Investment Analysis and Portfolio Management

Topics: Investment, Mutual fund, Bond Pages: 7 (1203 words) Published: March 25, 2014
Assignment 1:3
Investment Objectives:3
Risk Policy3
Asset allocation5
3-Special Circumstances6
4-Tax constrains (zakat)6
Asset Selections:6
Feedback & Control:6
Assignment 2:7
Transactions History7
Portfolio Performance Vs. index Performance9
1.Portfolio Performance vs. Dow Jones ETF Performance10
Assignment 311
Portfolio Returns vs. Market Return11

Assignment 1:
Ayyad Co. is a financial institution, created by a group of five individuals investing their savings until their retirement age which is in 15 years. They decided to allocate USD 200,000 per person and then manage their portfolio by themselves to achieve their investment objectives. The purpose of this Investment Policy Statement is to establish guidelines for the Company’s investment portfolio. The statement also incorporates investment objectives that will be used for monitoring the progress of the Portfolio’s investment program. Investment Objectives:

The investment objectives which are set by the company board of directors can be described by the following: 1-Annual absolute rate of return equal to 12%.
2-2% higher than the composite benchmark consisting of market indexes weighted according to the expected target asset allocations stipulated by the Portfolio’s investment guidelines. Risk Policy

1.Diversification: across and within asset classes is the primary means by which the company expects the Portfolio to avoid undue risk of large losses over long time periods. To protect the Portfolio against unfavorable outcomes within an asset class due to the assumption of large risks, the company will take reasonable precautions to avoid excessive investment concentrations. Specifically, the following guidelines will be in place:

a)No single investment security shall represent more than 15-20% of total Portfolio assets. b)With the exception of passively managed investment vehicles seeking to match the returns on a broadly diversified market index, no single investment pool or investment company (mutual fund) shall comprise more than 5% of total Portfolio assets. c)With respect to fixed income investments, for individual Bonds, the minimum average credit quality of these investments shall be investment grade (Standard & Poor’s BBB or Moody’s Baa or higher).

2.Rebalancing: it is expected that the Portfolio’s actual asset allocation will vary from its target asset allocation as a result of the varying periodic returns earned on its investments in different asset and sub-asset classes. The Portfolio will be rebalanced to its target normal asset allocation under the following procedures: The investment manager will review the Portfolio semiannually (30th Jun and 31st Dec) to determine the deviation from target weightings. During each semiannual review, the following parameters will be applied: a)If any asset class (equity or fixed income) within the Portfolio is +/–5 percentage points from its target weighting, the Portfolio will be rebalanced. b)If any fund within the Portfolio has increased or decreased by greater than 20% of its target weighting, the fund will be rebalanced. 3. The investment manager may provide a rebalancing recommendation at any time. 4. The investment manager shall act within a reasonable period of time to evaluate deviation from these ranges.

Asset allocation
Outline below are the long-term strategic asset allocation guidelines, determined by the company to be the most appropriate, given the Fund’s long-term objectives and short-term constraints. Portfolio assets will be allocated across broad asset and sub-asset classes in accordance with the following guidelines:

Asset ClassSub-Asset ClassTarget Allocation
Mutual Funds5%
Treasury Securities 15%
The ceiling of cash available for the company is only one million...
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