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Portfolio Management Presentation

Portfolio 1

Return Contribution of Top & Bottom securities

Top 5 - CBA, CSL, IAG

Bottom 5 - ANZ, BHP

Top 5 - BHP, CBA, CSL, TCL, BXB

Bottom 5 - NIL

  • Return of Portfolio 2 > Return of Portfolio 1
  • Even though we generated a low return, the active risk for portfolio was not as low as expected

  • Tracking Error: 5.63%

By complying our risk averse attitude, it is optimal that we are minimising active risks whilst getting a stable return throughout the 2 portfolios

Portfolio 2

Use of Passive Management Strategy

Siyu Wang 3483169

Qiaoxi Li 3365432

Bo Chi 3401350

  • Chose ANZ at the start
  • Apply technical analysis for big 4 banks in Australia
  • Decided to give up ANZ

Portfolio 1

Comments on Overweight & Underweight

Portfolio 2

Comments on return/risk

Description of Portfolio 1

Principles we follow

  • Aim for low active risks in selecting and allocating each stocks
  • Competitive Advantage
  • Valuation
  • Long-term

Therefore, we are value investors

Investment Goals & Strategies

  • More than a half of our funds were in the financial sector
  • Negative Allocation effect
  • Negative total effect
  • We were not effectively allocating each stock,
  • Therefore - end up with a very low return compared with the benchmark.
  • Investing stocks for long-term benefits

  • Aim for dividend received in future terms

  • Risk averse attitude

- Hedging risks by investing both high risk and low risk stocks

Portfolio 2

Actions to improve

  • Sold IAG
  • Bought WES

Reasons of Buying WES

  • Less weight on Financial sector
  • New sector: Consumer Cyclical
  • New Portfolio is more diversified
  • Wesfarmers - largest retail business in Australia

  • We have not invested in any similar business type before

  • The more diversified the portfolio, the less risk it is

Reasons of Selling IAG

  • high score on allocation effect
  • Portfolio return= 2.265 > Benchmark return

Decision on which portfolio to choose

  • By comparing IAG and AMP
  • AMP has competitive advantage over IAG
  • Macro economic Factors

- Inflation in Australia

- RBA Announcement: Interest Rate Decrease

  • AMP focuses more on investing overseas, whilst IAG focuses more on Australian local market
  • AMP’s business is more diversified than IAG

- banking/super/advice

Therefore, we chose to give up IAG in our portfolio 2, even though its increasing recently

Thank you!

Decision Factors:

(1) For comparison the tracking error

(2) Change and comfirm the investment structure

(3) Comfirm the companies relationship whit australia government

(4) Investment changes in macroeconomic conditions

Therefore, we believe that the 2nd portfolio will generate more profit in the long-term future.

Comparison & Contrary of Portfolios

  • Total profit in the end – 9 million
  • 6m profit generated after the first session – 20 stocks invested
  • 1m profit after the 1st portfolio – 7 stocks invested
  • Until 18th may, 2m more profit for the 2nd portfolio
  • For the 1st portfolio, IAG and ANZ were decreased.
  • rearranged and created the 2nd portfolio
  • results were quite good in portfolio 2
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