The new dynamics of managing the corporate portfolio

Corporate Finance, Capital Management Article, managing corporate portfolio

Article at a glance:

Companies today must actively manage their corporate portfolios or face off against activist shareholders, private equity firms, and hedge funds eager to jump in and do so for them.
Yet managing a corporate portfolio isn't what it used to be; it's no longer enough just to divest underperforming businesses and reinvest in better ones.
Companies must be—or become—the most natural owners of their businesses while balancing investment opportunities against their supply of capital, basing these moves on the predicted returns of current and potential investments.

This article contains the following exhibits:

Exhibit 1: Portfolio strategy assesses investment and divestment options and their implications for capital.
Exhibit 2: Managers can calculate the net return from all portfolio moves under construction.
Sidebar, exhibit 1: Across industries, focus and performance are not correlated.
Sidebar, exhibit 2: In overperforming industries, more focused companies took the advantage; in underperforming industries, those with more diverse portfolios did better.

Additional Thinking

Identifying the savings opportunities at investment banks

US investment banks are cutting costs by shrinking employment, but they can trim other types of spending without causing serious damage to their culture or morale.

Abstract

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