BREAKING DOWN 'Dedicated Portfolio'

Because the portfolio is usually made up of investment-grade instruments, there is generally no need to rebalance it. Additionally, the payments are virtually guaranteed, as there is a low level of default risk associated with investment-grade instruments.

An example of a dedicated portfolio strategy could involve a pension fund that will begin making payment distributions to plan members in five years' time. To immunize this cash outflow, which is a liability to the pension fund, the fund could purchase five-year government bonds.

RELATED TERMS
  1. Dedication Strategy

    A method by which the anticipated returns on an investment portfolio ...
  2. Immunization

    A strategy that matches the durations of assets and liabilities ...
  3. Portfolio Investment

    A holding of an asset in a portfolio. A portfolio investment ...
  4. Portfolio Manager

    The person or persons responsible for investing a mutual, exchange-traded ...
  5. Contingent Immunization

    A method of fixed income portfolio management, whereby managers ...
  6. Dedicated Short Bias

    A hedge fund strategy that maintains a net short exposure to ...
Related Articles
  1. Managing Wealth

    Introduction To The Portfolio Dedicated Strategy

    Dedicated Investment Portfolio strategies have been used by institutional investors like pension funds and insurance companies for many years and have gained some popularity with individual investors ...
  2. Managing Wealth

    Figuring Out How To Cover Your Liability Bases

    Whenever we talk about the asset-liability approach to portfolio management (ALM), the concepts of immunization and cash flow matching come into play.
  3. Managing Wealth

    The Workings Of Equity Portfolio Management

    Achieve analytical efficiency by applying your evaluation to a key set of stocks.
  4. Trading

    Top 4 Strategies For Managing A Bond Portfolio

    Find out how these strategies work and how you can put them to work for you.
  5. ETFs & Mutual Funds

    A Guide To Core-Satellite Investing

    Find out how this approach reduces risk and costs so you can maximize your portfolio's return.
  6. Financial Advisor

    What is Portfolio Management?

    Portfolio management is the act of maximizing the return on a portfolio. This is done with trading decisions made for the marketable securities in that portfolio. A portfolio manager, or a team ...
  7. Managing Wealth

    Understanding Portfolio Investment

    Portfolio investment involves buying securities with the expectation of earning a return on them.
  8. Managing Wealth

    Preparing For A Career As A Portfolio Manager

    Find out what it takes to win a spot in one of the most coveted financial careers.
  9. Professionals

    Financial Careers: Portfolio Management Jobs

    By Brian Perry This chapter will look at portfolio management jobs. These are some of the prestigious roles in the finance industry and involve directly managing institutional and retail client ...
  10. Trading

    Avoid Future Shock By Protecting Your Portfolio With Futures

    Worried about protecting your portfolio of diversified stocks and assets? Using futures with correct strategies can help.
RELATED FAQS
  1. What is the difference between passive and active portfolio management?

    Understand the difference between active portfolio management and passive portfolio management, and how each strategy benefits ... Read Answer >>
  2. What does the end of the quarter mean for portfolio management?

    Take a deeper look at why the end of a financial quarter, and all of its accompanying reports, is a significant event for ... Read Answer >>
  3. How are negative correlations used in risk management?

    Learn about risk management and how negative correlations between assets are used to diversify and hedge risk associated ... Read Answer >>
  4. How is portfolio variance reduced in Modern Portfolio Theory?

    Learn about modern portfolio theory, specifically what it asserts about asset allocation and managing portfolio risk through ... Read Answer >>
  5. The BEST definition of a benchmark portfolio is:

    The BEST definition of a benchmark portfolio is: a) A preset list of securities to be used to compare the performance of ... Read Answer >>
  6. What is the difference between portfolio management and financial planning?

    Understand the difference between financial planning and portfolio management, and learn which financial professionals can ... Read Answer >>
Hot Definitions
  1. AAA

    The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has ...
  2. GBP

    The abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories ...
  3. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  4. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  5. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  6. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
Trading Center