Assume you were approached by a client five years ago with £1000,000 to invest in the portfolio of equities. As an asset manager working for a reputable company in the city, you asked various questions related to risk appetite and investment objectives of the client who agreed to invest the fund passively for the first five-year period. Management Assignment Help
This year you decided to invest the money actively for the 10-week period from teaching week 3 to week 12*. In teaching week 3, you are therefore required to reinvest the realised money from passive investment in an active manner for which you have decided to make a thorough economic environment analysis and forecasting including a reassessment of your client’s risk tolerance and investment objectives. In this active investment period, your client is happy to continue investment in a new portfolio that is comprised of Equities (stocks) and Fixed-Income securities (corporate bonds). The client has surplus fund so if the money available from the realisation of passive portfolio is less than £1000,000, the client will fund the difference amount to invest in the active portfolio i.e., you will have a minimum of £1,000,000 to invest in the new portfolio.
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During the active portfolio management period of 10 weeks, you are instructed to select a range of suitable equities and bonds (only corporate bonds) for inclusion in the portfolio. In this period, you can buy, hold or sell securities. However, such decisions should be based on the findings of appropriate investment theory, models and relevant analysis. You are encouraged to make use of the Bloomberg trading terminals for portfolio functionalities where available (but excel may be used).
Required:
1. Demonstrating the application of appropriate theory (supported by reference to academic literature), you should supply a detailed analysis of how your portfolio was constructed and managed. You must include the key theories and principles of valuation, yield and volatility. Additionally, you should compare your portfolio performance with the suitable benchmark(s) and provide a narrative interpretation of the evaluation. Management Assignment Help
2. You must supply as an Appendix to the assignment (outside of the word limit), the required client information set out in A to C below. This is to enable the client to review your performance with a view to retaining your services.
A. Construction of the portfolio (for both passive and active investment strategy): Proposed overall allocation with justification demonstrating how the asset allocation match the investor profiling.
B. Management of the stocks and bond portfolio (active portfolio only): Details of changes made including reflection on strategy selected and reasons for portfolio restructuring. Your rebalancing strategies should be supported by relevant investment theories and assets pricing models.
C. A final evaluation of overall performance (for both the active and passive portfolio) as at the end of Teaching Week 12 carried out using suitable quantitative measures. These calculations should motivate your discussion of portfolio performance evaluation in requirement 1 above.
3. In line with the Value at Risk method of risk measurement, explain the risk exposure faced by your portfolio. Your client should be provided with the results of your calculated risk at 95% confidence interval. Client has also requested information about hedging risk using derivative instruments. As such, this section of your report should include relevant literature for VaR, risk exposure, and an illustrative example of hedging using Derivatives. Management Assignment Help
