fund structure
The client’s asset portfolio consists of bonds, equity funds, ETF and stocks invested from London Stock Exchange.
First of all, according to Mary’s premier risk preference, 30% of the assets have been invested in bonds. The bond investment percentile of 30% is usually regarded as a preferable long run investment for a risk aversion investor for the reasons of that the annual yield of bonds has already been fixed and the default risk of bonds is relatively low. Among all kinds of bonds, the risk of the treasury bond is the lowest. Therefore, we chose two UK gilt bonds with different maturities in our portfolio. The coupon values of these two bonds are 8.75% and 8% respectively. Meanwhile, we invested in two corporation bonds, which are raised by Lloyds Bank Group and its subsidiary. Since the credit ratings of these bonds which are given by Standard & Poor and Moody’s are above A. In other words, the default risks of these bonds are low. In addition, the flat yield of these bonds are much higher than that of the UK gilt bond, which reaches 7.46% and 8.428% respectively.
Secondly, 20% of Mary’s assets had been invested in funds. In this part, we invested most of the assets in insurance fund and pension fund; only a small proportion, about￡1,000, had been invested in ETF. Specifically, we put 10% of the assets in 2 well-performing insurance funds, Skandia Fleming Mid Cap Investment TST and MetLife Schroder UK MID 250 GBP ACC NAV, which got five stars according to the Morningstar Rating system. Meanwhile, the other 10% of the assets has been invested in pension funds. Based on the historical data analysis, we selected Skandia Fleming Mid Cap Pens and Aviva Invesco Perptual UK Aggressive S6. The annual return of thes...
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... may influence the performance of our portfolio, such as our client’s specific need, profit assignment policy and overall macro economy trend etc. To be more specifically, since portfolio management is a task of organizing and implementing a series of investment based on client’s expected return (Geoff, 2006), the changes of client’s need may lead to different performance of portfolio. In addition, the adjustment of profit assignment policy may influence asset structure and future profit. Our present profit assignment policy is reinvesting the profits into stock market, while we can adjust this policy according to Mary’s need. Meanwhile, macro economy situation also puts an impact on the performance of portfolio, since we expect the UK macro economy will goes well in the future, we may put more investment proportion in stock market and other risky investment market.
These ratios can be used to determine the most desirable company to grant a loan to between Wendy’s and Bob Evans. Wendy’s has a debt to assets ratio of 34.93% while Bob Evans is 43.68%. When it comes to debt to asset ratios, the company with the lower percentage has the lowest risk. Therefore, Wendy’s is more desirable than Bob Evans. In the area of debt to equity ratios, Wendy’s comes in at 84.31% while Bob Evans comes in at 118.71%. Like debt to assets, a low debt to equity ratio indicates less risk in a company. Again, Wendy’s is the less risky company. Finally, Wendy’s has a times interest earned ratio of 4.86 while Bob Evans owns a 3.78. Unlike the previous two ratios, times interest earned ratio is measured on a scale of 1 to 5. The closer the ratio is to 5, the less risky a company is. From the view of a banker, any ratio over 2.5 is an acceptable risk. Both companies are an acceptable risk, however, Wendy’s is once again more desirable. Based on these findings, Wendy’s is the better choice for banks to loan money to because of the lower level of
Can We Keep Our Promises? The purpose of this paper is to provide a summary of the article called “Can We Keep Our Promises?” by Robert D. Arnott, and to help better understand the three key risks facing each investor. Robert Arnott describes risk and return as “having two sides of the same coin” meaning risk is inseparable from return. Arnott points out the most important risks that are faced by managers of company pension plans: underperforming other corporate pension funds (their peers), losing money (mostly associated with portfolio standard deviation or volatility), and underperforming the values of pension obligations and therefore losing actuarial ground.
The fact that majority of the capital funds was in the form of portfolio capital instead of foreign direct investment (FDI) had also worsen the situation. The ratio of portfolio capital to FDI had increased substantially from 1:1.3 in 1990 to 1:6.5 in 1993. Given the volatile nature, portfolio capital tends to respond with greater speed to changes in the environment.
However, financial situation of the firm plays a very important role in the decision of the bondholder and this company has been one of the most profitable companies America in terms of ROE, ROA ad gross profit margin. Apart from decrease in earnings and cash flow in 1997, UST had continuous increases in sales (10-year compound annual growth rate of 9%), earnings (11%) and cash flow (12%). They are generating their cash flows out of the operations. Thanks to their premium pricing, they are achieving more than average gross profit margin. So, over the years UST's revenues are stable and positive, and generally its statements are positive. The company does not have any problems with its cash flow.
The financial challenge in the managing risk simulation was to balance between preserving capital and capital appreciation in the investment of funds based on a persons’ risk tolerance. The simulation targeted the stock mix for a client’s aversion to risk and the ability of the investment portfolio to have an expected rate of return. The prediction of fund future prices acted as a hedge and had an impact on the rate of return depending on the changing financial landscape of a company. The overall effect was to juggle the mix based on past history and predict a future outcome.
...r investments that can support the other weight and balance their portfolio and therefore alleviate some of the risk they face.
The weighted average of the bond yields as given on Exhibit 11 was 5.29% . Using the book value D/E ratio and other relevant information as given on Exhibit 10, such as the risk free rate or 4.56% and the given risk premium of 5%, the WACC for the proj...
A Critical Review of the Royal Mail’s Capital Structure Introduction This report will critically review the capital structure of the Royal Mail (RM) and the implications this has for the company, with reference to its apparent value and the return required by equity investors. The report will take data from the latest set of accounts published by the RM and accompanying investor reports. It will also refer to investors analysis and news item in an attempt to gain a qualitative impression of RM’s share value. The report also focuses on the market and its potential future.
William Sharpe, Gordon J. Alexander, Jeffrey W Bailey. Investments. Prentice Hall; 6 edition, October 20, 1998
From my perspective, the usefulness of CAPM is directed towards efficient investment decision making and strategic management. Moosa (2013) remarks CAPM to be a supportive model in ‘evaluating the performance of managed portfolios and for investment purposes’.
Brealey, Richard A., Marcus, Alan J., Myers, Stewart C. 1999, Fundamentals of Corporate Finance, 2nd edn, Craig S. Beytien, USA.
Keogh, Bryan. "The Trouble with Catastrophe Bonds." Www.businessweek.com. Bloomberg Businessweek Magazine, 21 Apr. 2011. Web. 27 Oct. 2013. .
...hese events happen or minimize the negative impact when they happened. This will stabilize the distributable profit.
Our understanding and the concept of investment in behavioural finance combines economics and psychology to analyse how and why investors make final decision. As an investor one’s decision to invest is fully influence by different type of attitudes of behavioural and psychological ( Ricciardi & Simon, 2000). Yet, in order to maximize their financial goal, investors must have a good investment planning. Furthermore , to gain a good investment planning , there must be a good decision making among investors. They have to choose the right investment plan I order to manage the resources for different type of investments not only to gain profit wise but also to avoid the risk that occur from investment.
This theory impacts global and domestic financial managers by basing their portfolio using capital market line, capital asset pricing, and securities as a foundation for investments. When used, the MPT establishes investment portfolios, which are used by companies such as Fidelity or Scott Trade for both long-term and short-term strategies.