Subject Code & Title :- MAF 707 Investments And Portfolio Management
Assignment Type :- Assessment 2
1 Assessment outline :-
Theta Asset Management (TAM) is an Australian asset manager with offices in over 18 countries. Assume you joined the asset manager recently as an in-house analyst responsible for the Equity and Exchange Traded Investments division.The board of management has charged you with the responsibility of assembling efficient portfolios for the benefit of the company using the asset groups identied on pages 2 and 3 of this document. The TAM serves a total of 179 clients which include institutional investors and high-net-worth individuals.
MAF 707 Investments And Portfolio Management Assessment 2
A client must have a minimum balance of $50 million to receive individualised service from your asset management company. This means that you must develop a set of optimal portfolios that contain the optimal asset mix for the smallest amount of money required to invest via the TAM. You have been given ten small cap stocks, ten large cap stocks, and ten exchange-traded funds to create potential asset mix individually for each group. This assignment requires you to write a report (3000 words in total including 400 words for the executive summary and conclusion that addresses the two distinct parts (see Section 2 Part I and Part II for further details) associated with this assessment.
2 Specific details
2.1 Part I
Parts I of this assignment is designed to help you gain a better understanding of large-cap stocks small-cap stocks and exchange traded funds (ETFs) as distinct asset groups that form part of investment portfolios. You do not have to limit this general discussion to the Australian market and you are encouraged to read widely and provide a critical perspective of these groups of asset in terms of their growth potential stability and historical risk-return performance.
MAF 707 Investments And Portfolio Management Assessment 2
2.2 Part II
Part II of this assignment requires you to engage your theoretical knowledge learned in this unit to implement portfolio management principles using Markowitz optimization techniques. For this purpose you have been provided with the price data for three the distinct groups of assets – small-cap stocks large-cap stocks and Exchange Traded Funds (ETFs).
Group 1: Small Cap ASX stocks
PILBARA MINERALS
EML PAYMENTS
BEGA CHEESE
NICK SCALI
BWX
CLINUVEL PHARMACEUTICALS
HARVEY NORMAN HOLDINGS
JAPARA HEALTHCARE
INVOCARE
BABY BUNTING GROUP
Group 2: Large Cap ASX stocks
COMMONWEALTH BK.OF AUS.
WESFARMERS
FORTESCUE METALS GP.
TRANSURBAN GROUP STAPLED UNITS
WESTPAC BANKING
SCENTRE GROUP UNIT
REA GROUP
CSL
THE A2 MILK COMPANY
AGL ENERGY
Group 3: Exchange Traded Funds(ETFs)
VANGUARD FTSE PACIFIC FUND ETF
VANGUARD MID-CAP INDEX FUND ETF
VANGUARD 500 INDEX FUND ETF
VANGUARD SMALL-CAP INDEX FUND ETF
VANGD.INTERMEDIATE- TERM TRSY.IDX.FD ETF
VANGUARD GROWTH INDEX FUND ETF
VANGUARD FTSE ALL WORLD EX US ETF
VANGUARD AUSTRALIAN(OTC) SHARES INDEX ETF
VANGUARD VALUE ETF
VANGUARD US MINIMUM VOLATILITY ETF
MAF 707 Investments And Portfolio Management Assessment 2
a) You are required to generate daily continuously compounded returns for each of the 30 assets and to create three equally weighted portfolios for each of the three groups using the data provided in the spreadsheet File name: Price data for Assignment II.xlsx (Large caps; Small caps; and ETFs)
Hint: You will create one equally weighted large-cap portfolio using the ten large-cap stocks in the data file one equally weighted small-cap portfolio using the ten small-cap stocks in the data file and one equally weighted ETF portfolio using the ten ETFs in the data file.)
Further more you must calculate traditional portfolio evaluation measures such as the Sharpe ratio and Treynor ratio as well as any other measures you believe are relevant to compare the three portfolios as distinct groups critically evaluating their performance and suitability for the specific group of investors that the TAM serve as part of their portfolio of customers.
MAF 707 Investments And Portfolio Management Assessment 2
b) Assuming short-sales are not permitted, you are required to construct separate efficient frontier using the continuously compounded return data from 15 February 2018 to 18 August 2021 (data has been provided in the folder) for different target returns such as 2%, 3%, 4%, 5%, 6%, 7%, 8%, 9%, 10%, 11%, 12%, 13%, 14%, 15%, 16%, 17%, 18% and 20%. (Hint: Please note that you may not find succesful convergence at certain levels of target returns and please identify them and report them as infeasible).
Given that the TAM’s investors fall into three categories: low-risk 4% to 6% target returns medium risk (8% to 10% target returns and high-risk 12% to 15% target returns). You are advised to identify
suitable efficient portfolios for each of these categories and provide details weights annualised returns and standard deviations, as well as Treynor and Sharpe ratios please maintain neatness and readability of the estimation output with respect to individual target returns). After completing these estimation procedures you must conduct a critical analysis of these portfolios.
MAF 707 Investments And Portfolio Management Assessment 2
3 Learning outcome details
3.1 Unit Learning Outcome (ULO) assessed
ULO1:
Students will need to develop and apply a sophisticated understanding of how financial markets operate including portfolio theory managed funds different asset classes derivative products and inter national investments.This assignment aims to develop an under standing of exchange traded funds and apply trading rules to create and track portfolios.
ULO2:
Students will need to reflect on the ethical obligations of a Financial Advisor in the context of portfolio optimisation and critically evaluate various trading strategies with respect to their portfolio performance.
ULO3:
Students will need to undertake independent research to design a portfolio optimisation strategy and apply it by critically analysing a range of complex finance related information to recommend defendable investing and financing decisions. This requires writing a business report on portfolio analysis using the assets provided in the assessment task.
ULO4:
Students will need to demonstrate the ability to evaluate and use different asset classes captured in this assignment.
MAF 707 Investments And Portfolio Management Assessment 2
3.2 Graduate Learning Outcome (GLO) assessed
GLO1: The assignment is for investment-specific knowledge and capabilities which is for appropriate to the level of study related to an investment or profession.
GLO3: The assignment is for digital literacy which is for using technologies to find use and disseminate information.
GLO4: The assignment is for critical thinking ability which is for evaluating information using critical and analytical thinking and judgment.
GLO6: The assignment is for self-management ability which is for working and learning independently and taking responsibility for personal actions.
GLO8: The assignment is for global citizenship which means to engage ethically and productively in the managed fund context and with diverse communities and cultures in a global context.
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