1.0 Objectives of Pension Fund Manager:
A pension fund manager cannot set objectives unless he knows the relevant characteristics of his clients or beneficiaries. These characteristics include their appetite of risk, desired level of return, details of their existing income, liquidity requirements, tax positions and future liabilities. Once the firm’s investment manager have established the objectives of the investor or fund, they can set about planning the most suitable investment strategies. A pension fund manager may have the objectives of meeting a specified set of future liabilities at minimum overall cost.
Investment portfolio policies can be categorized as either active or passive investment strategies. It is essential to all active strategies for the requirement of expectations about the factors, which is influenced on the performance of an asset class. In this case active equity management, this may include of future earnings, dividends and price-earnings ratio. In relations to active bond strategies, it may involve forecasts of future interest rates, interest-rate risk and yield spreads, and involving in foreign securities will require forecasts of future exchange rates. However, passive strategies can be classified minimum expectation output and one common type of this strategy is indexing, which objective is to replicate the performance of a preset index fund or benchmark.
2.0 Rationale of Choosing Fund
The firm fund manager may set up that invest in a particular country or geographical region such as Canada, UK, Sweden or Asian emerging markets- Japan. Singapore, South Korea. It may also establish funds to invest in particular segments, for example mixed asset allocation, technology, infrastructure and healthcare....
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...stock prices, inflation, moneys supply, interest rates and consumer price index (CPI) will clearly be influenced, which are as follows:
4.2.1 Stock Prices:
Works Cited
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About.com, 2013. Moderate Mutual Fund Portfolio- Moderate Asset Allocation. Available at: http://mutualfunds.about.com/od/managingyourportfolio/a/Moderate-Mutual-Fund-Portfolio-Example.htm [Accessed 17-12-2013]
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Robert Arnott describes risk and return as “having two sides of the same coin” meaning risk is inseparable from return. Arnott points out the most important risks that are faced by managers of company pension plans: underperforming other corporate pension funds (their peers), losing money (mostly associated with portfolio standard deviation or volatility), and underperforming the values of pension obligations and therefore losing actuarial ground. He defines each of these risks as well as giving a few examples on each one. He quickly jumps into how many tend to focus on standard deviation as the only a single metric calculation, rather than recognizing there are other ways to do so. The author discourages the focus on just one risk, because all are intertwined together and rely on one another.
Block, S. B., & Hirt, G. A. (2005). Foundations of Financial Management (11th ed). The
"Financial Management in the International Business." Hill: International Business: Competing in the Global Marketplace, Sixth Edition. : The McGraw−Hill Companies, 2007. . Print.
Portfolio Theory is not only used for budgeting, but is also used in investment strategies. Financial advisors create portfolios optimized to provide a certain rate of return at a certain level of risk. These portfolios can be comprised of a variety of financial instruments, like stocks, bonds, or mutual funds. In essence, the theory allows a client to build something to their specifications depending on how ag...
In 1984, Mansueto founded Morningstar Inc., which provides independent investment research to individuals, financial advisors, and institutional advisors(Ferrell, Ferrell, & Hirt, 2015). Although they provide these services to financial and institutional advisors, their main focus is on individual investors. Mansueto found that the average investor often finds investing very confusing because there are a wide variety of investment choices. There are three types of investment choices: mutual funds, stocks, and bonds. Each of these three types of investment have thousands of options for investors to choose. A mutual fund is a company that pools money from many investors and invests the money in securities such as stocks, bonds, and short-term
A investment that considers to be passive in securities that permits an investor to multiply his/her beginning capital investment on many securities all while earning profits.it consist of having power over securities by an investor along with active management by an investor over a certain period of time. The reason for the investment will be expected to be primarily for financial gain. During the course of this paper there will discussion trying to analyze a common portfolio including a beginning capital input of $10,000 given that the allocation to the portfolio. Also it will include certain investments started under the portfolio including their possible profit. This paper will consist of a table of their investment that has been offered for reference.
The advantages of retaining internal control on endowment allocation across asset classes and managers are the assets manage by internal managers. Because of it, the decision making between Kings College bursar and investment committee regarding the endowment performance is efficient. Moreover, Kings College has no relationship and no administrative burden to take care of. Finally, passive investment in equity index funds fit with the risk preferences of investment committee. The long-run objectives were to achieve total return of 3.35% with the least possible risk.
By Morningstar, Inc. concentrating more on mutual funds, rather than stocks and bonds would be a positive move for the business because they will be assisting more individual investors who are having a problem making a decision regarding how to invest (Ferrell, et al., 2016). Furthermore, mutual fund investments are the best investment for clients who are too busy to do their own investing in the market (Ferrell, et al., 2016).
Keown, A. J., Martin, J. D., & Petty, J. W. (2014). Foundations of finance: The logic and practice of financial management (8th ed.). Upper Saddle River, NJ: Pearson.
This structure was beneficial for the decision-making and profit generation for the clients and gave incentive to the fund manager to get a good investment performance. If clients were solely focused on investment performance and the entire peer group also kept to adopt the traditional model, this approach proved effective to business growth.
"Our Core Principles - Edward Jones: Making Sense of Investing." Edward Jones. Web. 12 Apr.
Capital Asset Pricing Model (CAPM) is an ex ante concept, which is built on the portfolio theory established by Markowitz (Bhatnagar and Ramlogan 2012). It enhances the understanding of elements of asset prices, specifically the linear relationship between risk and expected return (Perold 2004). The direct correlation between risk and return is well defined by the security market line (SML), where market risk of an asset is associated with the return and risk of the market along with the risk free rate to estimate expected return on an asset (Watson and Head 1998 cited in Laubscher 2002).
In the paper published by Xiong (2010), it is presented that a portfolio’s total return can be disintegrated into three components: the market return, the asset allocation policy return in excess of the market return, and the return from active portfolio management. The asset allocation policy return refers to the fixed asset allocati...
This assignment is concerned with your understanding of the key issues relative to portfolio analysis and investment. In completing this assignment you are to limit your scope to the US stock markets only. Use the Cybrary, the Internet, and course resources to write a 2-page essay which you will use with new clients of your financial planning business which addresses the following issues and/or practices:
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