ABSTRACT
This chapter shows how the principles developed in Chapters 6 through 8 can be applied to the governance of securities portfolios. The present chapter first recognises that the tasks of portfolio governance depend on the kind of portfolio being held: in particular, governance tasks differ according to the degree to which the portfolio contains liquid securities. A relatively liquid portfolio (i.e., one which principally contains marketable securities) presents the governance tasks of acquiring securities to achieve desirable risk-return tradeoffs, monitoring their performance, and selling them if their performance does not live up to the manager’s original expectations. A relatively illiquid portfolio (i.e., one composed mainly of non-marketable instruments) poses different governance tasks, principally because it is not possible to trade illiquid securities whose performance may prove to be unsatisfactory subsequent to their having been included in the portfolio.
