Investment and Value Trust

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Questions for Case 2 which will be discussed on 2/29/2012
1. How well has Value Trust performed in recent years?
It had surpassed S&P500 for 14years in a row, achieving better results both bull markets or bear markets. As to its extraordinary returns, its annual return is 14.6% on average, which is3.67% high than S&P500. In making that assessment, what benchmark(s) are you using? How do you measure investment performance?

What does good performance mean to you?
Making money, low risk, low volatility, consistent growth in returns.

2. What might explain the fund’s performance?
There are two most frequently used measurements:
(1) The percentage of annual growth rate of NAV assuming reinvestment (the total return on investment)

(2) The absolute dollar value today of an investment made at some time in the past. Measures above then compared with the benchmark portfolio such a s Russell 2000 Index, S&P500, Dow Jones, and Value Line. But there are some critics of those two measurements because they neglect the relative risk of the mutual fund. Different types of security yielded different returns and risks. Most Mutual fund manager used the variation of those two measurements: (1) Technical analysis: this involved the identification of profitable investment opportunities based on trends on stock prices, volume market sentiment, Fibonacci numbers, etc. (2) Fundamental analysis: This approach relies on insights afforded by an analysis of the economic fundamentals of a company and it’s Industry: supply and demand costs, growth prospects, etc. To what extent do you believe an investment strategy, such as Miller’s, explains performance? 3. What is capital-market efficiency?

What are its implications for investment performance in general? What are the implications for fund managers, if themarket exhibits characteristics of strong, semi-strong, or weak efficiency? 4. Suppose that you are an advisor to wealthy individuals in...
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