Portfolio Management Assessment Report Writing - Management Assignment Help

Assignment Task

You will be given funds to invest in the share market. You are required to construct two $1,000,000 equity investment portfolios:

1. A passive portfolio replicating the return of the index

2. An active portfolio to achieve your investment objective of outperforming the index

You will then prepare a report in which you can explain your investment strategy for constructing a passive and an active portfolio and then evaluate the investment performance of each in terms of absolute and relative return, risk and attribution effects to explain the differences in performance of each portfolio. You will be given an equally weighted index of ten companies selected from companies listed on the Australian Stock Exchange.

This assessment replicates the tasks that would be undertaken by portfolio managers in a real-world investment company. For the passive portfolio, your task will be to replicate, as closely as possible, the risk and return characteristics of the benchmark index. For your active portfolio, your task will be to select stocks and sectors, which will result in your portfolio, achieving a higher return than the index.

Your task is not necessarily to produce a positive return. If the markets fall in value, then your passive portfolio should fall in value by a similar degree. Your active portfolio should aim to outperform the return on the index: if the index falls your portfolio should fall by a lesser amount; if the index rises then your portfolio should rise by a higher amount.

For Passive portfolio

• calculate the numbers of shares required for your passive portfolio to replicate the composition of the index

For Active portfolio

Assess all ten companies and sectors from the index

• analyse the outlook for each company’s industry
• analyse the macroeconomic environment at the global and domestic level
• identify the firms and sectors which you consider will outperform relative to the index and build your active portfolio to reflect your predictions
• analyse and comment on financial ratios of each company over the previous five years. Examples of ratios that can be used-
• Return on Equity
• Net Profit Margin
• Earnings Growth

Evaluate your findings and select six companies for your active portfolio

• after assessing the ten companies, select six to be included in your active portfolio
• describe in the reasons for your selections (around 5 bullet points for each stock)
• also, describe the reasons why you have not chosen the other four firms (around 5 bullet points for each stock)
• assign portfolio weights for each of your companies and discuss why you have chosen the weights in comparison to the weight of each stock in the index
• calculate the number of shares required for each company to create a portfolio with the initial weights you have selected for your active portfolio

• why are some companies overweight in your portfolio, and why are others underweight?
• what do these active weights mean for your portfolio’s potential performance relative to the index?

Build your portfolios

• Create these two portfolios in Refinitiv Eikon, ensuring that all dates and numbers of shares are correct

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