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Professional Portfolio Management

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Preface
The investment landscape is ever-changing. Today’s innovative solution will be taken
for granted tomorrow. In writing Running Money: Professional Portfolio Manage-
ment, our goal was to expose students to what it is really like to run money profession-
ally by providing the tools.
Broadly speaking, this book focuses on the business of investment decision mak-
ing from the perspective of the portfolio manager—that is, from the perspective of the
person responsible for delivering investment performance. It reflects our combined
professional experience managing multibillion-dollar mandates within and across the
major global and domestic asset classes, working with real clients, and solving real
investment problems; it also reflects our experience teaching students. Before writ-
ing this text, we taught the Portfolio Management Course in the Master of Science
in Investment Management (MSIM) programs at Boston University and Reykjavik
University in Iceland. The MSIM curriculum encompasses and extends the CFA Body
of KnowledgeTM required of candidates for the CFA® designation. This text grew from
these courses and was refined as we used early versions of the manuscript in class.
Two draft chapters of this book have also been included in the CFA Institute’s con-
tinuing education program for charterholders since 2007.
This book aims to build on earlier investment coursework with minimal repetition
of standard results. Ideally the student should already have taken a broad investments
course that introduces the analysis of equity, fixed income, and derivative securi-
ties. The material typically covered in these courses is reviewed only briefly here as
needed. In contrast, new and more advanced tools are accorded thorough introduction
and development. Prior experience with Microsoft Excel spreadsheets and functions
will be helpful because various examples and exercises throughout the book use these
tools. Familiarity with introductory quantitative methods is recommended as well.
We believe this book is most effectively used in conjunction with cases, projects,
and real-time portfolios requiring hands-on application of the material. Indeed this is
how we teach our courses, and the book was written with this format in mind. This
approach is facilitated by customizable Excel spreadsheets that allow students to apply
the basic tools immediately and then tailor them to the demands of specific problems.
It is certainly possible to cover all 16 chapters in a single-semester lecture course. In
a course with substantial time devoted to cases or projects, however, the instructor may
find it advantageous to cover the material more selectively. We feel strongly that Chap-
ters 1, 2, and 14 should be included in every course—Chapters 1 and 2 because they set
the stage for subsequent topics, and Chapter 14 because ethical standards are an increas-
ingly important issue in the investment business. In addition to these three chapters, the
instructor might consider creating courses around the following modules:
• The investment business: Chapters 3, 6, 13, and 16
• These chapters provide a high-level perspective on the major components of the
investment business: clients, asset allocation, the investment process, and perfor-
mance. They are essential for those who need to understand the investment busi-
ness but who will not be involved in day-to-day investment decision making.
• Managing client relationships: Chapters 13, 15, and 16
• These chapters focus on clients: their needs, their expectations, their behavior, how
they evaluate performance, and how to manage your relationships with them. Virtually
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viii Preface

everyone involved in professional portfolio management needs to understand this

material, but it is especially important for those who will interact directly with clients.
• Asset allocation: Chapters 3–5, 11, and 12
• Asset allocation is a fundamental component of virtually every client’s investment
problem. Indeed widely cited studies indicate that it accounts for more than 90 percent
of long-term performance. Chapters 3–5 start with careful development of basic asset
allocation tools and progress to advanced topics including estimation of inputs, mod-
eling horizon effects, simulation, portable alpha, and portfolio insurance. Chapter 11
brings in alternative asset classes. Chapter 12 addresses rebalancing and the impact of
transaction costs and taxes. These chapters are essential for anyone whose responsibility
encompasses portfolios intended to address clients’ broad investment objectives.
• Security and asset class portfolio management: Chapters 6–12
• Starting with an overview of the investment process (Chapter 6), these chapters
focus on the job of managing a portfolio of securities within particular asset classes:
equities (Chapters 7 and 8), fixed income (Chapter 9), international (Chapter 10),
and alternatives (Chapters 11). Chapter 12 addresses rebalancing and the impact of
transaction costs and taxes.
Of course these themes are not mutually exclusive. We encourage the instructor to
review all the material and select the chapters and sections most pertinent to the course
objectives.
Running Money: Professional Portfolio Management includes several features
designed to reinforce understanding, connect the material to real-world situations, and
enable students to apply the tools presented:
• Excel spreadsheets: Customizable Excel spreadsheets are available online. These
spreadsheets allow students to apply the tools immediately. Students can use them
as they are presented or tailor them to specific applications.
• Excel outboxes: Text boxes provide step-by-step instructions enabling students to
build many of the Excel spreadsheets from scratch. Building the models themselves
helps to ensure that the students really understand how they work.
• War Story boxes: Text boxes describe how an investment strategy or product worked—
or did not work—in a real situation.
• Theory in Practice boxes: Text boxes link concepts to specific real-world exam-
ples, applications, or situations.
• End-of-chapter problems: End-of-chapter problems are designed to check and to
reinforce understanding of key concepts. Some of these problems guide students
through solving the cases. Others instruct students to expand the spreadsheets intro-
duced in the Excel outboxes.
• Real investment cases: The appendix provides four canonical cases based on real
situations involving a high net worth individual, a defined benefit pension plan,
a defined contribution pension plan, and a small-cap equity fund. The cases are
broken into four steps that can be completed as students proceed through the text.
The material required to complete the first step, understanding the investor’s needs
and establishing the investment policy statement, is presented in Chapters 1 and 2.
Step 2, determining the asset allocation, draws on Chapters 3–5. Step 3, implement-
ing the investment strategy, draws on the material in Chapters 6–13. The final step,
measuring success, brings together the issues pertaining to performance, ethics, and
client relationships addressed in Chapters 13–16.

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Preface ix

This book was conceived to share our investment management and university
teaching experience. Writing it has been a lot like being a portfolio manager: always
challenging, sometimes frustrating, but ultimately rewarding. We hope the book chal-
lenges you and whets your appetite for running money.

Supplements
The Online Learning Center (OLC) Web site, www.mhhe.com/sph1e, contains the
Excel spreadsheets and additional supplementary content specific to this text. Sample
exams, solutions, and PowerPoint presentations are available to the instructor in the
password-protected instructor’s center. As students read the text, they can go online to
the student center to download the Excel spreadsheets, check answers to the end-of-
chapter problems, and review the supplemental case material.
• Case spreadsheets: Excel spreadsheets give students additional material for analy-
sis of the cases.
• Solutions to end-of-chapter problems: Detailed solutions to the end-of-chapter
problems help students confirm their understanding.
• Sample final exams: Prepared by the authors, the sample exams offer multiple-
choice and essay questions to fit any instructor’s testing needs.
• Solutions to sample final exams: The authors offer detailed suggested solutions
for the exams.
• PowerPoint presentation: Prepared by the authors, the PowerPoint presentation
offers full-color slides for all 16 chapters to use in a classroom lecture setting.
Organized to accompany each chapter, the slides include images, tables, and key
points from the text.

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Acknowledgments
This book would not have been possible without the academic training provided to us
by many dedicated teachers. We’d especially like to thank our doctoral thesis advisors
Stephen Figlewski, Benjamin Friedman, and Seymour Smidt for their gifts of time,
encouragement, and thoughtful advice. We’d also like to recognize several professors
who challenged and guided us in our academic careers: Fischer Black, David Connors,
Nicholas Economides, Edwin Elton, Robert Jarrow, Jarl Kallberg, John Lintner, Terry
Marsh, Robert Merton, William Silber, and L. Joseph Thomas.
The practical experience we received in the investment industry helped us make
this book unique. We thank all our colleagues at Fidelity, Gottex, MFS, Prudential,
State Street, and Venus for their support and good ideas over the years. Space does
not permit listing all the individuals with whom we have shared the pursuit of supe-
rior investment performance for our clients. We would be remiss, however, if we did
not acknowledge Steve Bryant, Ed Campbell, Ren Cheng, Jennifer Godfrey, Richard
Hawkins, Timothy Heffernan, Cesar Hernandez, Dick Kazarian, Richard Leibovitch,
Liliana Lopez, Robert Macdonald, Kevin Maloney, Vik Mehrotra, Les Nanberg, Wil-
liam Nemerever, Marcus Perl, Dan Scherman, Robin Stelmach, and Myra Wonisch
Tucker.
We also want to thank those who helped with specific sections of the text, includ-
ing providing data and suggestions to improve chapters, cases, and examples. These
include Scott Bobek, Richard Hawkins, Ed Heilbron, Dick Kazarian, John O’Reilly,
Marcus Perl, Jacques Perold, Bruce Phelps, Jonathan Shelon, and George Walper, as
well as the MSIM students at Boston University and Reykjavik University who used
drafts of this text.
Michele Janicek, Executive editor, and Katherine Mau, Editorial coordinator, pro-
vided invaluable guidance and encouragement throughout the project. We also wish to
thank all of the other McGraw-Hill staff members who worked on the book.
We are grateful to the following individuals for their thoughtful reviews and sug-
gestions for this text:
Honghui Chen Zhuoming Peng
University of Central Florida Western Oregon University
Ji Chen Craig G. Rennie
University of Colorado-Denver University of Arkansas
Douglas Kahl Alex P. Tang
The University of Akron Morgan State University
David Louton Damir Tokic
Bryant University University of Houston-Downtown
Mbodja Mougoue Barbara Wood
Wayne State University Texas Christian University
Finally, a special thank you to our families and friends for their support and patience
during the long journey of writing this book; it would not have been possible without
them.

