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FINC 340 Investments Unit #1 Written Assignment Write an Investment Policy Statement INSTRUCTIONS: Using the APA Guidelines outlined in the syllabus...
Can someone answer this? Its an IPS statement
INSTRUCTIONS: Using the APA Guidelines outlined in the syllabus write an Investment Policy Statement (about 200 to 300 words) for the hypothetical client described below.
THE SITUATION: You are a Research Analyst working for a top portfolio management firm, "UMUC Portfolio Management" (in no way affiliated with the University of Maryland University College). A high-net-worth client has approached your firm with the objective of finding an analyst qualified to manage their large portfolio. Your firm has selected several of its analysts to develop test portfolios in order identify the best person to manage the portfolio of this rich client. You have been selected by your firm to develop a 5-week trial portfolio to present to the client (and class). Because of the importance of this client (and their potentially large investment) your fee for demonstrating superior portfolio selection and management skill will be substantial. The analyst with the best report will become the portfolio manager for this high-net-worth client's portfolio (valued at over $100 million). Your portfolio management report and presentation will be submitted directly to your firm's high-net-worth client with the approval of your firm's Board of Directors. The success of your recommendations will determine the success of your firm in landing this large investor. (It is expected that your portfolio recommendations will not be the same as those reached by other analysts). You should do a market wide financial evaluation to determine the current situation, best investment course, appropriate asset allocation for this important client.
OVERVIEW OF PORTFOLIO: You are to consider all necessary and relevant stock market performance and information, trends, and projections in supporting your strategy. These factors should include, but are not necessarily limited to, stock screens, earnings forecasts, P/E ratios and industry comparisons, technical analysis and trends, capital market relationships, and analysts' reports and ratings. Your report will specifically be concerned with risk and return, sector analysis, cumulative wealth, capital market line, security market line, and performance rankings. In addition, you must consider portfolio weights, commission costs and other factors covered in the course.
Investment constraints are (1) you cannot purchase the S & P 500 Index, (2) you cannot purchase bond funds, (3) you cannot purchase mutual funds or bond funds (3) you cannot trade securities during the 5-week holding period and (4) bonds cannot be purchased on CBOE. You will have to simulate your purchase of bonds using Yahoo! Finance or another source and track the purchase on your tracking spreadsheet.
The investment schedule of the portfolio is as follows:
Week 2- Invest $100,000 in Stocks or ETFs
Week 3- Invest $100,000 in Bonds
Week 4- Invest $100,000 in Options
Week 5- Invest $100,000 in Futures
Week 6- Friday by the Closing Bell of the NYSE, Sell the Portfolio
INVESTMENT POLICY CHEAT SHEET: Your investment policy statement should include the following:
Risk: The fact pattern does not provide information about the client’s risk tolerance. However, due to the short time horizon the client will be likely to take on more risk than usual.
Return objectives: You are in competition with others to provide as high a return as possible in five-weeks.
Investment constraints: (1) you cannot purchase the S & P 500 Index, (2) you cannot purchase bond funds, (3) you cannot purchase mutual funds or bond funds (3) you cannot trade securities during the 5-week holding period and (4) bonds cannot be purchased on CBOE. You will have to simulate your purchase of bonds using Yahoo! Finance or another source and track the purchase on your tracking spreadsheet.
Taxes: The short holding period (five-weeks) makes the tax impact neglible.
Your investment theory: Some financial advisers start with a portfolio theory then apply it to all clients. Other financial advisers start with the client and base the portfolio on the client’s wants and desires.
The asset allocation of the portfolio is 25 percent ETFs or equtieis, 25 percent bonds, 25 percent options and 25 percent futures. To benchmark this portfolio you will have to compare it to an index you create of the market performance of 25 percent each of ETS or equities, bonds, options and futures. This will show your knowledge and skills as a portfolio manager compared to the market your portfolio represents. (Note: This does not indicate the amount the risk in the portfolio.)
