BEX5131 - ASSIGNMENT

发布时间：2024-05-23

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BEX5131 - ASSIGNMENT

Due date: Monday, 3 June 2024, 11:55 PM

Weighting: 60%

This assignment has two parts: Part A (35 points) and Part B (25 points).

This is an individual assignment.

Note: The final submission should be in both Word and PDF format. If any two submissions from different students are the same, both will get zero points. Use of ChatGPT or other AI composition software is not permitted.

PART A (35 points)

Question 1 (30 points)

In Part A, students will build a strategic asset allocation consistent with their investor (risk) profile. Each student will be assigned an investor profile based on their age.

Find your assigned age from the following table: Your age is assigned based on your first name.

Table 1: Investor profile: Age

Age in years	The student whose first name begins with the following letters
80	A, B, C, D, E, F, G
60	H, I, J, K
40	L,M, N, O, P, Q, R
30	S, T, U, V, W
20	X, Y, Z

Students are required to create their strategic asset allocation using this investor profile and the capital market assumptions given in Appendix 1.

1. You have been assigned an investor profile based on your age. Based on this profile, you must answer the following questions (1(a) to 1(e)). To determine your investor profile, follow this rule: Your maximum allocation to Equity must not exceed (100 - your age) %.

a) Suppose you have an asset manager who proposes the following Strategic Asset Allocation (SAA) for portfolios suitable for investors in different age groups. Which portfolio would you choose? Why? (3 points)

Table 2: SAA for different investor profiles

		Portfolios (SAA)
	Asset class	Conservative	Moderate	Balanced	Growth	High Growth
Equity	AU Equity	6%	11%	16%	24%	30%
	Developed Market (DM) ex-AU Equity	5%	11%	22%	32%	39%
	Emerging Market (EM) Equity	3%	5%	7%	8%	9%
ALT	Infrastructure	1%	3%	3%	4%	5%
	Private Equity	2%	3%	5%	6%	6%
	Private Debt	10%	9%	8%	5%	2%
Fixed Income	AU Govt Bonds	13%	10%	7%	4%	3%
	AU Inflation Linked Bonds	15%	12%	10%	6%	4%
	AU Corp Bonds	8%	7%	5%	4%	0%
	Global ex-AU Govt Bonds (Hedged)	11%	10%	5%	0 %	0%
	Global ex-AU Corp Bonds (Hedged)	3%	3%	4%	4%	0%
	AU Cash	23%	16%	8%	3%	2%

b) You asked your investment manager to send you the Capital Market Assumptions (CMAs) they had used for these allocations. These are given in Appendix 1. Use these CMAs and Carver’s top-down approach to create your own SAA. Follow these rules while creating your portfolio. (14 points)

i) Keep the cash allocation as it is.

ii) Keep the allocation to Equity, Alternatives and Fixed Income as they are in the portfolio

suggested by your manager. For example, if you selected the conservative portfolio, your allocation to Equity, Alternatives, and Fixed Income should be kept at 14%, 13% and 50%, respectively.

iii) Use Carver’s method to allocate for allocation within Equity, Alternatives and Fixed Income.

For example, if you selected the Conservative portfolio in part 1(a) then 14% of your portfolio should be allocated between AU Equity, Developed Market (DM) ex-AU Equity and Emerging Market (EM) Equity using Carver’s method. And will do the same for Alternatives and Fixed Income assets.

There are several ways to distribute your portfolio within Equity and Fixed income. For example, you can allocate within equity in two steps or in one step. Please show the SAA using both the one- step and two-step processes.

c) Which one of the two SAAs you created in 1(b) following the one-step and two-step Carver’s Top- down approaches will you choose? Explain. (3 points)

d) Compare the expected rate of returns of the portfolios suggested by your investment manager and the one you created. Which one would you prefer? Why? (4 points)

e) From the table below, estimate the Sharpe Ratio of the portfolio created by the Carver method and your investment manager. Which portfolio would you choose? Explain your selection. For portfolio returns in columns (2), (4) and (6) of Table 3, use your estimates from the previous question. (4 points)

Table 3: Performance of the portfolios

Portfolios	Returns (Manager)	Volatility (Manager)	Returns (Carver one-step method)	Volatility (Carver one- step method)	Returns (Carver two-step method)	Volatility (Carver two-step method)
(1)	(2)	(3)	(4)	(5)	(6)	(7)
Conservative		5.81%		5.60%		5.58%
Moderate		6.07%		5.96%		5.98%
Balanced		7.06%		6.91%		7.04%
Growth		8.34%		8.29%		8.53%
High Growth		9.40%		9.43%		9.77%

f) Will you change your allocation if you have twice the amount of wealth you have now? (2 points)

Question 2 (5 points)

You are provided with two sets of daily values of the following indices in the last five years (attached):

• S&P/ASX200 Franking Credit Adjusted Daily Total Return Index Tax Exempt (Bloomberg: SPAX2F0)

• S&P/ASX200 Total Return Index (Bloomberg: AS51T)

Further information about the indices is available here:

https://www.betashares.com.au/wp-content/uploads/2020/03/Betashares-SP-ASX-Australian-Technology- ETF-ATEC-Index-Methodology.pdf

a) Please calculate the annualised return of the two indices over the last five years (using the data file provided) (3 points)

b) Explain what franking credit is and explain the difference (if any) between the two returns you calculated (2 points)

PART B (25 points)

In Part B, students will read the PDS and Investment Guides of two different super funds and choose an investment option.

Background

Suppose you want to change the Fund with which you invest your superannuation (pension) savings. You are considering Hostplus and Rest Super as possible alternatives.

a) Consider the fees and cost of $50,000 in superannuation balance. Which of the super funds would you choose solely based on costs and fees? (5 points)

b) What, in your opinion, can explain the difference in fees and costs charged by these two super funds? (5 points)

c) Now look at the historical performance of the MySuper options ofHostplusandRest Super. Based on past performance, which one of these two options would you choose? Explain. (7 points)

d) Assuming the same age profile that you have in Part A and the rule that your maximum allocation to Equity must not exceed (100 - your age) %, which pre-mixed investment option offered by these two super funds will you choose? If there are more than one investment option that suit your investor profile (that is, they all have the right allocation to Equity), then you must compare them and explain your selection process. (8 points)