In order to answer all the sections in paper, you would need to create a database, which will support your past and future recommendations to the client. The statistics that must be included in the paper: FTSE 100 performance (UK) from 2008 to 2013, Treynor’s ratio (Excess Return to Beta), Security Market Line (SML) Properties, Annualised return of FTSE 100 UK, Top 20 risk adjusted performers ranked by beta, Pearson correlation matrix for chosen stocks. Statistics in the appendices, which are not included in the word count: Portfolio Efficient Frontier, Capital Market Line Properties, Historical portfolio performance, Pie chart with a portfolio breakdown and shown percentages for each investment, Normal distribution of Annual Portfolio Returns, Indexed Stock Returns from 2008 to 2013, Indexed Portfolio and FTSE 100 returns from 2008 to 2013, Correlations among Stock Indices, Risk for Foreign Investor in Stocks, Portfolio Standard Deviation Calculation, Weighted VAR-COVAR MATRIX, Portfolio Value Track.
You are a manager in the investment industry, whose role is to provide investment portfolio advice and management to a client. You should identify the profile of this client (age, sex, past experience, geography, capital appreciation expectations, income expectation, risk profile (aversive or not), portfolio thoughts (e.g capitalist or philanthropist), need for income at future time periods, need for capital, fee/cost horizons, capital withdrawals and additions, need for liquidity, tie up and tie down periods, morals, ethical and social responsibility aspiration, sustainability, range of portfolio (no to extreme ratios), guiding metrics), your investor principal, who should reflect a typical client profile which you may outline and define. The time period of your selection of a past investment strategy and its investment outcomes may be defined by you (the investment manager), but your future investment strategy would reflect the same period in the future investment strategy (take 5 years in the past and then 5 years to the future). You should make reasonable assumptions in undertaking this task that reflect the nature and experience from the world of investment practice. Your answer should be a balance of both practice and theoretical approaches to investment management. You should validate your work with appropriate documentation, statistics, numerical data and information on matters referred to in your work that might be included in the appendices of the assignments (i.e. not included in the 3000 word limit in course assignment).
1. Setting investment philosophy. Outline what investment strategy you as the investment manager might have adopted in a past time period in meeting a principal investors’ objectives with an allocated fund of £1,000,000 (one millions pounds sterling). You might use the range of financial investments that are available in the marketplace that might reflect your aspirations in meeting your investor principal’s expectations and explain to your investor principal your rationale for the securities included in your portfolio.
2. You should formulate your past strategy with its asset portfolio of securities. State their nature, characteristics, prices and volumes transacted during the life of your investment strategy and their value outcomes over the period of the investment strategy’s period (range of investments (1 or more), Markowitz, passive/active, asset weights (20/20.20), capital allocation, returns, capital appreciation annual, income annual). Basically you are telling the client that if he/she would have been with you for the past 5 years, you would have actively responded to the changes in the past. Show that you could have done it better, as you know this stuff (time period 2008-2013).
3. Theory. Your principal investor has been sent literature and had a conversation with another investment company describing the nature of the market and its mechanisms that have caused him some concern about the various frameworks, ideas and financial vocabulary that they used (i.e theory, concepts and terms of investment). Provide an explanation of these key investment frameworks and concepts that guide your provision of your professional expertise of investment advice and management that enable you to advise him, your investor principal as his client. In short, explain how the market of financial assets and securities functions using the theory and practice to reassure your client.
4. Future portfolio. From your past investment portfolio strategy and your explanation to your client outline the basis of your future portfolio for the same principal and indicate the rationale for your asset portfolio, its portfolio weightings and the securities therein, giving due consideration to the risks involved in pursing this strategy. In so doing, you would outline what assets and securities are in your investment portfolio and their likely value outcomes. You should also outline what other investments are available but not included in this portfolio and why they have excluded from your portfolio section. When investing outside your country, always consider the exchange rate (transaction cost). You’ll need to make some assumptions about the future, basing those predictions on the past exchange rate patterns (have to put it in words in a smart, so that you will also be able to justify your predictions – all the numbers you can put into the appendices).
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