Reference no: EM131960400

Investments & Portfolio Management Assessment -

Assessment objectives - This assignment requires you to write a report (3000 words with 600 words allocated for the executive summary and conclusion) covering the three parts outlined below. The purpose of Part I of this assignment is to build your general understanding of exchange-traded funds (ETFs) as a form of managed investment in terms of its evolutionary path globally, fund objectives of different ETFs, categorization of ETFs on the basis of asset classes covering equity, fixed income and commodity, and finally discuss about popular ETFs in USA and Australia. This section has a word limit of 800 words.

Having developed a general understanding of ETFs in Part I, the second part of this assessment requires you to further enhance your knowledge by narrowing down your investigation to Vanguard MSCI Australian Small Companies Index ETF (VSO). This part requires you to reflect on their fund structure, objectives, sectoral diversification and performance. This requires you to conduct your own research about this fund. In addition, we have also appended selected Bloomberg screens from the Portfolio & Risk Analytic function capturing structure and performance related issues associated with this particular fund at a given point in time - including the underlying assets that form part of this portfolio (see the Excel Spread Sheet for additional details on member companies and weightings [Tab 2: All companies and weights]). Carefully examine these screens from Bloomberg and interpret the information provided by these screens. The aim of this section is to develop industry based authentic learning outcomes by directly incorporating industry practices. This section has a word limit of 800 words.

Part III of this assignment requires you to engage your theoretical knowledge learned in this unit to implement portfolio management principles using Markowitz optimisation techniques. For this purpose, we further narrow down the fund to a sub-sample of 11 stocks representing all industry sectors covered by Vanguard MSCI Australian Small Companies Index ETF (VSO). This section has a word limit of 800 words.

2 Specific details

2.1 Part I -

Discuss your understanding of Exchange Traded Funds (ETF). Your discussion will cover the evolution of global ETF structure; ETFs categorized on the basis of asset classes: Equity, Fixed Income and Commodity: major ETFs in USA and Australia. (Word limit 800 words)

2.2 Part II -

II) You are required to discuss the fund structure, objectives, sectoral diversification and performance of Vanguard MSCI Australian Small Companies Index ETF (VSO). You are expected to conduct your own research about this fund in addition to the appended Bloomberg screens from the Portfolio & Risk Analytic function capturing structure and performance related issues associated VSO provided in Appendix I - including the underlying assets that form part of this portfolio (see the Excel Spread Sheet for additional details on member companies and weightings).Hint: pay attention to the appropriateness of the benchmark used against Vanguard MSCI Australian Small Companies Index ETF (Bloomberg screens 3 to 6 in Appendix 1). (Word count: 800 words)

2.3 Part III -

Assume that you are required to spend AUD 500 Million across the following sub-sample of 11 stocks that form part of Vanguard MSCI Australian Small Companies Index ETF (VSO) covering all sectors:

BLOOMBERG TICKER & COMPANY NAME

1) SGR AU Equity - STAR ENTERTAINMENT GRP LTD

2) MTS AU Equity - METCASH LTD

3) WOR AU Equity - WORLEYPARSONS LTD

4) IFL AU Equity - IOOF HOLDINGS LTD

5) ANN AU Equity - ANSELL LTD

6) DOW AU Equity - DOWNER EDI LTD

7) CAR AU Equity - CARSALES.COM LTD

8) DLX AU Equity - DULUXGROUP LTD

9) CHC AU Equity - CHARTER HALL GROUP

10) VOC AU Equity - VOCUS GROUP LTD

11) SKI AU Equity - SPARK INFRASTRUCTURE GROUP

Using the data provided in the spreadsheet (File name: Data1.xlsx) for these 11 stocks, you are required to generate continuously compounded return for each on a daily basis and form an equally weighted portfolio as a naive trading strategy requiring equal distribution of the available fund (AUD 500 million) across the above eleven stocks.

a) Comment on the performance using measures such as return, risk, Sharpe ratio and Treynor ratio associated with this equally weighted portfolio. and generate risk-return measures and evaluate the performance.

In your summary you will also cover issues such as correlation between assets including their relationship with the market index (Small Cap Index), summary statistics of individual stocks. You are advised to source additional information on these stocks from databases such as DatAnalytics Premim from the library web page to structure your summary. (200 words)

b) Assuming short-sales are permitted, you are required to construct an efficient frontier using the continuously compounded return data from 4 July 2011 to 30 March 2018 for different target return. You are required to use target returns of 1%, 2%, 3%, 4%, 5%, 6%, 7%, 8%, 9%, 10%, 11%, 12%, 13%, 14%, 15%, 16%, 17%, 18%, 20% and 25% using the 11 stocks identified above. Please note that there may not be convergence at certain target returns and you are required to report evidence of convergence or convergence failure at these target returns in an appendix. If there is no convergence achieved at a given target return clearly identify the target returns that fail to achieve convergence in a table for those respective target returns. Provide details (weights, and annualized returns and standard deviations) of the efficient portfolios forming the frontier for those target returns that achieve convergence and you are advised to present these estimation output in an appendix (please maintain neatness and readability of the estimation output with respect to individual target returns). Having completed these estimation procedures, you are required to briefly comment on the performance of these portfolios using different performance measures ( such as return, risk, portfolio beta, Sharpe ratio and Treynor ratio). Please use DatAnalytics Premim from the library database page to extract individual company beta. [600 words].

Attachment:- Assignment Files.rar