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Brief Contents
1 Introduction 1 12 Portfolio Management through Time:
2 Client Objectives for Diversified Taxes and Transaction Costs 393
Portfolios 11 13 Performance Measurement and
3 Asset Allocation: The Mean–Variance Attribution 423
Framework 51 14 Incentives, Ethics, and Policy 457
4 Asset Allocation Inputs 101 15 Investor and Client Behavior 479
5 Advanced Topics in Asset 16 Managing Client Relations 499
Allocation 139
6 The Investment Management SAMPLE CASES 519
Process 187
GLOSSARY 540
7 Introduction to Equity Portfolio
Investing: The Investor’s View 217 REFERENCES 548
8 Equity Portfolio Construction 241
9 Fixed-Income Management 273
INDEX 554
10 Global Investing 325
11 Alternative Investment Classes 361

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Table of Contents
Chapter 1 Portfolio Return and Variance 65
Introduction 1 Objective Function 66
Constraints 66
1.1 Introduction 1 Investment Horizon 67
1.2 What Is a Portfolio Manager? 4 3.3 Practice: Solution of Stylized Problems Using
1.3 What Investment Problems Do Portfolio the Mean–Variance Framework 69
Managers Solve? 5 The Efficient Frontier 70
Asset Allocation and Asset Class Portfolio The Optimal Portfolio 76
Responsibilities 5 Investment Horizons 79
Representative Investment Problems 6 The Shortfall Constraint 82
1.4 Spectrum of Portfolio Managers 7 Asset–Liability Management 83
1.5 Layout of This Book 9 Practice Summary 86
Appendix 1
Chapter 2 Returns, Compounding, and Sample Statistics
Client Objectives for Diversified A. Returns 91
Portfolios 11 B. Continuous Compounding 92
C. Sample Statistics 92
2.1 Introduction 11
D. Application in Excel 93
2.2 Definitions of Risk 12
Appendix 2
2.3 The Portfolio Management Process and the
Optimization
Investment Policy Statement 15
Parameters and Assumptions 94
The Investment Policy Statement 16
Decision Variables 94
2.4 Institutional Clients 20
Objective 95
Foundations and Endowments 20
Constraints 95
Pension Plans 24
Solution 95
2.5 Individual Investors 35
Optimization Failure 96
Understanding the Client: Situational
Linear Programming 96
Profiling 35
Quadratic Programming 97
The Individual’s IPS: Objectives and
Excel Solver 97
Constraints 38
Appendix 3
Trends in the Wealth Management Business 39
Notation
2.6 Asset Class Portfolios 41
Investment 100
Statistical 100
Chapter 3
Asset Allocation: The Mean–Variance Chapter 4
Framework 51 Asset Allocation Inputs 101
3.1 Introduction: Motivation of the Mean–Variance 4.1 Sensitivity of the Mean–Variance Model to
Approach to Asset Allocation 51 Inputs 101
Types of Asset Allocation 52 4.2 Constant Investment Opportunities 102
Asset Classes 52 Using Sample Moments 102
The Mean–Variance Framework 54 James–Stein Estimation 105
3.2 Theory: Outline of the Mean–Variance Linking Returns to the Economy 110
Framework 57 Implied Views 114
Utility Theory 57 Cross-Sectional Risk Models 118
Return Behavior 61 Combining Estimates: Mixed Estimation 123
Return Variance 63 4.3 Time-Varying Investment Opportunities 124
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Table of Contents xiii

Appendix Implementation Issues 195

Mixed Estimation with Multiple Assets Feedback/Review Process 198
6.5 The Importance of Quality Control 200
6.6 A Sample Investment Strategy: The SRY
Chapter 5
Model 202
Advanced Topics in Asset Allocation 139 Philosophy of the Strategy 202
5.1 Introduction 139 Signal Creation 204
5.2 Horizon Effects in the M–V Framework 141 Capturing the Signal 205
Horizon-Dependent Risk Aversion 141 Implementation Issues 207
Horizon-Dependent Risk and Return 149 Feedback/Review Process 210
5.3 Dynamic Programming 153
The General Framework 153
Chapter 7
Mean–Variance with Recursive Shortfall
Constraints 154
Introduction to Equity Portfolio Investing:
The Impact of Mean Reversion 160 The Investor’s View 217
Some Intuition about Changing Investment 7.1 Introduction 217
Opportunities 160 7.2 Equity Strategies 218
Portfolio Choice with Mean Reversion 161 Passive Strategies 218
5.4 Simulation 165 Structured Active Strategies 218
The Impact of Required Expenditures and Active Strategies 220
Alternative Probability Distributions 166 7.3 Selecting the Equity Mix 221
Specialized Objectives 168 Equity Return Behavior 221
Resampled Mean–Variance 170 7.4 Alternative Equity Mixes 223
5.5 Asset Allocation with Active Managers 171 Optimal Mean–Variance
5.6 Portfolio Insurance 174 Allocations 224
Option-Based Portfolio Insurance 175 Stress Testing Allocations 228
Constant Proportional Portfolio 7.5 The Equity Management Business 229
Insurance 176 Equity Fund Structures 229
Who Should Buy Portfolio Insurance? 176 7.6 Implementing the Equity Mix 231
Appendix 1 Sample Equity Mixes 231
The Estimated VAR1 Model Equity Portfolio Performance 234
Appendix 2 7.7 Equity Portfolio Investment Objectives 235
DP Solution of the Mean Reversion Model Overview of Manager Guidelines 235
Sample Manager Guidelines 236
Chapter 6
The Investment Management Chapter 8
Process 187 Equity Portfolio Construction 241
6.1 Introduction 187 8.1 Introduction 241
6.2 The Efficient Market Hypothesis (EMH) 188 8.2 Passive versus Active Management 242
Definition of the EMH 188 The Record of Active Management 242
Implications of the EMH 188 Growth in Equity Fund Management 245
6.3 General Discussion of Investment 8.3 Passive Portfolio Construction 245
Strategies 191 Full Replication 246
6.4 The Five Key Elements of the Investment Sampling 246
Process 192 8.4 Goals for Active Management 256
Introduction 192 Investment Processes 256
Philosophy of the Strategy 192 8.5 Sector Management 258
Signal Creation 193 8.6 Style and Sector Management 260
Capturing the Signal 195 8.7 Identifying Style 264

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xiv Table of Contents

8.8 Sample Active Portfolio 269 10.6 Implications of Globalization 348

Investment Philosophy 269 Interest Rate Convergence: When They Do and
Portfolio Construction 269 Why They Don’t 350
Are Hedged Bonds Redundant? 351
Chapter 9 Global Equities: Country versus Industry
Fixed-Income Management 273 Effects 352
9.1 Introduction 273 10.7 Currency Overlays: Incentive-Compatible
9.2 Fixed-Income Markets, Instruments, and Performance Evaluation 354
Concepts 274
The U.S. Bond Market 274 Chapter 11
A Review of Key Fixed-Income Concepts 279 Alternative Investment Classes 361
Empirical Properties of Stock and Bond
11.1 Introduction 361
Returns 290
11.2 Hedge Funds 363
9.3 Fixed-Income Mandates 292
Definition of a Hedge Fund 363
9.4 Passive Management 293
How a Hedge Fund Works 364
9.5 Active Management 299
Hedge Fund Styles and Returns 366
A Sample Active Mandate 300
Data Issues 368
Universes and Benchmarks 302
11.3 Manager Selection 369
Active Strategies and Tactics 303
Sources of Alpha 369
9.6 Structured Portfolios 313
The Due Diligence Process 371
Cash Matching 313
Fund of Funds 373
Immunization 314
11.4 Venture Capital and Private Equity 374
Contingent Immunization 319
Performance Record of Venture Capital and
Matching Additional Risk Measures 320
Private Equity 375
Chapter 10 11.5 Real Estate 378
Introduction to Real Estate 378
Global Investing 325
Performance Record of Real Estate 380
10.1 Introduction 325 11.6 Commodities 381
10.2 Investing with a Global Perspective 326 Commodity Prices and Returns 381
The Investment Policy Statement Performance Record of Commodities 383
Revisited 327 11.7 Allocating Assets Including Alternatives 383
Operational Considerations for International Issues for Implementing Investments in
Investing 328 Alternatives 383
10.3 Global Investment Opportunities 329 Risk Analysis of Investment Allocation 385
Global Equity Opportunities 329 Computing Optimal Allocations 387
Global Bond Opportunities 334 Appendix
10.4 The Impact of Currency 336 Sources for Return Series
Unhedged Returns 337
Hedged Returns 338 Chapter 12
Cross-Hedging 338
Portfolio Management through Time: Taxes
Proxy Hedging 338
Asset versus Currency Decisions 340
and Transaction Costs 393
Hedging Uncertain Returns 341 12.1 Introduction 393
10.5 International Diversification: Failure to 12.2 Performance Shortfall 394
Deliver? 346 Look-Back Bias 395
The Correlation Conundrum 346 Implementation Costs 396
International Diversification with Active Signal Capture and Implementation Lags 398
Managers 348 Poor Execution, Trade Errors, and Fraud 398

