FIN 923

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Table of Contents
Table of Contents1
Investment Policy Statement (IPS):1
Constructing the portfolio:3
Passive Portfolio:6
Active Portfolio:7
Performance of Active portfolio 18
Sharp Ratio:19
Conclusion:20
References21

Investment Policy Statement (IPS):

Mr. Ziad Hamzeh- Lebanese National- is a Senior Credit Risk Manager at Invest Bank Head Office Sharjah; He is 45 years Old, resident in Sharjah for 20 years. Mr. Hamzeh is divorced with two children living with their mother in Beirut- Lebanon and continuing their Bachelor Studies in American University of Beirut, as he believes the educational system is better and cheaper than that in U.A.E. His main Objective is to earn minimum of 15% in a period of 10 weeks, as he believes UAE stock market is a great opportunity as Dubai is a candidate city for the EXPO 2020, however he is not willing to loose more than 15% of his initial capital of AED 1,000,000/-. As he will use some of this capital for buying a house in Dubai near his new office; for he got a new job offer at Emirates NBD as Head of Credit Risk Department, which he will be joining in January 2014.

Mr. Hamzeh is a highly paid and a well respected banker with a current annual income is AED 540,000/- (i.e AED 45,000/- monthly) plus a yearly bonus that counts to no less than AED 60,000/- which would be credited in his account every 31st December of each year. His liquidity needs during these 10 weeks is a rent cheque of AED 50,000/-, additionally AED 75,000/- for each of his two sons [adding up to AED 150,000/-] who are studying in AUB (American University of Beirut) as a living and educational support, last he spends up to AED 30,000/- as a living expense for that period of 10 weeks.

Mr. Hamzeh has accumulated through out his life an Asset base totaling of AED 3,600,000/- where he invested most of it in real estate (i.e buying a peace of land and a vacation home in Lebanon summing up to AED 2,000,000/-) as he believes that real estate can preserve his capital and give him an appreciable capital gain through out his life time and AED 600,000 in a saving account in Lebanon; now he is planning to take some risk to invest the remaining AED 1,000,000/- to make enough capital gains to pay for a new one bed room apartment in Dubai which will cost him AED 900,000/- and pay for the kids tuition plus his own living expenses before transferring to his new job.

His financial advisor has pointed out some of the major bullet points in order to be able to visualize, simplify, and manage Mr. Hamzeh objectives, financial needs, and portfolio:

Asset Base: AED 3,600,000/-
Cash to Invest: AED 1,000,000/-
Annual Income: AED 540,000/-
AED 60,000/- Bonus
Expense needs: AED 900,000/- for buying a new apartment
AED 150,000/- for his two sons
AED 50,000/- for renting an apartment in Sharjah
AED 30,000/- for living expense

Return Objective: Minimum of 15% return (capital appreciation) Risk Ability: Above average risk ability due to high asset base and income Risk Willingness: moderate/high average as he is looking for high returns where he is well informed about the risk involved; however he is calling a 85% protection of capital as a stop lose strategy (he wants to get out of the market if it went down by 15%). Risk Tolerance: above average to moderate, as he is able and moderately willing to take risk. Unique needs and preferences: avoid any investments, which is involved in Tobacco, Alcohol, money laundry and terrorism. Time Horizon: 10 weeks

Liquidity needs: Minor to insignificant as he has high Asset base Tax Concern: Nil
Benchmark: DFM Index
Afterwards a numerous meetings and consultations with Mr. Hamzeh were held; and thereafter we have agreed upon the following as a regulatory factors for the portfolio that is being invested and some terms and conditions to be followed: 1. Investment will take place in Dubai Financial Market as requested by the...
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