What is Project Portfolio Management?

by Paul Harder

May 7, 2002

You may be surprised to find out that PPM derives its beginnings from the world of financial investing. PPM leverages the work of a Nobel Prize-winning economist to bring balance to an organization's project activities.

The World of Modern Portfolio Theory
In the early 1950s, Harry Markowitz--an economist at the City University of New York--created a theory about investment that would change the world. He created a unique approach to investing in stocks and other assets. Unlike traditional asset management, which focused on predicting individual stock price movements using fundamental or technical analysis, Markowitz focused on evaluating the performance of a portfolio of assets based on the combination of its components' risk and return. His hypothesis and subsequent work were so revolutionary that Professor Markowitz was a joint Nobel Laureate for economics in 1990. This system has become known as the Modern Portfolio Theory (MPT).

However, this theory had to wait for advances in computer power to become fully available.