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Table of Contents xv

12.3 Portfolio Adjustments without Taxes 14.4 Ethical Situations 464

or Costs 399 Artificially Boosting Performance 465
12.4 Transaction Costs 401 Paying Bribes and Other Questionable Sales
Cost Components 401 Techniques 465
Rebalancing with Transaction Costs 406 Hiding Mistakes 466
Transaction Costs and Target Portfolios 410 Use of Commissions for Manager and Sponsor
Turnover versus Value Added 411 Benefit 467
12.5 Taxation of Investment Returns in the United 14.5 Industry Guidelines for Good Business
States 411 Practices 467
12.6 Strategies to Reduce Individual Investor Taxes 414 Artificially Boosting Performance 468
Enhancing After-Tax Returns 414 Paying Bribes and Other Questionable Sales
Wealth Preservation and Transfer 416 Techniques 468
General Recommendations 417 Hiding Mistakes 469
12.7 Tax Managing a Portfolio of Securities 418 Use of Commissions for Manager and Sponsor
Benefit 469
Chapter 13 14.6 Internal Company Policies to Protect the
Performance Measurement and Franchise 470
Attribution 423 General Policy Discussion 470
Specific Policy Discussion 470
13.1 Introduction 423
14.7 Effective Manager and Analyst Compensation
13.2 Performance Measurement 425
Policies 473
Security Valuation 425
Portfolio Manager Compensation 473
Return Measures 427
Analyst Compensation 474
The Impact of Flows and Errors 428
Other Investment Professional
Risk Measures 432
Compensation 476
13.3 Performance Attribution 434
Appendix
Benchmarks 434
Sample List of Investment Policies
Returns-Based Analysis 435
Holdings-Based Attribution 444
13.4 Performance Appraisal 451
Chapter 15
Appendix Investor and Client Behavior 479
Calculation of Risk Measures 15.1 Introduction 479
15.2 Theory and Observations of Human
Chapter 14
Behavior 480
Incentives, Ethics, and Policy 457 Normative Behavior 481
14.1 Introduction 457 Normal Behavior 482
Interests of the Portfolio Manager and the Behavioral Finance 484
Client 458 Observations of Individual Investor
Outline of Chapter 458 Behavior 487
14.2 The Investment Company Business Observations of Institutional Investor
Model 459 Behavior 489
Variables Influencing Firm Profits 459 15.3 Implications for Active Management 490
Relative Importance of Variables 460 General Observations 490
Employee Compensation 461 Limits to Market Efficiency and Opportunities for
14.3 Incentives for Businesspeople and Portfolio Active Management 491
Managers 462 15.4 Implications for Setting Investment
Short-Term Incentives for the Individual or Small Policy 492
Firm 462 15.5 Implications for Manager Selection 492
Long-Term and Firm Incentives 463 The Record 494

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Chapter 16 16.6 Retaining Clients 511

Managing Client Relations 499 Ongoing Client Communication 512
Communication in Periods of Poor
16.1 Introduction 499 Performance 512
16.2 General Recommendations for Client 16.7 Case Study 515
Management 499
General Implications 501
16.3 Meeting Client Needs 501 Sample Cases 519
Meeting Individual Investor Needs 502 Glossary 540
Meeting Institutional Investor Needs 504
16.4 Manager Selection Process 505 References 548
16.5 Securing New Clients 507 Index 554
Individual Investors 508
Institutional Investors 509

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Chapter

1Introduction
Chapter Outline
1.1 Introduction
1.2 What Is a Portfolio Manager?
1.3 What Investment Problems Do Portfolio Managers Solve?
1.4 Spectrum of Portfolio Managers
1.5 Layout of This Book

1.1 Introduction
The investment business is an exciting industry for a career. The stakes are high and
the competition is keen. Investment firms are paid management fees to invest other
people’s money, and their clients expect expert care and superior performance. Manag-
ing other people’s money is a serious endeavor. Individuals entrust their life savings
and their dreams for attractive homes, their children’s educations, and comfortable
retirements. Foundations and endowments hand over responsibility for the assets that
support their missions. Corporations delegate management of the funds that will pay
future pension benefits for their employees. Successful managers and their clients
enjoy substantial financial rewards, but sustained poor performance can undermine
client well-being and leave a manager searching for a new career.
Many bright and hardworking people are attracted to this challenging industry. Because
their competitors work so hard, portfolio managers must always be at their best and con-
tinue to improve their skills and knowledge base. For most portfolio managers, investing
is a highly stimulating vocation, requiring constant learning and self-improvement.
Clients are demanding, especially when results are disappointing. Although this is con-
sidered a stressful job by many people, some professionals continue to manage money
into their 80s or 90s.1
Portfolio management is becoming more sophisticated due to the ongoing advance-
ment of theory and the growing complexity of practice, led by several trends:
• Advances in modern portfolio theory.
• More complex instruments.
• Increased demands for performance.

1
Consider Charlie Munger, born in 1924, who is six years older than his investing partner, Warren Buffett.

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2 Chapter 1 Introduction

EXHIBIT 1.1 $14,000

Mutual Fund Mutual Fund
(including ETFs $12,000
and UITs)* and Institutional
$10,000
Institutional Assets in

$ Billions
the United States, in $8,000
$ Billions.
$6,000
Source: Investment Company
Institute (ICI) and Plan Sponsor
Network (PSN). $4,000

$2,000

1995 2000 2005 2007

*Exchange Traded Funds (ETFs) and Unit Investment Trusts (UITs).

• Increased client sophistication.

• Rising retirement costs, and the growing trend toward individual responsibility for
those costs.
• Dramatic growth in assets under management.
These trends parallel the growing use of mathematics in economics, the improvements
in investment education of many savers, and the increasing competitiveness of the indus-
try. Assets controlled by individual investors have grown rapidly. In 2005 half of all U.S.
households owned stock. Of those who held stocks, 90 percent owned stock mutual funds
while nearly 50 percent owned individual stocks. By 2007 the mutual fund industry had
expanded to $12.0 trillion under management from $2.8 trillion in 1995; it managed over
8,700 funds and employed over 165,000 Americans.2 The size of the institutional money
management business has also grown. Exhibit 1.1 shows that pension plan, foundation,
and endowment assets grew threefold between 1995 and 2007 to over $10 trillion.
Portfolio management is based on three key variables: the objective for the invest-
ment plan, the initial principal of the investment, and the cumulative total return on that
principal. The investment plan, or strategy, is tailored to provide a pattern of expected
returns consistent with meeting investment objectives within acceptable levels of risk.
This investment strategy should be formed by first evaluating client requirements, includ-
ing willingness and ability to take risk, cash flow needs, and any constraints, such as legal
restrictions. Given the cash flow needs and acceptable expected risk and return outcomes,
the allocation between broad asset classes is set in coordination with funding and spending
policies. After investment vehicles are selected and the plan is implemented, performance
should be analyzed to determine the strategy’s success. Ongoing review and adjustment
of the portfolio are required to ensure that it continues to meet client objectives.
This book presents effective portfolio management practice, not simply portfolio
theory. The goal is to provide a primer for people who wish to run money profession-
ally. The book includes the information a serious portfolio manager would learn over
a 20-year career—grounded in academic rigor yet reflecting real business practice and
presented in an efficient format. Importantly, this book presents tools to help manage
a portfolio into the future; that is what a portfolio manager is paid to do. Although the
book discusses the value of historical data, it guides the reader to think more about the

2
Investment Company Institute Factbooks, 2002–2008.

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Theory in Practice
Famous Last Words: “It Is Different This Time”
2008 was a terrible year for the markets. The S&P 500 fell nearly 40 percent, high-yield
bonds declined over 25 percent, and in December Bernie Madoff admitted to what he
claimed was a $50 billion Ponzi scheme. Although these numbers are shocking, they are
not unprecedented, and the reasons behind them are not new. Security values can change
drastically, sometimes with surprising speed. Declining values can be a response to peak-
ing long-term market cycles, short-term economic shocks, or the idiosyncratic risk of an
individual security.
Market cycles can take months or years to develop and resolve. The dot-com bubble
lasted from 1995 to 2001. The March 2000 peak was followed by a 65⫹ percent multiyear
decline in the NASDAQ index as once lofty earnings growth forecasts failed to materialize.
The S&P 500 dropped over 40 percent in 1973 and 1974 as the economy entered a period
of stagflation following the boom of the 1960s and the shock of the OPEC oil embargo.
Black Monday, October 19, 1987, saw global equity markets fall over 20 percent in a single
day. The collapse of Enron destroyed more than $2 billion in employee retirement assets
and more than $60 billion in equity market value. We are still calculating the dollar impact
of the subprime mortgage crisis.
Each of these examples had a different cause and a different time horizon, but in each
case the potential portfolio losses were significant. To assist investors, this book outlines
the basic—and not so basic—principles of sound portfolio management. These techniques
should prepare the investor to weather future market swings. The broad themes include
• Creating and following an investment plan to help maintain discipline. Investors often
appear driven by fear and greed. The aim should be to avoid panicking when markets
sell off suddenly (1974, 1987) and missing the potential recovery, or overallocating to
hot sectors (the dot-com bubble) or stocks (Enron), and being hurt when the market
reverts.
• Focusing on total return and not yield or cost.
• Establishing and following proper risk management discipline. Diversification and rebal-
ancing of positions help avoid outsized exposure to particular systematic or idiosyncratic
risks. Performance measurement and attribution provide insight into the risks and the
sources of return for an investment strategy.
• Not investing in what you do not understand. In addition to surprisingly good per-
formance that could not be explained, there were additional red flags, such as lack of
transparency, in the Enron and Madoff cases.
• Behaving ethically and insisting that others do too.
Although attractive or even positive returns cannot be guaranteed, following the princi-
ples of sound portfolio management can improve the likelihood of achieving the investor’s
long-range goals.

implications for the future. Simply studying historical records and relationships is a
sure way to disappoint clients.
This is not a cookbook or a collection of unrelated essays; the chapters tell a uni-
fied story. This book presents techniques that the reader may use to address real situ-
ations, not merely simplified, stylized problems, such as the simple case presented in
the following Theory in Practice box. A working knowledge of investments, including
derivatives, securities analysis, and fixed income, is assumed, as well as basic profi-
ciency in Excel. Where necessary, the book presents careful development of new tools
that typically are not covered in an MBA curriculum.
3

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Theory in Practice A Simple Case

Jean is retired and single, with approximately $700,000 in assets. Jean earns a small amount
of income from a part-time job, receives Social Security payments, and collects income
from investments. Jean owns a home and has a modest lifestyle. Jean needs to decide how
to invest her assets and set a realistic spending policy. What information is needed to advise
Jean effectively? What needs to be done to determine the best course of action for Jean’s
assets?
The following exhibit lists key data to help answer these questions and frame the problem:
Assets
Total equities $ 415,000
Total bonds 125,000
Home 130,000
Income
Assets 12,000
Other 11,000
Expenses 26,500
What would be the next steps in exploring the situation? What additional information
about Jean and the financial situation would be nice to know?

