The word count includes:

-     the main text, including in-text reference citations and quotations. The word count does not include:

- Appendices. These may be used to include supporting data which may be too detailed or complex to include as a Table. They are not a device to incorporate material which would otherwise cause you to exceed the word limit.

- Title page

- Contents page

- Abstract/executive summary

- Tables, figures, legends

- Reference lists

- Acknowledgements

Module Title: Asset Management

Assignment for Summative Assessment

Please note that the maximum word limit is 3500 words. This will exclude reference lists

and any appendix attached at the end of the report.

Assume that you are working as a financial analyst in a financial consulting firm. Your company mainly offers support to individual investors who invest their money in the capital market. For simplicity, assume that all the investments are made in financial assets listed and traded mainly on the London Stock Exchange. You are requested to offer specialist investment advice to a client who has a total of £100,000 cash to invest. As a financial analyst you are required to prepare a report making suggestions as to the selection of appropriate financial assets to buy with the £100,000. In preparing your  report with detailed suggestions to the client you should  note the following requirements apply:

1. You have to invest a total of £100,000 or any fractional amount as close to £100,000 as possible (considering the indivisibility of investment in some cases).

2. You have to form a portfolio rather than investing money in one single financial asset.

3. The minimum number of financial assets that you should include in the portfolio is five and the maximum is ten financial assets.

4. You have to make an assessment of the risk attitude of your client at the beginning of your report and set out an appropriate investment strategy to follow.

5. You may include a risk-free security in the portfolio. The proportion of investment in risk-free assets should be determined by you and based on your assessment of the risk attitude of your client.

6. You have to include common stock in the portfolio. However, the proportion of investment in stock should be determined by you based on your assessment of the risk attitude of your client.

8. You may assume that short selling is allowed.

12. Your target is to maximise return and minimise risk. However, the combination of risk and return should follow be based upon your assessment of the client’s risk attitude.

13. You must write the report in a professional manner.

14. You need to compare the performance of your portfolio with the return of a selected index (FTSE  100) for a period of the past  12 months to justify the selection and construction of your portfolio.

15. You must provide relevant explanations concerning the selection of each asset and also provide appropriate explanations concerning the construction of the portfolio. You must show appropriate calculations of asset values and returns of individual assets  and  the  portfolio,  along  with  risk  calculations  to justify  your  decision  in constructing the portfolio and the inclusion of any assets in the portfolio .

16. Any argument you provide in your explanations must be supported by appropriate literature.

Please note that you should follow an appropriate format for your report. Please see below for a guide:

1. The report should start with a letter of transmittal.

2. You must provide an executive summary of your report.

3. You must provide an introduction in your report setting out the context and purpose of your report.

4.  Please  provide  a  detailed  analysis  for your  client  indicating  the  choices  and preferences,  and   relevant   investment  strategy   based  on  these  choices  and preferences.

5. You must provide a description of available financial assets for investment purposes and provide relevant arguments in support of forming a portfolio of assets rather than investing in single assets.

6. You must clearly describe your choice of assets to invest in and provide both quantitative and qualitative arguments in support of the selection of each individual asset.

7. If you have used any model in your analysis, please provide a critical analysis for each model used.

8. You should show the superiority of your portfolio by comparing it with a selected market index. You may also use any relevant qualitative arguments to support your position. Please note that you are not obliged to create a portfolio which must perform better than the selected index return, as long as you can defend your choice for any future possible gain.

9. You must include relevant concluding comments.

10. Any references that you used in the report must be shown at the end of the report along with all the calculations used to support your decision.

It is important to note that you should create your portfolio based on your own views and calculations. As there is always a difference in views among investors, it is highly unlikely that two individual investors will come up with portfolios consisting of the same assets with same weights. Therefore, any two submitted report with same portfolio (same assets with same weights) will be viewed critically by the examiner.

Generic Assessment Marking Criteria

You will be marked according to five criteria:

•   Quality of Presentation, including referencing

•   Understanding and use of Theory

•   Quality of Analysis

•   Structure and Argument

•   Conclusions

The following will be looked for in assessing each of these criteria.

Presentation and references

All material is thoroughly and correctly referenced.

Citations are given in the Harvard format.

Direct quotations from sources are referenced with page numbers.           Appropriate use has been made of tables, diagrams, graphs and pictures.

The use of formatting (line spacing, font, justified margins etc) is consistent throughout. The text is clear and readable, without typographic errors and spelling mistakes.        The essay is within the maximum word length of 3500.

The bibliography contains only the works cited in the essay, is presented in author alphabetical order and is complete, accurate, and consistently formatted.

Theory

You have included evidence of wider reading i.e. not relying on a textbook or single text source, but engaging with specialist texts, journal articles and reports.                 The report provides a demonstration of an understanding and awareness of a range of theoretical positions or technical options.

The discussion demonstrates an ability to place a particular text’s argument within a range of positions evident in the literature and to recognise its strengths and limitations as an explanatory framework.

Direct quotes, paraphrasing or other evidence of active engagement with theory and/or technique is apparent throughout the report.

Analysis

The  report  demonstrates  an  ability  to  understand  different  theories  and  models available to make investment decisions. The students must show, where appropriate all  relevant  calculations  and  also  qualitative  explanations   in  support  of  any recommended decision. The students need to be sufficiently critical in using models. It is expected that alternatives are pointed out and any specific model used out of those alternatives should be based on appropriate reasons that must be presented in the report.

Structure and Argument

A report assignment will normally include an executive summary, introduction, several (sub-titled) sections in the main body, a conclusion and a bibliography. A coherent argument is evident, which clearly links the different elements of the essay together and leads the reader through to a justifiable conclusion. The argument is logically constructed with  each section  building on the  insights of preceding  sections  i.e. different perspectives are not simply thrown together without an understanding of how they  contribute  to  the  overall  argument  presented.  Theory  is  integrated  into  the analytical and/or practical elements of the assignment where appropriate. Meaning is not obscured by poor grammar, paragraph or sentence construction.

Conclusions

The conclusion summarises the whole of the assignment and not just the analysis i.e. conclusions relate to the questions posed, adequacy of the theory, empirical issues explored and reflect on your approach to the work.

The conclusions refer to the argument presented to that point and do not introduce new ideas or arguments “at the last moment” .

The conclusion demonstrates your ability to justify your theoretical and analytical approach.

Conclusions have been drawn and follow, and are justified by, the analysis in the main body of the assignment.

Specific Guidance:

1. Students need to start with a hypothetical evaluation of their client. The attitude and risk preference of the client needs to be analysed and assessed. Once they have made their specific assumptions of the risk attitude of the client then based on that they should design an investment strategy that may comprise an aggressive or defensive investment  strategy.  Students  should  build  on  a  simple  theoretical  risk-return relationship and progress towards explaining the meaning of aggressive and defensive strategies and the effect of each on investment decision.

2. The students should explain the context of investment in financial assets. It is necessary to make a critical analysis concerning  investing  in a single asset and investing in a portfolio of assets. Students should focus on the risk advantages arising out of creation of portfolio with the help of a discussion of correlation and covariance.

3. Students must calculate the return and associated risk of each selected asset along with the intrinsic value of the asset to justify the investment in that asset. The students should also  provide a calculation of the systematic  risk component to justify the inclusion of that asset in the portfolio.

4. The students should provide clear explanations of qualitative issues relevant to selecting stocks. Industry analysis or macroeconomic analysis etc. can be used to make such explanations.

5. The students should compare the historic performance of the newly constructed portfolio (based on the return of each financial assets included in the portfolio) with the historic performance of selected index (FTSE  100) in order to justify the portfolio selection.