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Fund type: Investment Trust
Inception date: 1st January 2012
Resident country of investors: UK
Fund aims: Maximisation of income.
Return basis: “Relative” to FTSE all share
Management contract: 1.25% annual fee taken on 31st December each year (based on total value of fund including cash position)
Maximum number of holdings: 15
Limitations on investments: Socially responsible investments only. The extent of this will be left to the judgement of the fund manager.
Use of derivatives: Not permitted
Asset allocation limitations: None
Strategy: Buy and hold (long- term approach)
Permitted to invest overseas: Yes
Investment Name EPIC Code Size of holding Notes
BP BP. 100,000 shares
HSBC HSBA 120,000 shares
Centrica CNA 80,000 shares
Prudential PRU 20,000 shares
Astrazeneca AZN 15,000 shares
Diageo DGE 40,000 shares
Provident Financial PFG 10,000 shares
Tesco TSCO 150,000 shares
National Grid NG. 100,000 shares
Close Brothers CBG 70,000 shares
8% Treasury Stock 2015
– £100,000 Nominal UKT8 12/07/15
1.3/4% Treasury GILT 2022 – £150,000 Nominal UKT1<3/4
Cash £ £500,000 On deposit earning 1% pa since fund inception date
In the report you will discuss how your portfolio could be reconstructed and managed to meet the aims of the fund set out in the supporting information. It is expected that some discussion on the use of derivatives will be given in order to explore how they could be used to meet the objectives of the portfolio. Your recommendations should utilise a range of appropriate techniques for security selection and be fully researched. You must also make reference to key academic theories underpinning portfolio construction and security analysis
Any supporting documents, such as excel spreadsheets, tables, charts etc. should be securely attached to your work when it is submitted.
You can choose any cut off date you wish – however, practically, this should be within the 3 month period prior to submission.
It is at this date which you will buy and sell shares
No news articles etc should be used after this date so perhaps best to leave your cut off date as late as possible
Remember that although the inception date was 1st January 2012 doesn’t mean that data and information before this date cant be used!
Outcome 1 20/100
Analysis of the past performance of the portfolio
Outcome 2 30/100
Identify & measure the risks which the fund faces in the current climate.
Outcome 3 40/100
Outline key recommendations for changes to the existing portfolio with consideration given to key investment theories.
Outcome 4 10/100
Written communication and use of information sources
No definitions: use a glossary for this
This assignment is about critical analysis not description
View marking scheme as a guide to word count for each section. This is in the module guide.
Your report should include the following
Clearly numbered sections
References List & Bibliography
KEY TOPICS / STRUCTURE
Brief overview of what’s wrong with the current portfolio
What asset allocation you want your new portfolio to look like and whY;
More detailed sector allocation discussion
Decision on top down / bottom up approach
Detailed discussion on what stocks and assets to put in the portfolio and how they have been picked
If derivatives or any special investments are being recommended
How your new portfolio meets the funds aims
EXECUTIVE SUMMARY This should be a summary of your key findings in one short paragraph
Should be short and simply state what changes you have made.
eg. to key stocks and asset allocation
Past Performance You will need to measure the past performance of each element of the existing portfolio, upto your chosen cut-off date.
Include capital performance, any interest accrued and any dividends received in the period of analysis.
This section should be brief and get straight to the point about what the problems of the portfolio are in its current form
Identify and if appropriate, measure the risks facing the portfolio in the current economic climate;
It is these problems you are going to address in the assignment ;
Recommendations for changes Details of the key changes you will make;
What asset allocation you want your new portfolio to look like and why;
More detailed sector allocation discussion;
Decision on top down / bottom up approach;
Detailed discussion on what stocks and assets to put in the portfolio and how they have been picked;
If derivatives or any special investments are being recommended;
How your new portfolio is expected to meet the aims of the portfolio;
INVESTMENT THEORY This should includ;
The approach you are taking;
eg. Fundamental, top down, strategic …..;
Key theories such as EMH, RWH in the context of your approach;
Key limitations and empirical and academic findings;
PORTFOLIO THEORY Alongside your discussion it is important that some appreciation is made of the key theoretical determinants of portfolio construction and returns.
This also includes some critical evaluation of the techniques which you have used to pick your investments;
However when picking the shares you do not have to bound by these theoretical considerations providing you have discussed them.
However if you feel such arguments stand you can follow their best practice if you wish. However please ensure the funds aims are fully met.
NEW ASSET ALLOCATION This is where you want to ‘get to’ in terms of your new portfolio;
You should justify why this new asset allocation is suitable in meeting the aims of your new portfolio;
Some discussion on portfolio theory should be given here and different approaches to portfolio construction;
DETAILED ANALYSIS You should provide more detailed analysis on the sectors and investment types you are going to investigate / include / recommend if following a top down approach;
If you are taking a bottom up approach this section is not really required;
PORTFOLIO OVERVIEW I am unable to talk about each specific portfolios as there are a number of them. So the following advice is rather generic;
If required, you can make any assumptions as necessary, providing these are appropriate and justified.
You may ignore the effects of charges, commission, trading costs and taxes for the purpose of the assignment, assume that these are all nil. You should mention this assumption and its relevance, in your discussion.
PORTFOLIO RECONSTRUCTION Looking at the current portfolio and the additional cash which needs to be invested you must make recommendations on how the portfolio should be reconstructed to meet the funds aims
If you wish you can retain some part of the existing holdings, however, justification should be included;
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