BAFI1045-Equity Portfolio Management Report- Management Assignment Help

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 Straits Times Index (STI)
2. An active portfolio to achieve your investment objective of outperforming the index

Equity Portfolio Management Assessment 

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 ten companies selected from STI index that tracks the performance of the top 30 companies listed on the Singapore Stock Exchange to create an active portfolio

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 Straits Times Index (STI) benchmark index. For your active portfolio, your task will be to select stocks and sectors from ten stocks selected from companies in the STI Index, 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 STI index

For Active portfolio
Assess all ten companies and sectors from the stocks shared with you
• 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 three financial ratios of each company over the previous five years. Examples of ratios that can be used-
• Return on Equity               
• PEG Ratio
• Net Profit Margin
• Earnings Growth
• Debt to Equity

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 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 as compared to the index?
• what do these active weights mean for your portfolio’s potential performance relative to the index?

For each portfolio
• explain the reasoning for your stock selection and weighting relative to the index
• provide comments on total return/risk and active return/risk of your portfolios 
• discuss the sectors and securities’ active weights in your portfolio 
• report your results for each portfolio 
• analyse the active return of your portfolios with reference to the allocation and selection effects
• What was the overall performance of the active portfolio, your passive portfolio and the benchmark index?
• describe any major market events which contributed to the return performance of the benchmark or of your portfolios
• have you achieved (or not achieved) the goal for your passive/active portfolio Finally, which of the two portfolios will you recommend and why?