1.2 What Is a Portfolio Manager?

Investment management firms employ many investment professionals. They include
a CEO to manage the business, portfolio managers supported by research analysts,
salespeople to attract and retain clients, and a chief investment officer to supervise the
portfolio managers. Many more people work behind the scenes, such as risk officers
and accounting professionals, to make sure the money is safe. A portfolio manager
may be defined by three characteristics:
1. Responsible for delivering investment performance.
2. Full authority to make at least some investment decisions.
3. Accountable for investment results.
Investment decisions involve setting weights of asset classes, individual securities,
or both to yield desired future investment performance. Full authority means control
over these decisions. For example, portfolio managers do not need the approval of a
committee or superior before directing allocation changes. In fact, on more than one
occasion portfolio managers have resigned after their full discretion was restricted.
A chief investment officer has authority not over security selection but over the port-
folio manager’s employment, making the chief investment officer a portfolio man-
ager for the purposes of this book. A fund-of-funds manager retains control over the
weights of the underlying fund managers and therefore is a portfolio manager. The
typical mutual fund manager who issues orders for individual equity, fixed income, or
derivative securities is the most visible form of portfolio manager.
A portfolio manager is held accountable for his or her performance whether or not
it meets expectations. Portfolio managers typically have benchmarks, in the form of a
market index or group of peers, and their performance results are compared with these
benchmarks for client relationship, compensation, and career advancement purposes.
Portfolio managers do not necessarily follow an active investment process. Managers
of passive portfolios are portfolio managers because they are responsible and held
4

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Chapter 1 Introduction 5

accountable to their clients and firm for their portfolio returns. If performance does
not meet client expectations, at some point the portfolio manager will be terminated.
But if results exceed expectations, clients may increase the level of their commitment,
thereby generating higher management fees for the portfolio manager’s firm. Portfolio
managers are accountable to their firm, which is seeking to maintain and expand rev-
enues, and they receive bonuses (or perhaps pink slips) depending on performance.3
Analysts may be held accountable for their recommendations, in some cases with
precise performance calculations. However, they do not set security weights in a port-
folio and are not ultimately responsible for live performance. Portfolio managers may
use analysts’ recommendations in decision making, but the ultimate security selection is
under their control. Although analysts are not portfolio managers based on the definition
here, they can obviously benefit from understanding the job of the portfolio manager.
Risk officers are responsible for identifying, measuring, analyzing, and monitoring
portfolio and firm risks. While they may have discretion to execute trades to bring
portfolios into compliance, they are not portfolio managers. They do not bear the same
responsibility and accountability for performance. In fact, it is recommended that
portfolio management and risk functions be separated to avoid potential conflicts of
interest.

1.3 What Investment Problems Do Portfolio Managers Solve?

Asset Allocation and Asset Class Portfolio Responsibilities
The job of a portfolio manager is to help clients meet their wealth accumulation and
spending needs. Many clients expect to preserve the real value of their original princi-
pal and spend only the real return. Some have well-defined cash inflows and outflows.
Virtually all clients want their portfolio managers to maximize the value of their sav-
ings and protect them from falling short of their needs.
The asset allocation problem requires portfolio managers to select the weights
of asset classes, such as equities, bonds, and cash, through time to meet their clients’
monetary needs. Asset allocation determines a large portion of the level and pattern
of investment performance. The remainder is determined by the individual asset class
vehicle(s) and their underlying holdings. The goals of asset allocation are to manage
variability, provide for cash flow needs, and generate asset growth—in other words,
risk and return, either absolute or relative to a target or benchmark. The client is diver-
sified in most situations by holding investments in several reasonably uncorrelated
assets. Derivative instruments may help with this process. Asset allocation may also be
a source of excess performance, with the portfolio manager actively adjusting weights
to take advantage of perceived market under- and overvaluation.
Many portfolio managers do not make asset allocation decisions. Instead, they are
hired to run a pool of money in a single asset class, or style within an asset class.
They may have a narrowly defined benchmark and limited latitude to select securities
outside a prespecified universe—such as a small-cap value manager or a distressed
high-yield bond manager. In most cases the strategy or style is independent of the
client—the portfolio manager follows his or her investment process regardless of the
client’s broader wealth and spending needs. In fewer cases the portfolio is custom-
ized to the client’s needs. For example, immunized fixed income portfolios involve

3
Some investors feel someone is not a true investment professional until he or she has been fired by
at least one client and therefore understands the seriousness and challenge of this responsibility.

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6 Chapter 1 Introduction

customized duration matching. Equity completeness funds are customized to provide

dynamic, specialized sector and style characteristics.

Representative Investment Problems

Client relationships are typically defined by formal documents with stated investment
objectives that include return goals, income needs, and risk parameters. Objectives and
related guidelines are determined by client type, individual situation, and preferences.
More and more individual investors are seeking the support of professional port-
folio managers. Retail mutual funds began growing rapidly in the bull market of the
1980s. There are now more mutual funds than stocks on the New York Stock Exchange,
and hundreds of exchange traded funds (ETFs), all directed by portfolio managers. In
most cases these managers are charged with individual asset class management; the
number of traditional balanced mandates requiring management of asset class weights
has grown less rapidly. Currently popular horizon-based funds, which have grown
to exceed $200 billion, are made up of multiple asset classes whose weights change
through time in a prespecified fashion. Such funds require two levels of allocation—
one determining the asset class weights and the other the fund or security weights
within the individual asset classes.
The high net worth business has grown rapidly, with the level of service tied to
client asset levels. Clients with more than $5 million in assets typically receive face-
to-face advice on asset allocation and manager selection that is supplemented by other
money-related services. Smaller clients receive a lower level of service through ques-
tionnaires and phone conversations.
A defined benefit (DB) plan represents a pool of money set aside by a company,
government institution, or union to pay workers a stipend in retirement determined by
a prespecified, wage-based formula. A DB plan is characterized by a schedule of fore-
cast future cash flows whose shape is determined by the sponsor’s employee demo-
graphics. The present value of this stream of payments, or liability, varies with interest
rates. A portfolio manager’s goal is to set both asset allocation and funding policies to
meet these cash flow needs at the lowest possible cost and lowest risk of falling short
of the required outflows. Plans frequently hire a pension consultant to help them with
in-house asset allocation, or in some cases they hire an external DB asset allocation
manager. Recent legislation requires corporations to include in their financial state-
ments the effect of changes in liability relative to changes in the market value of the
assets held to offset it. This motivates the need to closely manage the relationship
between the assets and the liability, and many companies are replacing their DB plans
with alternative forms of employee retirement programs to avoid the inherent risk.
The most popular replacement vehicle is the defined contribution (401(k) or DC)
plan. The DC plan is a hybrid program, combining a company sponsor with individ-
ual users of the program. Individual employees decide how much to save and how to
invest, and the company supports this effort with contribution matching and advisory
support services. Portfolio managers are hired by the company to provide diversified
multi-asset investment options, individual asset class product management, and cus-
tomized asset allocation advice and vehicle selection.
Portfolio managers are responsible for underlying asset class portfolios on a stand-
alone basis and within multi-asset class products. Seldom are they the same as the asset
allocators because portfolio management tends to improve with specialization; for
example, high-yield bonds trade differently than investment-grade bonds, both of which
trade differently than emerging market bonds. In most cases there are both active and

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Chapter 1 Introduction 7

passive managers in the same asset class, though less liquid markets generally have
fewer index funds. Asset classes with higher potential risk-adjusted active return (alpha)
and less liquidity command higher fees and portfolio manager compensation. In these
portfolios the managers are responsible for setting security weights, but they must also
seek out available securities and be conscious of the ability to sell their positions.

