ZEUS ASSET MANAGEMENT INC.
Huy Tu Nguyen
1. Overview of Zeus Asset Management Inc.
Founded in 1968, Zeus Asset Management Inc. (ZAM) is an independent, money – management company offering services to both institutional and individual clients. ZAM follows a conservative, risk-averse, quality-oriented investment management to exploit the extra return from long term strategies. In fact, the company’s investment philosophy of risk-aversion can be guaranteed by the experienced staff, who have the average of 18 years of experience in the sector and have deal with recession and major market downturns, compared to the age of 26 on average and 5 years of experience in Fidelity Investments’ staff – the largest asset-management firm. The high quality professionals allow ZAM serving its clients and performing the company’s strategies effectively. Moreover, the clients and investment strategies of the firm also highly support its original direction since it allows ZAM to diversify its portfolios and seek the return in association with investor’s requirements. Different to some other asset- management firms, ZAM has both institutional and individual customers who have different financial goals therefore the firm has designed portfolios to meet the needs of clients. In fact, Zeus Asset Management concentrates on risk–averse, high net worth individuals and companies with various return and risk profile. With individually managed account, the company apply the minimum requirement of $2 million, the portfolios then customized based on an investor’s investment objectives and risk-return profile alongside with other particular concerns, such as: tax, liquidity, legal restrictions, diversification, time horizon… Besides, ZAM has constructed a range of mutual funds, including equity fund, bond fund, balance fund and international fund, to meet the requirements of different clients. Why is estimation of risk-adjusted returns of particular interest to Zeus? Since the capital of ZAM is allocated in a range of portfolios which have different level of risk and return, the company is taking consideration into risk-adjusted return methods to properly evaluate the performance of a particular asset class in association with its risk. In fact, there are some key benefits of risk-adjust returns that ZAM can gain to apply for portfolio evaluating purposes. First, risk adjustment methods allow the company to choose between investment opportunities of various expected risk and return. Moreover, such methods facilitate ZAM to compare the performance of portfolios that have different levels of return and risk since it provides a metric based on the company and market’s data. A second benefit is providing a guide to firm’s managers in allocating the capital and the weights of asset classes in a particular portfolio in order to meet the requirements of different clients. For instance, as the individual investors of Zeus are typically risk-averse and high-net-worth, they may more likely to pursue the asset growth over the long term and avoid the portfolio’s volatility; therefore, a larger proportion of the portfolio may distribute to fixed-income assets and the strategic asset allocation should be applied. At each level of risk, the portion of asset is determined based on its risk-adjusted return relative to other portfolios. 2. Risk-adjusted return models
The firm’s manager, John Abbott, considered risk-adjusted methods, including: Sharpe ratio, Treynor ratio and Jensen’s Alpha, for gaining the insights, enhancing the portfolio evaluation as well as attracting potential investors. 2.1 Sharpe ratio
Sharpe ratio measures the excess return per unit of deviation in an investment asset or a trading strategy (which reflect the risk of the portfolio). It can be calculated as follows: Sharpe ratio =
with Rp = average return of the portfolio, Rf = average of the risk-free rate and σp = standard deviation of the portfolio. 2.1.2...
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