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About Transaction

Transaction


A portfolio manager's motivation to execute an investment strategy is to achieve the best possible returns for their clients or investors while managing risk. To execute an order, a portfolio manager may use a variety of methods, such as using an Indication of Interest (IOI) to signal interest in buying or selling a specific security.


An IOI is a non-binding message sent to potential counterparties indicating a desire to buy or sell a specific security at a specified price. It is used as a way for a portfolio manager to gauge interest in a security before committing to a trade. IOIs can be sent to a select group of potential counterparties or broadcast to a wider group.


Once the IOI is sent, the portfolio manager will evaluate the responses to determine if the trade is likely to be executed at the desired price. If the responses are favorable, the portfolio manager will then execute the trade through the appropriate channels, such as an online brokerage or directly with the company.


Performance of the portfolio is measured using various metrics, such as Transaction Cost Analysis (TCA) which is used to measure the cost of executing a trade. TCA includes factors such as the price of the security, the cost of executing the trade, and any other costs associated with the trade. TCA is used to determine the overall cost-efficiency of a trade and to identify areas where improvements can be made to reduce costs. Other performance metrics include tracking return, volatility, and risk-adjusted returns such as sharpe ratio, information ratio etc.


In summary, a portfolio manager's motivation to execute an investment strategy is to achieve the best possible returns while managing risk. To execute an order, a portfolio manager may use methods such as sending Indication of Interest (IOI) to gauge interest in a security before committing to a trade. Performance of the portfolio is measured using various metrics such as Transaction Cost Analysis (TCA) and risk-adjusted returns.