1.4 Spectrum of Portfolio Managers

Financial advisors provide individual and institutional clients with asset allocation rec-
ommendations, manager search capabilities, manager monitoring, and performance
analysis. Registered investment advisors (RIA) cater to high net worth investors
and may also provide tax guidance, insurance strategy, estate planning, and expense
management services. In some cases sophisticated RIAs may be defined as money
therapists, helping clients process their feelings about wealth, charitable giving, and
handling money within their families. High-end advisors typically charge a basis point
fee that declines with increasing asset levels. Family offices may provide services
beyond strict money management, even providing travel agent functions.
Pension consultants recommend investments and managers for institutional inves-
tors. They tend to be more rigorous in their process than managers of high net worth
assets—for example, studying liability dynamics when proposing asset allocation
and funding policies for a DB plan. Although RIAs may have earned the Certified
Financial Planner® designation, which includes topics in estate planning and tax
policy, many pension consultants will have earned the Chartered Financial Analyst®
charter, a longer and more rigorous professional program. Many pension consulting
firms have one or more liability actuaries on staff as well. Pension consultants speak in
terms of benchmarks and portfolio risk, whereas advisors to smaller individual inves-
tors may not even focus on total return. Although they are sophisticated, there is still
a need to manage relations with pension clients. They may need to be educated about
asset liability management, introduced to new asset classes, or supported in periods
of unhealthy funding status. Pension plans, foundations, and endowments have been
known to blame (that is, fire) their investment consultants when overall results are
subpar.
Fund-of-funds managers take investment advice a step further, taking full discretion
of the assets, placing the assets with individual securities managers, and in many cases
charging performance fees for doing so. Funds-of-funds became popular in the new
millennium by providing simultaneous exposure to a diversified mix of hedge funds.
Over the last 10⫹ years traditional brokerage firms, or wire houses, have transi-
tioned from a commission-based to a fee-based business, providing basic asset alloca-
tion services and in-house mutual fund products. They walk a fine line, balancing their
clients’ investment objectives with their own need to sell their employers’ products.
Wrap accounts, popularized in the mid-1990s, are offered by brokerage houses and
are defined by their individual securities or mutual fund holdings. They offer separate
accounting and flat basis point fee structures, including trading commissions. Trust
banks, or trust departments of banks, are a smaller part of the business today but con-
tinue to manage pools of assets passed down between generations within trust vehi-
cles. As banks have grown through consolidation, their trust management has become
more centralized and standardized.
The mutual fund industry grew rapidly during the post-1981 equity and later bond
bull markets. Individual investors returned to equity funds in droves during that period

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8 Chapter 1 Introduction

EXHIBIT 1.2 More Rigorous

Profile of Portfolio
Managers by
Rigor and Level of Alternatives
Separate
Specialization Account Manager
Pension Consultant Manager

Mutual Fund Firm

Generalist Specialist

Registered
Investment Advisor

Brokerage House

Less Rigorous

after withdrawing assets during the 1970s bear market. In the 1990s mutual fund firms
sought to capture the growing DC market as companies began favoring 401(k) plans
over traditional DB programs. Mutual fund companies competed with investment per-
formance,4 low-cost packages offering record keeping (asset collection, safekeeping,
and reporting); cafeteria-style investment programs (individual mutual fund, balanced
products, and brokerage); and by the late 1990s, full menus offering any investment
option, including competitors’ funds. Lifestyle and horizon-based products were intro-
duced during that period, meeting the need for automatic diversification of the grow-
ing 401(k) balances. The percentage of U.S. households invested in mutual funds grew
from less than 10 percent in 1980 to close to 45 percent by 2007. Over 45 million U.S.
households currently own mutual funds in tax-deferred accounts.5
Separate account money managers tend to specialize in a few investment disciplines,
though larger firms have diversified beyond their original disciplines or even asset
classes. Their clients may be institutional investors, but smaller firms also have high net
worth investors. Sometimes large firms specialize in an asset class attractive to individ-
ual investors, such as municipal bonds.6 Institutional investors, frequently with the help
of consultants, will select specialist managers to fill out their asset allocation profiles.
Alternative managers, including hedge funds and private equity funds, are perhaps
more sophisticated than mutual funds and traditional separate account managers. They
may manage short positions, trade derivatives, and use leverage. In addition, they have
more control over client access to liquidity and can limit transparency. Alternative
investment vehicles include commingled limited partnerships and separate accounts.
Portfolio managers may be categorized by investment process rigor and level of
specialization, as shown in Exhibit 1.2.

4
Interestingly, in the mid-1990s when Vanguard’s passive fixed income performance and a compet-
itor’s active equity performance dominated the mutual fund business, Vanguard introduced the idea
of offering a competitor’s mutual funds, in this case equity funds, combined with its own bond funds
in a single program. Before that event 401(k) plans tended to include only one management firm.
5
Investment Company Institute, “Trends in Ownership of Mutual Funds in the United States, 2007.”
6
Appleton Partners, a $2 billion money manager, specializes in municipals for wealthy individuals as
well as institutional investors.

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Another random document with
no related content on Scribd:
applied also to the parchment-trade carried on at the Fair of St.
Germain.
It is evident from the many renewed edicts and ordinances
referring to this trade that it was not easy to carry out such
regulations effectively, and that much friction and dissatisfaction was
produced by them. It seems probable also that, with the trade in
parchment as in other trades, the attempt to secure uniformity of
price, irrespective of the conditions of manufacture or of the market,
had the effect not infrequently of lessening the supply and of causing
sales to be made surreptitiously at increased prices.
After the use of parchment had in large part been replaced by
paper made of linen, the supplies of Paris came principally from
Lombardy. Later, however, paper-mills were erected in France, the
first being at Troyes and Esson. These earlier paper manufacturers
were, like the book-dealers in Paris, made free from tax. This
exemption was contested from time to time by the farmers of the
taxes and had to be renewed by successive ordinances. Later, the
university associated with its body, in the same manner as had been
done with the parchment-dealers, the manufacturers and dealers in
paper, and confirmed them in the possession of the privileges
previously enjoyed by the librarii and stationarii. The privileges of the
paper manufacturers extended, however, outside of Paris, which
was, of course, not the case with the librarii.
While, in connection with the requirements of the university and
the special privileges secured through university membership, the
book-trade of Paris and the trades associated with it secured a larger
measure of importance as compared with the trade of the provinces
than was the case in either Italy or Germany, there came into
existence as early as the middle of the fourteenth century a
considerable trade in manuscripts in various provincial centres.
In Montpellier, the university was, as in Paris, a centre for
publishing undertakings, but in Angers, Rouen, Orleans, and
Toulouse, in which there are various references to book-dealers as
early as the beginning of the fourteenth century, the trade must have
been supported by a public largely outside of the university
organisation. The statutes of Orleans and of Toulouse, dating from
1341, regulate the supervision of the trade in manuscripts.
In Montpellier, there appears to have been, during the beginning of
the fourteenth century, a business in the loaning of the manuscripts
and of manuscript hefts—pecias, similar to that already described in
Bologna. The university authorities, usually the bedels, supervised
the correctness of the pecias and prescribed the prices at which they
should be rented. The stationarii who carried on this business and
also the venditores librorum were members of the university body.
The sale of books on commission was also supervised under
regulations similar to those obtaining in Bologna.
No stationarius was at liberty to dispose of a work placed in his
hands for sale (unless it belonged to a foreigner) until it had been
exposed in his shop for at least six days, and had at least been three
times offered for sale publicly in the auditorium. This offering for sale
was cared for by the banquerii, who were the assistants or tenants of
the rectors. These banquerii were also authorised to carry on the
business of the loaning of pecias under the same conditions as
those that controlled the stationarii. They were also at liberty, after
the close of the term lectures, to sell their own supplies of
manuscripts (usually of course the copies of the official texts) at
public auction in the auditorium.
It is difficult to understand how, with a trade, of necessity, limited in
extent, and the possible profits of which were so closely restricted by
regulations, there could have been a living profit sufficient to tempt
educated dealers to take up the work of the stationarii or librarii.
It is probably the case, as Kirchhoff, Savigny, and others point out,
that the actual results of the trade cannot be ascertained with
certainty from the texts of the regulations, and that there were
various ways in which, in spite of these regulations, larger returns
could be secured for the work of the scholarly and enterprising
librarii.
An ordinance issued in 1411 makes reference to booksellers
buying and selling books both in French or in Latin and gives
privilege to licensed booksellers to do such buying and selling at
their pleasure. This seems to have been an attempt to widen the
range of the book-trade, while reference to books in the vernacular
indicates an increasing demand for literature outside of the circles of
instructors and students.
In the beginning of the fifteenth century, there was, among a
number of the nobles of families in France, a certain increase in the
interest of literature and in the taste for collecting elaborate,
ornamented, and costly manuscripts.
The princely Houses of Burgundy and of Orleans are to be noted
in this connection, and particularly in Burgundy, the influence of the
ducal family was of wide importance in furthering the development of
the trade in manuscripts and the production of literature.
A large number of the manuscripts placed in these ducal family
libraries were evidently originally prepared by scribes having
knowledge only of plain script, and the addition of the initial letters
and of the illuminated head and tail pieces was made later by
illuminators and designers attached to the ducal families. It was to
these latter that fell the responsibility of placing upon the
manuscripts the arms of the owners of the libraries. In case
manuscripts which had been inscribed with family arms came to
change hands, it became necessary to replace these arms with
those of the later purchaser, and many of the illuminated
manuscripts of the period give evidence of such changing of the
decorations, decorations which took the place of the book-plate of to-
day.
The taste for these elaborate illuminated manuscripts, each one of
which, through the insertion of individual designs and of the family
arms, became identified with the personality and taste of its owner,
could not easily be set aside, after the middle of the fifteenth century,
by the new art of printing. As a matter of fact, therefore, it not
infrequently happened, towards the latter part of the fifteenth century,
that these noble collectors caused elaborate transcripts to be made,
by hand, of works which were already in print, rather than to place in
their own collection books in the form in which ordinary buyers could
secure them.
 By the year 1448, the number of certified librarii in Paris had
increased to twenty-four.[366] Kirchhoff is of opinion that a certain
portion at least of these librarii carried on also other trades, but it is
evident that there had come to be in these years, immediately
preceding the introduction of the printing-press, a very considerable
development in the demand for literature and in the book-trade of the
capital.
In 1489, the list of book-dealers and of those connected with the
manufacture of books who were exempt from taxation included
twenty-four librarii, four dealers in parchment, four dealers in paper,
seven paper manufacturers (having mills outside of Paris), two
illuminators, two binders, and two licensed scribes.
In the following year, the list of librarii free from taxation was
reduced to seventeen. It is probable that those librarii whose names
had been taken off the exemption list undertook a general book
business carried on outside of the university regulations, and were
probably able to secure returns more than sufficient to offset the loss
caused by the curtailing of their freedom from taxation and of their
university privileges.
This reduction in the number of manuscript-dealers who remained
members of the corporation was, however, very promptly made up
by including in the corporation the newly introduced printers. As early
as 1476, one of the four officials of the guild was the printer Pasquier
Bonhomme.
The cessation of the work of the scribes and the transfer of the
book-trade from their hands to those of the printers took place
gradually after the year 1470, the printers being, as said, promptly
included in the organisation of the guild. There must, however, have
been, during the earlier years at least, not a little rivalry and
bitterness between the two groups of dealers.
An instance of this rivalry is given in 1474, in which year a librarius
juratus, named Herman von Stathoen (by birth a German), died.
According to the university regulation, his estate, valued at 800
crowns of gold, (there being no heirs in the country) should have
fallen to the university treasury. In addition to this property in Paris,
Stathoen was part owner of a book establishment in Mayence,
carried on by Schöffer & Henckis, and was unpopular with the Paris
dealers generally on the ground of his foreign trade connections.
Contention was made on behalf of the Crown that the property in
Paris should be confiscated to the royal treasury, and as Schöffer &
Henckis were subjects of the Duke of Burgundy, whose relations with
Louis XI. might be called strained, the influence of the Court was
decidedly in favour of the appropriation of any business interest that
they might have in their partner’s property in Paris. In the contention
between the university and the Crown, the latter proved the stronger,
and the bookseller’s 800 crowns were confiscated for the royal
treasury, and at least got so far towards the treasury as the hands of
the chancellor.
As a further result of the issue which had been raised, it was
ordered on the part of the Crown that thereafter no foreigner should
have a post as an official of the university or should be in a position
to lay claim to the exemption and the privileges attaching to such
post.
While in Paris the manuscript-dealers had been promptly driven
from the field through the competition of the printers, in Rouen they
held their own for a considerable term of years. The space which
had been assigned to the librarii for their shops at the chief doorway
of the cathedral, continued to be reserved for them as late as 1483,
and the booksellers keeping on sale the printed books, were
forbidden to have any shops at this end of the cathedral, but were
permitted to put up, at their own cost, stalls at the north doorway.
The oldest Paris bookseller whose name has been placed on
record is described as Herneis le Romanceur. He had his shop at the
entrance to Notre Dame. His inscription appeared in a beautiful
manuscript presenting a French translation of the Code of Justinian,
a manuscript dating from the early part of the thirteenth century. It is
possible that Guillaume Herneis, whose name appeared in the tax
list of 1292 with a rate of ten livres, was the scribe and the publisher
of the above manuscript, but if this were the case he must have been
at the time of this tax rating well advanced in years.[367] In 1274, the
name of Hugichio le Lombard appears recorded on several
manuscripts which have been preserved in existing collections. In
the taxes of 1292, appears the name of Agnien, Libraire, in the Rue
de la Boucherie, assessed for thirty-six sous. The tax is too large to
make it probable that Agnien was a mere pedlar or did business from
an open stall, and it is Géraud’s opinion that he was charged
probably as a university bookseller to whom the tax collector had
refused the exemption belonging to university members.[368]
In the year 1303, the stock of books of a certain Antoine Zeno,
libraire juré, was scheduled for taxation. Among the titles included in
this schedule are the commentaries or lectures of Bruno on S.
Matthew (57 pages, price one sol), the same on Mark, Luke, and
John, the commentaries of Alexander on Matthew, the Opera Fratris
Richardi, the Legenda Sanctorum, various texts of the Decretals,
commentaries of S. Bernard on the Decretals, a treatise of a certain
Thomas on metaphysics, on physics, on the heavens and the earth,
and on the soul, and a series of lectures on ethics, and on politics.
The scheduled price ranged from one sol to eight sols, the latter
being the price of a manuscript of 136 pages. The books were
probably confined exclusively to texts used in the university
work.[369]
In 1313, appears in the tax list, assessed for twelve sous, the
name of Nicholas L’Anglois, bookseller and tavern-keeper in Rue St.
Jacques.
It is to be noted that the booksellers, and for that matter the
traders generally of the time, are frequently distinguished by the
names of their native countries. It is probable that Nicholas failed to
escape taxation as a bookseller because he was also carrying on
business (and doubtless a more profitable business) in his tavern.
The list of 1313 includes in fact but three booksellers, and each of
these is described as having an additional trade.[370]
A document of the year 1332 describes a sale made by a certain
Geoffroy de Saint Léger, a clerc libraire, to Gérard de Montagu,
avocat du roy au parlement. Geoffroy acknowledges to have sold,
ceded, assigned, and delivered to the said Gérard a book entitled
Speculum Historiale in Consuetudines Parisienses, comprised in
four volumes, and bound in red leather. He guarantees the validity of
this sale with his own body, de son corps mesme. Gérard pays for
the book the sum of forty Parisian livres, with which sum Geoffroy
declares himself to be content, and paid in full.[371] It appears that
the sale of a book in the fourteenth century was a solemn
transaction, calling for documentary evidence as specific as in the
case of the transfer of real estate.
In the year 1376, Jean de Beauvais, a librarius juratus, is recorded
as having sold various works, including the Decretals of Gregory IX.,
illustrated with miniatures, a copy of Summa Hostiensis, 423
parchment leaves, illustrated with miniatures, and a codex of
Magister Thomas de Maalaa.[372]
In the year 1337, Guidomarus de Senis, master of arts and
librarius juratus, renews his oath as a taxator. He seems to have put
into his business as bookseller a certain amount of literary gaiety, if
one may judge from the lines added at the end of a parchment codex
sold by him, which codex contains the poems of Guillaume de
Marchaut.
The lines are as follows:

