LUBS3655 Professional Portfolio Management Semester 2 2023/2024Java

Java Python LUBS3655

Professional Portfolio Management

(Semester 2, 2023/2024)

40% Assignment

Assignment Outline

Working in a team of five that has been preassigned within your seminar group, you are asked to derive an investment strategy with an investment scope of the World Equity Markets using data and functions from the Bloomberg Terminal. Implement the investment strategy and rebalance the portfolio in Bloomberg through Trading idea Message (TMSG) for a period of four weeks. The marks of the assignment are not related to the actual performance of the chosen investment strategy over that period.

Rules of Trading

• Each team consists of 5 members.

• Investment Time: Investment trading can be started anytime between Monday 26 th February and Friday 1 st March. Investment period ends on Friday22 nd March.

• Investment scope: Index members of FTSE 350, S&P 500, Stoxx Europe 600, CSI 300, IBOVESPA

• Long & Short positions allowed

• Notional Cash allowance: £10,000,000 each team

• Trading costs are not taken into account.

• The total return of the portfolio is measured using GBP. Therefore the total return of portfolios including foreign stocks, i.e. stocks not included in the FTSE350, is subject to exchange rate risk.

• Participants are allowed to provide comments on each trade. For example:

Type of analysis – fundamental, quantitative or technical analysis.

Which Bloomberg functions are used?

Other supporting documents and/or analytical reasoning for the trade decisions.

Requirement

 As a group, construct a final investment report which covers

1. Your investment objective (3%)

 Assume it is an open-end fund that has 10 million pounds under management. The investment scope is the five equity markets.

 You need to decide the following:

 Asset Allocation: if the World Equity Market is too big for your consideration, you can narrow your choice to one or a few countries with supporting argument. You may also decide to focus on just one index constituents e.g. FTSE350 or S&P500 given your investment objective. (You will need to back it up with your economic argument for the choice in Section 4 below).

 Time horizon, return and risk benchmark (for example, 3-5 year investment horizon that will beat the FTSE350 index in terms of risk and return).

 For example: First State Global Growth Funds - Dividend Advantage is an open-end unit trust established in Singapore. The Fund's objective is to provide regular distributions and long-term growth from high dividend yielding equity investments focused in the Asia Pacific ex Japan region. The Fund invests principally into the Dublin-domiciled First State Asian Equity Plus Fund. [See more examples on Bloomberg in each fund’s description page]

 Hint: although this is the first part you need to write in your report, you may find it easier to focus on the investment philosophy decision and identify an achievable investment objective that also sounds valuable to some investors.

2. Explanation and rationalization of your investment philosophy (4%)

 What is your investment philosophy?

 What belief about the market and what evidences (theoretical, empirical or from your own observation and testing) do you have to justify this philosophy?

 How does this investment philosophy connect with your investment objective?

 What profit opportunities emanate from this philosophy?

 Does your team have the abilities to exploit the profit opportunities? (e.g., fundamental or technical analysis skills, country or sector expertise)

3. Description of your investment strategy (5%)

 Describe the strategy or strategies that are derived from the philosophy

 What is the strategy (e.g. Japanese Small Cap, Trading on news, or Market timing)?

 Why as a team you think this strategy is suitable? (e.g., evidence from the literature and\or evidence from your backtesting.)

4. Discussion of the process of the portfolio construction and the rationales of security selections and replacements (7%)

 In this section we like to see some details of your implementation. The following questions do not necessarily apply to every strategy.

 Discuss key investment decisions:

 What is your planned portfolio structure? Discuss the reasons for the choices of asset allocation to different markets and industries (to justify what you have described in section 2 for your investment objective), and a general rule of your allocation among securities (e.g., equal weighted or idea importance weighted).

 Summarize your security selection (portfolio rebalance decision).

LUBS3655 Professional Portfolio Management Semester 2, 2023/2024Java

 For this section of discussion, please do not list and discuss every activity of your portfolio. It is better to summarize the decisions by the common themes of reasons. It is helpful to refer your discussion of rational back to the investment philosophy. For example, reapplying the filtering on EQS, you need to rebalance your portfolio.

 Do you have a monitoring and stock replacing procedure

5. Summary and critical evaluation (attribution analysis) of the portfolio performance (7%)

 Summarize your portfolio performance over a period starting on the day you did your first trade and ending on Friday 22nd March. Discuss your portfolio return in the context of your selected benchmark and investment objective.

 Present an attribution analysis. Present and discuss some aspect of attribution analyses that you think help readers understand your investment performance and strategy. The attributions analysis will have to include the three major components of total return of your portfolio, i.e.

6. Conclusion of what lessons have been learned and discussion about the future of this strategy (8%)

 Reflect on the key lessons you have learned as a team. Especially discuss any aspects that you find when there is a gap between theory and practice.

 Reflect on the performance of your portfolio so far and its implication for your longer term objective. What is your future expectation of your strategy? Should further adjustments or addition factors be considered?

 How did you allocate responsibilities among team members to ensure a smooth team work structure for achieving the best outcome for a given strategy? (You don’t have to create artificial roles in your team for this discussion. What I like to see is if you are able to identify the key strengths in your team and make effort in creating a good team work environment.)

 Draft a 10-minute presentation to sell your investment strategy with no more than 10 slides (you will not be asked to give the presentation.). The slides will form. part of your document to be submitted as appendix to the main report. (6%)

Reference

Make clear which sources you have used and what information you have found. Show sources that lead to each item of information or opinion taken from elsewhere. Tables, charts and screenshots taken from Bloomberg need to be indicated as Bloomberg sources.

Word count

Assignments should be for a maximum of 2500 words in length. Everything is included in the word count except the title, bibliography, table charts and the investment presentation appendices. Make sure you use tables and charts effectively. Don’t include any large table and charts without referring to them in the main text.

Summary of key steps to good group work

1. Get to know the group members

2. Establish ground rules

3. Understand the task

4. Define your roles

5. Plan your work

6. Check your progress

7. Address the problems

8. Help everyone to pull their weight

9. Complete on time

10.Evaluate your experience

11.Be fair and positive

Tips from previous student’s reflections:

 Have an agenda for each team meeting

 Be well-prepared individually before team meetings

 Make the most opportunity of the Bloomberg system when available

Assignments should be a maximum of 2500 words in length.

All coursework assignments that contribute to the assessment of a module are subject to a word limit, as specified in the online module handbook in the relevant module area of the MINERVA. The word limit is an extremely important aspect of good academic practice, and must be adhered to. Unless stated specifically otherwise in the relevant module handbook, the word count includes EVERYTHING (i.e. all text in the main body of the assignment including summaries, subtitles, contents pages, tables, supportive material whether in footnotes or in-text references) except the main title, reference list and/or bibliography and any appendices. It is not acceptable to present matters of substance, which should be included in the main body of the text, in the appendices (“appendix abuse”). It is not acceptable to attempt to hide words in graphs and diagrams; only text which is strictly necessary should be included in graphs and diagrams.

You are required to adhere to the word limit specified and state an accurate word count on the cover page of your assignment brief. Your declared word count must be accurate, and should not mislead. Making a fraudulent statement concerning the work submitted for assessment could be considered academic malpractice and investigated as such. If the amount of work submitted is higher than that specified by the word limit or that declared on your word count, this may be reflected in the mark awarded and noted through individual feedback given to you