Case Study: Portfolio Management Project 3208AFE, Trimester 2, 2020

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1. Outline

Your fund management firm has been asked to submit a proposal to construct and then manage an active equity portfolio for a potential client (the client is an Australian company called CalderaInvestments). The specifications are:

Stock Markets:                         USA

Portfolio Size:                          US$20M

Portfolio Composition:                        8US stocks (making up 50% to 100% of portfolio),

US equity ETFs (the balance of the portfolio)

Preferred Assets:                      Stocks: any component of the USS&P 500 Index. ETFs: any US equity ETF.

Investment Horizon:                5 years commencing November 1st, 2020

Investment Strategy:                Complying with your chosen investment style

Transaction Costs:                   Management fees, brokerage rates, statutory costs etc. should be advised as part of the proposal.

(Additional specifications will be given in the lectures and at learning@gu.)

2. Report

A written report is required. The Portfolio Report must comprehensively describe your portfolio management project and should be of the highest professional standard. The appendices should contain essential information, calculations and data only. The appendices should be at the end of the report so that they can be accessed easily by the examiner. The report will be submitted online as one pdf file.Additional requirements for the report will be given in the lectures and on learning@gu.

3. Stock Screening Process

Reduce the stocks under consideration to 20 by a stock screening process that accords with your chosen investment style. From these 20 stocks, undertake anin-depth stock selection process (that must also be consistent with your chosen investment style) for choosing 8 stocks from these 20 with the potential to outperform over the investment horizon. This process must involve fundamental analysis and be consistent with your investment style, and it mayinvolve other techniques if this is part of your investment style. If your firm wishes to include any ETFs then these must also be consistent with your chosen style.Further details will be discussed in the lectures, tutorials and on learning@gu.

4. Portfolio Construction

Your client has also expressed interest in the concept of ‘efficient’ portfolios.

  • Based on the best 8 stocks selected by the stock screening process (plus any ETFs you have selected), findthe minimum variance portfolio weights.
  • Determine your preferred portfolio, and if it differs from the answer in part (a), explain your reasoning.

The portfolio should be constructed, implemented and managed within the investor’s specifications, and evaluated and reported accordingly. Your final portfolio represents the initial portfolio you would recommend to the client if the proposal is accepted.

Reports must contain the reasons and rationale for the stock selection process used, and for the final portfolio.

5. Groups

Each student is to undertake the project as part of a team of 4-5 students. The written Case Study Report is due in , on the  4 of September, and is worth 40% of the course mark. Note: each student is also required to produce a 3-minute video presentation (worth 20% and due in Week 12) about the fund management firm and the Case Study report. The videos are individual assessments. Details to follow.

6. Project Hints

Start data collection as soon as possible. Participate in workshops because much of the analysis will be practiced there. Do not waffle. Quality is more impressive than quantity. Ask questions early!

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