Explicit au mois d’avril,

Qui est gai, cointe et gentil,
L’an mil trois cent soixante et onze.
D’Avril la semaine seconde,
Acheva à un vendredi,
Guiot de Sens c’est livre si,
Et le comansa de sa main,
Et ne fina ne soir ne matin,
Tant qu’il eut l’euvre accomplie,
Louée soit la vierge Marie.[373]

Philip the Bold, Duke of Burgundy, was one of the more important
book collectors of his time. In 1386, the Duke paid to Martin
L’Huillier, dealer in manuscripts and bookbinder, sixteen francs for
binding eight books, six of which were bound in grain leather.[374]
The Duke of Orleans also appears as a buyer of books, and in 1394,
he paid to Jehan de Marsan, master of arts and dealer in
manuscripts, twenty francs in gold for the Letters of S. Pol, bound in
figured silk, and illuminated with the arms of the Duke.
Four years later, the Duke makes another purchase, paying to
Jehan one hundred livres tournois for a Concordance to the Bible in
Latin, an illuminated manuscript bound in red leather, stamped.
The same Duke, in 1394, paid forty gold crowns to Olivier, one of
the four principal librarii, for a Latin text of the Bible, bound in red
leather, and in 1396, this persistent ducal collector pays sixty livres
to a certain Jacques Jehan, who is recorded as a grocer, but who
apparently included books in his stock, for the Book of the Treasury,
a book of Julius Cæsar, a book of the King, The Secret of Secrets,
and a book of Estrille Fauveau, bound in one volume, illuminated,
and bearing the arms of the Duke of Lancaster. Another volume
included in this purchase was the Romance of the Rose, and the
Livres des Eschez, “moralised,” and bound together in one volume,
illuminated in gold and azure.[375]
In 1399, appears on the records the name of Dyne, or Digne
Rapond, a Lombard. Kirchhoff speaks of Rapond’s book business as
being with him a side issue. Like Atticus, the publisher of Cicero,
Rapond’s principal business interest was that of banking, in which
the Lombards were at that time pre-eminent throughout Europe. In
connection with his banking, however, he accepted orders from
noble clients and particularly from the Duke of Burgundy, for all
classes of articles of luxury, among which were included books.
In 1399, Rapond delivered to Philip of Burgundy, for the price of
five hundred livres, a Livy illuminated with letters of gold and with
images, and for six thousand francs a work entitled La Propriété de
Choses. A document, bearing date 1397, states that Charles, King of
France, is bound to Dyne Rapond, merchant of Paris, for the sum of
190 francs of gold, for certain pieces of tapestry, for certain shirts,
and for four great volumes containing the chronicles of France. He is
further bound in the sum of ninety-two francs for some more shirts,
for a manuscript of Seneca, for the Chronicles of Charlemagne, for
the Chronicles of Pepin, for the Chronicles of Godefroy de Bouillon,
the latter for his dear elder son Charles, Dauphin. The King further
purchases certain hats, handkerchiefs, and some more books, for
which he instructs his treasurer in Paris to pay over to said Rapond
the sum of ninety francs in full settlement of his account; the
document is signed on behalf of the King by his secretary at his
château of Vincennes.[376]
Jacques Rapond, merchant and citizen of Paris, probably a
brother of Dyne, also seems to have done a profitable business with
Philip of Burgundy, as he received from Philip, for a Bible in French,
9000 francs, and in the same year (1400), for a copy of The Golden
Legend, 7500 francs.
Nicholas Flamel, scribe and librarius juratus, flourished at the
beginning of the thirteenth century. He was shrewd enough, having
made some little money at work as a bookseller and as a school
manager, to carry on some successful speculations in house
building, from which speculations he made money so rapidly that he
was accused of dealings with the Evil One. One of the houses built
by him in Rue Montmorency was still standing in 1853, an evidence
of what a clever publisher might accomplish even in the infancy of
the book business.
The list of booksellers between the years 1486-1490 includes the
name of Jean Bonhomme, the name which has for many years been
accepted as typical of the French bourgeois. This particular
Bonhomme seems, however, to have been rather a distinctive man
of his class. He calls himself “bookseller to the university,” and was a
dealer both in manuscripts and in printed books. On a codex of a
French translation of The City of God, by S. Augustine, is inscribed
the record of the sale of the manuscript by Jean Bonhomme,
bookseller to the University of Paris, who acknowledges having sold
to the honoured and wise citizen, Jehan Cueillette, treasurer of M. de
Beaujeu, this book containing The City of God, in two volumes, and
Bonhomme guarantees to Cueillette the possession of said work
against all. His imprint as a bookseller appears upon various printed
books, including the Constitutiones Clementinæ, the Decreta
Basiliensia, and the Manuale Confessorum of Joh. Nider.
Among the cities of France outside of Paris in which there is
record of early manuscript-dealers, are Tours, Angers, Lille, Troyes,
Rouen, Toulouse, and Montpellier. In Lille, in 1435, the principal
bookseller was Jaquemart Puls, who was also a goldsmith, the latter
being probably his principal business. In Toulouse, a bookseller of
the name of S. Julien was in business as early as 1340. In Troyes, in
the year 1500, Macé Panthoul was carrying on business as a
bookseller and as a manufacturer of paper. In connection with his
paper-trade, he came into relations with the book-dealers of Paris.
Manuscript Dealers in Germany.—The information
concerning the early book-dealers in Germany is more scanty, and
on the whole less interesting, than that which is available for the
history of bookselling in Italy or in France. There was less wealth
among the German nobles during the fourteenth and fifteenth
centuries, and fewer among the nobles who had means were
interested in literary luxuries than was the case in either France,
Burgundy, or Italy.
As has been noted in the preceding division of this chapter, the
references to the more noteworthy of the manuscript-dealers in
France occur almost entirely in connection with sales made by them
to the members of the Royal Family, to the Dukes of Burgundy, or to
other of the great nobles. The beautifully illuminated manuscript
which carried the coat-of-arms or the crest of the noble for whom it
was made, included also, as a rule, the inscription of the manuscript-
dealer by whom the work of its preparation had been carried on or
supervised, and through whom it had been sold to the noble
purchaser. Of the manuscripts of this class, the record in Germany is
very much smaller. Germany also did not share the advantages
possessed by Italy, of close relations with the literature and the
manuscript stores of the East, relations which proved such an
important and continued source of inspiration for the intellectual life
of the Italian scholars.
 The influence of the revival of the knowledge of Greek literature
came to Germany slowly through its relations with Italy, but in the
knowledge of Greek learning and literature the German scholars
were many years behind their Italian contemporaries, while the
possession of Greek manuscripts in Germany was, before the
middle of the fifteenth century, very exceptional indeed. The
scholarship of the earlier German universities appears also to have
been narrower in its range and more restricted in its cultivation than
that which had been developed in Paris, in Bologna, or in Padua.
The membership of the Universities of Prague and of Vienna, the
two oldest in the German list, was evidently restricted almost entirely
to Germans, Bohemians, Hungarians, etc., that is to say, to the races
immediately controlled by the German Empire.
If a scholar of England were seeking, during the fourteenth and
fifteenth centuries, special instruction or special literary and scholarly
advantages, his steps were naturally directed towards Paris for
theology, Bologna for jurisprudence, and Padua for medicine, and
but few of these travelling English scholars appear to have taken
themselves to Prague, Vienna, or Heidelberg.
In like manner, if English book collectors were seeking
manuscripts, they betook themselves to the dealers in Paris, in
Florence, or in Venice, and it was not until after the manuscript-trade
had been replaced by the trade in the productions of the printing-
press that the German cities can be said to have become centres for
the distribution of literature.
Such literary interests as obtained in Germany during the
fourteenth century, outside of those of the monasteries already
referred to, centred nevertheless about the universities. The oldest of
these universities was that of Prague, which was founded in 1347,
more than a century later than the foundations of Paris and Bologna.
The regulations of the University recognised the existence of scribes,
illuminators, correctors, binders, dealers in parchment, etc., all of
which trades were placed under the direct control of the university
authorities.
 Hauslik speaks of the book-trade in the fourteenth century as
being associated with the work of the library of the university, and
refers to licensed scribes and illuminators, who were authorised to
make transcripts, for the use of the members of the university, of the
texts contained in the library.[377]
If we may understand from this reference that the university
authorities had had prepared for the library authenticated copies of
the texts of the works required in the university courses, and that the
transcribing of these texts was carried on under the direct
supervision of the librarians, Prague appears to have possessed a
better system for the preparation of its official texts than we have
record of in either Bologna or Paris. Hauslik goes on to say that the
entire book-trade of the city was placed under the supervision of the
library authorities, which authorities undertook to guarantee the
completeness and the correctness of all transcripts made from the
texts in the library. Kirchhoff presents in support of this theory
examples of one or two manuscripts, which contain, in addition to the
inscription of the name of the scribe or dealer by whom it had been
prepared, the record of the corrector appointed by the library to
certify to the correctness of the text.[378]
The second German university in point of date was that of Vienna,
founded in 1365, and, in connection with the work of this university
the manuscript-trade in Germany took its most important
development. There is record in Vienna of the existence of stationarii
who carried on, under the usual university supervision, the trade of
hiring out pecias, but this was evidently a much less important
function than in Bologna.
The buying and selling of books in Vienna was kept under very
close university supervision, and without the authority of the rector or
of the bedels appointed by him for the purpose, no book could be
purchased from either a magister or a student, or could be accepted
on pledge.
The books which had been left by deceased members of the
university were considered to be the property of the university
