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Overview:
You are an investment manager presented with a list of three new clients who have signed up for your firm’s services. As part of your responsibilities, you will assume the management of one of those three clients. Using your knowledge of investments combined with contemporary market factors, you will evaluate that client’s existing financial conditions and investments. You will also evaluate their future goals and the overall economic and market conditions. You will then recommend specific investment options based on those factors and the client’s risk tolerance.
As a first step toward the future portfolio, you must evaluate the selected client’s existing portfolio performance. A deeper understanding of the client’s existing portfolio starts with an inventory overview of the existing assets and how those assets have performed. A quantitative analysis of past performance helps the investment manager establish a point of reference, determine what the conditions are now, if the conditions align with the client’s goals and risk tolerance, and eventually how existing assets must be changed in the future. As a portfolio manager, you can’t guide your clients forward until you know where they stand now.
Directions:
Choose one of the three profiles from the Project Profiles found in the Supporting Materials section. Use the profile desсrіption and the information compiled in the Project Template to evaluate the performance of the client’s existing investments over the last year, the performance of the client’s existing investment versus appropriate benchmarks, and the performance of the investments on a risk-adjusted basis. Then, discuss your findings in a written summary.
Calculations: Complete the required calculations on the Project Template.
1. As a first step, look up the U.S. Treasury 10-year bond rate and enter it in Cell D6. This is considered the market standard definition of “risk free rate.”
2. The investments, ticker, dollar amounts, and weights have already been generated for each profile and should be left unchanged.
3. Enter the last business closing day dollar price for each investment in column G. Note that cash and CD will not have any closing prices.
4. Enter the business closing day dollar price one year ago from the date in column G for each investment in column H. Note that cash and CD will not have any closing prices.
5. In Column I, Annual Return will be automatically calculated as you complete columns G and H.
6. Any return generated must be considered in excess of what could have been earned without taking on market (credit risk), as in investing in the risk-free U.S. Government bond. Column J, Risk Adjusted Return, automatically calculates the difference between annual return and return generated from U.S. Government Bond.
7. Five-year annual return can be calculated manually, where for simplicity you assume the asset was held in each prior five years, with the beginning year price as P1, the end year price as P2, and the annual return calculated as (P2-P1)/P1, and then multiplied by 100 to be converted to %. Once you have the annual rate of return divided for each year, you add the five-year return and divide by five. Also, you can look up the five-year annual return from any financial search engine by looking up the ticker.
Summary: Create a written 3- to 4-page summary that is supported by appropriate calculations completed on the Project Template.
1. Each investment return must also be compared to a comparable benchmark to assess if the investment has over- or underperformed during the last 12 months. You can compare the last 12-month return of your investment to the last 12-month return of a bond index when the investment is a bond, a large stock market index when the investment is a stock, or individual stocks when the investment is a stock, and so on. Find a comparable benchmark and enter the difference between the portfolio investment’s return and the benchmark in column L.
Specifically, you must address the following rubric criteria:
• Analyze past portfolio performance. Include the following in your calculations:
o Quantitative assessments from:
Annual return
Risk-adjusted return
Five-year return
Annual return versus appropriate benchmark
• Compare portfolio investments to relevant benchmarks. Include the following in your calculations and summary:
o Identify benchmarks for existing investments to be compared to, and identify the reason for benchmark selection.
o Discuss return data on investments within the portfolio.
o Identify over- and underperforming investments in relation to each benchmark.
What to Submit:
Current Portfolio Evaluation
This milestone requires two deliverables. Submit the completed Project Template and a 2- to 3-page Microsoft Word document to support planned adjustments within the future rebalancing of the portfolio. Use 12-point Times New Roman font, double spacing, and one-inch margins. Sources should be cited according to APA style.
Your supporting research should be as up to date as possible. Any news stories, press releases, or other sources must be dated within the last 60 days. Company data should be no more than one year old. Using older data may result in being asked to resubmit your work.
Supporting Materials:
The following resources may help support your work on the project:
-Profile Options: Project Profiles
Select one of the three profile options to create your rebalanced portfolio.
-Template: Project Template
Use this Excel template to create your rebalanced portfolio.
Order from us for quality, customized work in due time of your choice.