The Sortino Framework for Constructing Portfolios

The Sortino Framework for Constructing Portfolios, 1st Edition

Focusing on Desired Target Return™ to Optimize Upside Potential Relative to Downside Risk

The Sortino Framework for Constructing Portfolios, 1st Edition,Frank Sortino,ISBN9780123749925


Elsevier Science




234 X 155

A fully tested method of constructing portfolios for high net worth individuals and institutional investors that beats benchmarks and provides a target rate of return within various risk tolerances.

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Key Features

• Only book to describe the Sortino method and Desired Target Return™ in a way that enables portfolio managers to adopt the method
• Software to implement the portfolio construction method is included free of charge to book buyers on a password protected Elsevier website. Book buyers can use the software to construct portfolios using this method right away, in real time. They can also load in their current portfolios and measure them against these measures.
• The Sortino method has been tested over 20 years at the Pension Research Institute. Portfolio managers can be confident of the success of the method, even returns in the economic crisis, in which the method has still beaten all S&P benchmarks.


The most common way of constructing portfolios is to use traditional asset allocation strategies, which match the client’s risk appetite to a weighted allocation strategy of fixed income, equities, and other types of assets. This method focuses on how the money is allocated, rather than on future returns.

The Sortino method presents an innovative change from this traditional approach. Rather than using the client’s risk as the main factor, this method uses the client’s desired return.


Primary: Portfolio managers of high net worth individuals and institutional investors,
Wealth Managers and Financial Advisors in Private Bank, Money Management Firms, and Wealth Management Firms, Portfolio Managers and Investment Officers in Money Management Firms, Private Banks, and Wealth Management Firms

Frank Sortino

Dr. Sortino founded the Pension Research Institute in 1981, focusisng on problems facing fiduciaries. He is also Professor of Finance Emeritus at San Francisco State University. He is known internationally for his published research on measuring and managing investment risk and the widely used Sortino Ratio.

Affiliations and Expertise

Chairman and Chief Investment Officer, Pension Research Institute

The Sortino Framework for Constructing Portfolios, 1st Edition

Building the Framework

Chapter 1. The Big Picture.

Chapter 2. Getting All The Pieces of the Puzzle.

Chapter 3. Beyond the Sortino Ratio

Chapter 4. Optimization & Portfolio Selection


Chapter 5. Birth of the DTRTM 401(k) Plan:

Chapter 6. A Reality Check From An Institutional Investor:

Chapter 7. Integrating the DTR Framework into a Complex Corporate Structure:

Chapter 8. The Role of Regulation in the Next Financial Market Evolution:

Chapter 9. Sharing Downside Risk in Defined Benefit Pension Plans:

Chapter 10. (Reprint) On the Foundation of Performance Measures under Asymmetric Returns, Christian S. Pedersen and Stephen E. Satchell

Appendix 1. Formal Definitions and Procedures

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