authorities, and could be sold only under their express directions.
The commission allowed by the authorities for the sale of books was
limited to 2½ per cent., and before any books could be transferred at
private sale, they must be offered at public sale in the auditorium.
The purpose of this regulation was apparently here as in Paris not
only to insure securing for the books sold the highest market prices,
but also to give some protection against the possibility of books
being sold by those to whom they did not belong.
The regulation of the details of the book business appears to have
fallen gradually into the hands of the bedels of the Faculty, and the
details of the supervision exercised approach more nearly to the
Italian than to the Parisian model.
The third German university was that of Heidelberg, founded in
1386. Here the regulations concerning the book-trade were
substantially modelled upon those of Paris. The scribes and the
dealers in manuscripts belonged to the privileged members of the
university. The provisions in the foundation or charter of the
university, which provided for the manuscript-trade, make express
reference to the precedents of the University of Paris.
By the middle of the fifteenth century, there appears to have been
a considerable trade in manuscripts in Heidelberg and in places
dependent upon Heidelberg. In the library of the University of
Erlangen, there exists to-day a considerable collection of
manuscripts formerly belonging to the monastery of Heilsbronn,
which manuscripts were prepared in Heidelberg between 1450 and
1460. The series includes a long list of classics, indicating a larger
classical interest in Heidelberg than was to be noted at the time in
either Prague or Vienna.[379]
The University of Cologne, founded a few years later, became the
centre of theological scholarship in Germany, and the German
manuscripts of the early part of the fifteenth century which have
remained in existence and which have to do with theological subjects
were very largely produced in Cologne. A number of examples of
these have been preserved in the library of Erfurt.
One reason for the smaller importance in Germany of the
stationarius was the practice that obtained on the part of the
instructors of lecturing or of reading from texts for dictation, the
transcripts being made by the students themselves. The authority or
permission to read for dictation was made a matter of special
university regulation. The regulation provided what works could be
so utilised, and the guarantee as to the correctness of the texts to be
used could either be given by a member of the faculty of the
university itself or was accepted with the certified signature of an
instructor of a well known foreign university, such as Paris, Bologna,
or Oxford.
By means of this system of dictation, the production of
manuscripts was made much less costly than through the work of
the stationarii, and the dictation system was probably an important
reason why the manuscript-trade in the German university cities
never became so important as in Paris or London.
It is contended by the German writers that, notwithstanding the
inconsiderable trade in manuscripts, there was a general knowledge
of the subject-matter of the literature pursued in the university, no
less well founded or extended among the German cities than among
those of France or Italy. This familiarity with the university literature is
explained by the fact that the students had, through writing at
dictation, so largely possessed themselves of the substance of the
university lectures.
In the Faculty of Arts at Ingolstadt, it was ordered, in 1420, that
there should be not less than one text-book (that is to say, one copy
of the text-book) for every three scholars in baccalaureate. This
regulation is an indication of the scarcity of text-books.
The fact that the industry in loaning manuscripts to students was
not well developed in the German universities delayed somewhat the
organisation of the book-trade in the university towns. Nevertheless,
Richard de Bury names Germany among the countries where books
could be purchased, and Gerhard Groote speaks of purchasing
books in Frankfort. This city became, in fact, important in the trade of
manuscripts for nearly a century before the beginning of German
printing.[380]
 Æneas Silvius says in the preface of his Europa, written in 1458,
that a librarius teutonicus had written to him shortly before, asking
him to prepare a continuation of the book “Augustalis.”[381] This
publishing suggestion was made eight years after the perfection of
Gutenberg’s printing-press, but probably without any knowledge on
the part of the librarius of the new method for the production of
books.
In Germany there was, during the thirteenth and fourteenth
centuries, outside of the ecclesiastics, very little demand for reading
matter. The women had their psalters, which had, as a rule, been
written out in the monasteries. As there came to be a wider demand
for books of worship, this was provided for, at least in the regions of
the lower Rhine, by the scribes among the Brothers of Common Life.
The Brothers took care also of the production of a large proportion of
the school-books required.
During the fourteenth century and the first half of the fifteenth, the
Brothers took an active part in the production and distribution of
manuscripts. Their work was distinct in various respects from that
which was carried on in monastery or in university towns, but
particularly in this that their books were, for the most part, produced
in the tongue of the common folk, and their service as instructors
and booksellers was probably one of the most important influences
in helping to educate the lower classes of North Germany to read
and to think for themselves. They thus prepared the way for the work
of Luther and Melanchthon.
As has been noted in another chapter, the activity of the Brothers
in the distribution of literature did not cease when books in
manuscripts were replaced by the productions of the printing-press.
They made immediate use of the invention of Gutenberg, and in
many parts of Germany, the first printed books that were brought
before the people came from the printing-presses of the Brothers.
Some general system of public schools seems to have taken
shape in the larger cities at least of North Germany as early as the
first half of the thirteenth century. The teachers in these schools
themselves added to their work and to their earnings by transcribing
text-books and sometimes works of worship. Later, there came to be
some extended interest in certain classes of literature among a few
of the princes and noblemen, but this appears to have been much
less the case in Germany than in Italy or even than in France. In the
castles or palaces where there was a chaplain, the chaplain took
upon himself the work of a scribe, caring not only for the
correspondence of his patron, but occasionally also preparing
manuscripts for the library, so called, of the castle. There is also
record of certain stadtschreiber, or public scribes, licensed as such
in the cities of North Germany, and in some cases the post was held
by the instructors of the schools.
Ulrich Friese, a citizen of Augsburg, writing in the latter half of the
fourteenth century, speaks of attending the Nordlingen Fair with
parchment and books. Nordlingen Church was, it appears, used for
the purpose of this fair, and in Lübeck, in the Church of S. Mary,
booths were opened in which, together with devotional books,
school-books and writing materials were offered for sale.
In Hamburg also, the courts in the immediate neighbourhood of
the churches were the places selected by the earlier booksellers and
manuscript-dealers for their trade. In Metz, a book-shop stood
immediately in front of the cathedral, and in Vienna, the first book-
shop was placed in the court adjoining the cathedral of S. Stephen.
Nicolaus, who was possibly the earliest bookseller in Erfurt, had his
shop, in 1460, in the court of the Church of the Blessed Virgin.
From a school regulation of Bautzen, written in 1418, it appears
that the children were instructed to purchase their school-books from
the master at the prices fixed in the official schedule.[382] A certain
schoolmaster in Hagenau, whose work was carried on between 1443
and 1450, has placed his signature upon a considerable series of
manuscripts, which he claims to have prepared with his own hands,
and which were described in Wilken’s History of the library in
Heidelberg. His name was Diebold Läber, or, as he sometimes wrote
it, Lauber, and he describes himself as a writer, schreiber, in the
town of Hagenau. This inscription appears in so many manuscripts
that have been preserved, that some doubt has been raised as to
whether they could be all the work of one hand, or whether Lauber’s
name (imprint, so to speak) may not have been utilised by other
scribes possibly working in association with him.[383]
Lauber speaks of having received from Duke Ruprecht an order
for seven books, and as having arranged to have the manuscripts
painted (decorated or illuminated) by some other hand. Lauber is
recorded as having been first a school-teacher and an instructor in
writing, later a scribe, producing for sale copies of standard texts,
and finally a publisher, employing scribes, simply certifying with his
own signature to the correctness of the work of his subordinates.
There is every indication that he had actually succeeded in
organising in Hagenau, as early as 1443, an active business in the
production and distribution of manuscripts. The books produced by
him were addressed more generally to the popular taste than was
the case with the productions of the monastery scribes.
In part, possibly, as a result of this early activity in the production
of books, one of the first printing-presses in Germany, outside of that
of Gutenberg in Mayence, was instituted in Hagenau, and its work
appears to have been in direct succession to that of the public writer
Lauber.
The relations between Hagenau and Heidelberg were intimate,
and the scholarly service of the members of the university was
utilised by the Hagenau publishers. The book-trade of Hagenau also
appears to have been increased in connection with the development
of intellectual activity given by the Councils of Constance and Basel.
In regard to the latter Council, Kirchhoff quotes Denis as having said:
Quod concilium, qui scholam librariorum dixerit haud errabit.[384]
Either as a cause or as an effect of the activity of the book
production in Hagenau, the Hagenau schools for scribes during the
first half of the fifteenth century became famous.[385] The work of
producing manuscripts appears to have been divided, according to
the manufacturing system; one scribe prepared the text, a second
collated the same with the original, a third painted in the rubricated
initials, and a fourth designed the painted head-pieces to the pages,
while a fifth prepared the ornamented covers. It occasionally
happened, however, that one scribe was himself able to carry on
each division of the work of the production of an illuminated
manuscript.
Hagen quotes some lines of a Hagenau manuscript, as follows:

