Reference no: EM133052538

1. You are an advisor to a UK-based pension scheme which invests over £500m in overseas assets. (i) Explain the choices open to the fund in managing the foreign currency exposure inherent in such investments. (ii) Discuss the ways in which each of these choices can be implemented.

2. (i) Describe the methods of trading and the types of derivative contracts traded on the major derivative exchanges in the US and Europe (excluding the UK). (ii) Describe the following types of dealing instruction and the circumstances in which each instruction might be used by a derivatives trader: (a) market order (b) stop order (c) limit order Describe the risk faced by a trader in placing a limit order to unwind a long position and suggest a more appropriate order type.

3. A general insurance company writes household property, legal expenses insurance, personal accident insurance and private medical expenses insurance. In 1999, the premium income of the company was just over £2,000 million. The company has a very large ratio of free assets to total assets and has never made an underwriting loss since it was founded just over 25 years ago. Over 80% of the assets of the company are invested in UK Government Bonds. The managing director of the company wishes to increase the return on the bond portfolio by widening the range of assets in which the company invests Explain the issues which the company will need to address if the range of assets were to be extended to a wider range of bonds.

4. You are an investment consultant advising a new client which is a large pension fund. The pension fund has assets of £500 million managed by a single external manager, XYZ Asset Management, using a balanced mandate with no investment constraints. XYZ is a well-established UK investment manager, managing in excess of £50 billion of institutional pensions and charity funds. XYZ operates a growth oriented investment philosophy. Although the client is not dissatisfied with the performance record of XYZ, it has asked you to conduct a full manager review. Draft a letter to the Chairman of Trustees of the fund: (i) detailing the investigations you will carry out in conducting your review, and the reasons for conducting these investigations (ii) commenting on the structure of the current investment management arrangements, and alternative arrangements which might be introduced