The purpose of this assignment is to present and defend your investment recommendations based on a client’s scenario.
For this assignment, you will develop a PowerPoint presentation Your presentation should contain 10-15 slides. Your presentation should guide the client through the proposed financial portfolio. The presentation should include the following information:
- Overview of the client,
- Recommendations for the client,
- Asset allocation,
- Expected risk and return,
- Graphs and/or visuals of percentiles,
- Policy statement guidelines and exceptions,
- Objective for the client,
- Portfolio selection,
- Methods used (active/passive),
- Management style,
- Portfolio monitoring/rebalancing,
- Performance review,
- Annual allowable withdraw limit, and
- Sources of reference.
Speaker’s notes to be included in POWERPOINT
1
2
Benchmark – Individual Portfolio Project
An Overview of the UNCW Investment Endowment:
The UNCW Investment Endowment is a modest-sized endowment of approximately $100 million with an annual spending policy of 4.5% plus a 1.25 %/year endowment administrative fee. The long-term annual real return objective is +5.5%, net of covering reasonable and appropriate charges to administer fundraising (Moran & Liu, 2020).
Investment Policy Statement:
The UNCW Investment Endowment has adopted a formal Investment Policy Statement (IPS) that outlines the overall mission of the Endowment and sets out investment restrictions, liquidity requirements, and the Endowment’s time horizon (Cherry, et al., 2022). The Endowment’s mission is to safeguard the Endowment’s assets by ensuring that they are invested prudently and consistently with the Endowment’s stated purpose. The Endowment strives to maximize its investment returns within its mandated risk parameters by purchasing safe, liquid assets (Amel-Zadeh, & Serafeim, 2018). To ensure it can fulfill its spending obligations, the Endowment avoids or minimizes risky investments wherever possible.
Investment Constraints, Liquidity Needs, and Time Horizon:
The Endowment has adopted a strict spending strategy that allocates 4.5% of its total assets for expenditure and an extra 1.25 % for administrative expenses. Therefore, the Endowment must have a reserve of liquid assets equal to its annual expenditure requirements if it is to adhere to this spending strategy (Chambers et al., 2020). The Endowment also works to keep reserves liquid enough to cover emergencies like sudden increases in spending. The Endowment has finally settled on a time horizon for its financial holdings. With a time horizon of five to seven years, the Endowment hopes to generate the actual returns it needs to fulfill its mission (Moran, & Liu, 2020). For the Endowment to ensure its holdings are following its aims, it has to be able to look at the big picture and make allocation changes over a period that is longer than the time horizon of any one investment (Neeraja, & Sobanraja, 2020).
Data Presentation:
The latest endowment update presented to the UNCW Board of Trustees on 10/24/19 shows that the endowment comprises various asset classes. These include domestic and international equities, fixed income, real estate, private equity, and alternative investments (Cherry et al., 2022). The total return on the endowment during FY 2019 was 8.7%, which was above the long-term real return objective of +5.5%. The fixed income portion of the portfolio, which makes up 8% of the total portfolio, is composed of high-quality bonds with an average yield of 2.4% and a duration of 4.2 years.
The equity portion of the portfolio, which makes up 82% of the total portfolio, comprises domestic equities with an average return of 13.7% and international equities with an average return of 11.2%. Hence, the real estate portion of the portfolio, which makes up 6% of the total portfolio, comprises various types of real estate investments with an average return of 11.3%. The alternative investments portion of the portfolio, which makes up 4% of the total portfolio, comprises investments in hedge funds, private equity, venture capital, commodities, and other alternative investments with an average return of 15.2%.
Investment Recommendations:
Given the long-term real return objective of +5.5% and the current performance of the endowment, it is recommended that the asset class and allocation targets remain unchanged. The current allocations align with the endowment’s long-term objectives and provide a satisfactory return. Additionally, the current portfolio is diversified across various asset classes, which helps reduce risk.
It is also advised that the Endowment adopt a long-term strategy for its investments to guarantee that its funds be handled in a way that is consistent with its stated mission and objectives. The Endowment should regularly evaluate the performance of its assets to achieve its lengthy real return targets over an investment horizon of five to seven years (Amel-Zadeh, & Serafeim, 2018). In addition, the Endowment must think about doing periodic portfolio restructuring to keep its asset class and proportion goals stable
Conclusion:
Based on the review of the endowment update, it is recommended that UNCW consider making changes to the 12/31/19 asset class and allocation targets. A few potential changes include increasing the exposure to alternative investments, such as real estate, venture capital, and private equity; increasing the allocation to international investments; and increasing the allocation to fixed-income investments. Research has shown that diversifying the endowment portfolio can help reduce portfolio risk while increasing returns over the long term. Additionally, increasing the exposure to alternative investments can further diversify the portfolio, potentially leading to higher returns and lower risk. Portfolio investment and asset allocation are only two of the many areas covered by these encyclopedic sources. The Endowment must also talk to its financial advisers and other professionals to ensure its money is used wisely.
References
Chambers, D., Dimson, E., & Kaffe, C. (2020). Seventy-five years of investing for future generations.
Financial Analysts Journal,
76(4), 5-21.
https://www.tandfonline.com/doi/abs/10.1080/0015198X.2020.1802984
Amel-Zadeh, A., & Serafeim, G. (2018). Why and how investors use ESG information: Evidence from a global survey.
Financial Analysts Journal,
74(3), 87-103.
https://www.tandfonline.com/doi/abs/10.2469/faj.v74.n3.2
Cherry, S. T., Prentice, C., Roberto, A., & Hunter, J. (2022). Resilience in Nonprofit and Public Organizations: A Case Study on Mutually Beneficial Community Engagement.
Collaborations: A Journal of Community-Based Research and Practice,
5(1).
https://collaborations.miami.edu/articles/10.33596/coll.99/print/
Moran, M. T., & Liu, B. (2020).
The VIX Index and Volatility-Based Global Indexes and Trading Instruments: A Guide to Investment and Trading Features. CFA Institute Research Foundation.
Neeraja, M., & Sobanraja, M. (2020). An empirical investigation on portfolio decision-making of individual investors.
Journal of Contemporary Issues in Business and Government| Vol,
26(2), 750.
https://cibgp.com/article_7773_9caf384a073eec290185367997387563
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