Dis buch vollenbracht vas,

In der zit, also man schreip vnd las,
Tusent vnd vyer hundert jar.
Nach Christus gebort daz ist war,
Dar nach jn dem eyn vnd siebentzigsten jar,
Vff sant Pauly bekarung, daz ist ware,
Von Hans Dirmsteyn, wist vor war,
Der hait es geschreben vnd gemacht,
Gemalt, gebunden, vnd gantz follenbracht.[386]

Hagenau was one of the few places of book production (excepting

the workshops of the Brothers of Common Life) in which, during the
manuscript period, books were prepared to meet the requirements of
the common folk. The literature proceeding from Hagenau included
not only “good Latin books,” that is to say, copies of the accepted
classics as used in Heidelberg and elsewhere, but also copies of the
famous Epics of the Middle Ages, the Sagas, Folk Songs, Chap-
Books, copies of the Golden Bull, Bible stories, books of worship,
books of popular music, books of prophecy, and books for the telling
of fortunes, etc.[387]
Throughout both Germany and the Low Countries, it was the case
that, during the manuscript period, the work of the school teachers
was closely connected with the work of the producers and sellers of
manuscripts, and the teachers not infrequently themselves built up a
manuscript business. The school ordinance of the town of Bautzen,
dating from the year 1418, prescribed, for example, the prices which
the scholars were to pay to the locatus (who was the fifth teacher in
rank in the institution) for the school-books, the responsibility for
preparing which rested upon him.
A history of the Printers’ Society of Dresden, printed in 1740, gives
examples of some of these prices:
 For one A. B. C. and a paternoster, each one groschen.
For a Corde Benedicite, one groschen.
For a good Donat, ten groschens.
For a Regulam Moralem et Catonem, eight groschens.
For a complete Doctrinal, a half mark.
For a Primam Partem, eight groschens.

In case no books are purchased from the locatus, there shall be

paid to him by each scholar, if the scholar be rich, two groschens, if
he be in moderate circumstances, one groschen, and if the scholar
be poor, he shall be exempt from payment.[388]
A certain Hugo from Trimberg, who died about 1309, is referred to
by Jaeck as having been a teacher for forty years, at the end of
which term he gave up the work of teaching with the expectation of
being able to make a living out of his collection of books. The
collection comprised two hundred volumes, of which twelve are
specified as being original works, presumably the production of
Trimberg himself. Jaeck does not tell us whether or not the good
schoolmaster was able to earn enough from the manifolding or from
the sale of his books to secure a living in his last years.[389]
Kirchhoff refers to the importance of the fairs and annual markets
for the manuscript trade. It is evident that, in the absence of any
bookselling machinery, it was of first importance for the producers of
copies of such texts as might be within their reach, to come into
relations with each other in order to bring about the exchange of their
surplus copies.
There is record of the sale and exchange of manuscripts, during
the first half of the fifteenth century, at the Fairs of Salzburg, Ulm,
Nordlingen, and Frankfort. It was in fact from its trade in manuscripts
that Frankfort, by natural development, became and for many years
remained the centre of the trade in printed books.[390] Ruland
speaks of one of the most important items of the manuscript-trade at
the Frankfort Fair between 1445 and 1450, being that of fortune-
telling books and illustrated chap-books.
 It appears also from the Fair records that in Germany, as in Italy,
the dealers in parchment and paper were among the first to
associate with their goods the sale of manuscripts. In 1470, occurs
the earliest record of sales being made at the fair in Nordlingen of
printed books.[391] The earliest date at which the sale of printed
books at the fair at Frankfort was chronicled was 1480. In 1485, the
printer Peter Schöffer was admitted as a citizen in Frankfort.
While Kirchhoff maintains that the distribution of books in
manuscript was more extensive in Germany than in either France or
Italy, and emphasises particularly the fact that there was among
circles throughout Germany a keener interest in literature than
obtained with either the French or the Italians, he admits that the
record of noteworthy booksellers in Germany, during the manuscript
period, is, as compared with that of France and Italy, inconsiderable.
In Cologne, he finds, as early as 1389, through an inscription in a
manuscript that has been preserved, the name of Horstan de
Ledderdam, who called himself not a librarius, but a libemarius. The
manuscript that bears this record is a treatise by Porphyry on
Aristotle.
In Nordlingen, the tax list of 1407 gives the name of Joh. Minner,
recorded as a scriptor. There is an entry of a sale made by Minner to
the Burgermeister Protzen of a German translation of the Decretals.
The tax list of 1415 gives the name of Conrad Horn, described as a
stadtschreiber. Horn seems to have carried on an extensive
business in the production and the exchange of manuscripts.
Kirchhoff quotes a contract entered into by him in 1427 with a certain
Prochsil of Eystet for the purchase of a buch, the title of which is not
given, for the sum of forty-three Rhenish gulden.
The name of Diebold Lauber has already been mentioned. His
inscription appears on a number of manuscripts that have been
preserved principally through the Heidelberg University. On the first
sheet of a Legend of the Three Holy Kings from this library, is written
the following notice, which can be considered as a general
advertisement: