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TITLE: Project on management of a small portfolio

CLASS / COURSE: Portfolio Management


2010-2011 Investments for Managers


Module leader: Roberta Adami


Coursework on management of a small portfolio


The context

You are a portfolio manager in a UK-based fund management firm and have to build a small ethical balanced portfolio. The fund should include mainly equities and at least two bonds (not more than 5 bonds allowed). You are borrowing £10,000,000 at the annual rate LIBOR + 2.5%.

Your objective as a portfolio manager is to produce a small fund (15 assets) of equities and bonds which should aim at delivering an annualised return of at least 15%.

No short-selling, derivatives or use of other funds allowed.

The holding period is 5 weeks (beginning and end of investment to be decided by the fund manager).

Trading is allowed during the holding period (transaction costs are assumed to be zero).




Part 1

A)   By undertaking fundamental analysis of listed equity select at least three equity sectors that you expect to perform well in the coming 5 weeks. Within each sector, on the basis of your analysis (qualitative and quantitative such as company news, current and expected P/E ratios, EPS, return forecasts, etc.) select at least 10 shares that you expect to outperform the market.

B)    All shares must be from ethical companies, according to the fund manager’s definition of ethical investment (no gambling, arms, tobacco).

C)   At least 2 but not more than 5 bonds must also be included, they can be government and / or corporate.

D)   By using your own judgement and appropriate financial concepts determine the best asset allocation (% of capital allocated to each asset)

E)    Define a benchmark index against which to benchmark your results at the end of the investment period

                                                                                                                        (50 MARKS)


Part 2

Monitor the performance of the portfolios on a weekly basis. In terms of fundamental factors explain reasons for the changes you are observing.                                                                                                                                        (10 MARKS)


Part 3

Critically evaluate the performance of your portfolio against the performance of the selected benchmark.

                                                                                                                        (15 MARKS)

Part 4

Conclude and explain the divergences you observe between your portfolio and the benchmark in terms of passive or active management theories and concepts.      

                                                                                                                        (5 MARKS)      


Guidelines and important notes

  • Answer all questions in this coursework and present your investment plan and findings in a professionally formatted report.  The remainder of the marks (20 marks) will be allocated for your report structure and written presentation. 
  • The assignment should be produced in Word and Excel spreadsheets used for all calculations where necessary.
  • Each set of computations should be introduced by fully researched and referenced paragraphs of descriptions covering: concepts, underlying assumptions, statement of formulae used together with an outline of the procedure.
  • All quantitative analysis should show a clear set of assumptions and should be submitted together with the coursework in a disk.
  • The assignment must be undertaken individually.
  • The assignment will be graded to reflect: understanding of key investment analysis concepts, ability to gather relevant data and to carry out an in depth analysis. You will also be judged on your ability to make sound financial decisions and to produce an accurate, well presented and referenced report that demonstrates reading and coverage of both the theory and practice.
  • Word limit is 5000, including appendices and tables.   
  • Deadline: hand in your completed work to the Postgraduate Office by 6pm Wednesday 20nd April 2011.


You will be required to submit 5,000 word essay with the following:

• Title Page with your full name, student identification number, date of submission, your email address, home address, telephone number, and word count.

• Executive Summary: explaining you’re your aims and objectives, thesis, broad assumptions, results and conclusion.

• Detailed Logical and Coherent Analysis: the body of your work should state your arguments, evidence and authority for your position, counter-arguments and consequences of your position.

• Conclusions: brief summary of your major points.

• Footnotes: detailing the author or editor, date, title of article or book, place of publication, publisher’s name, and page number or website address.

• Bibliography: arranged in alphabetical order.

• You are required to submit TWO PRINTED HARDCOPIES and an electronic version on a 3.5 disk with your name and title of report.

• Due date: to be announced in class.

1.12 Required Registration & Readings

Please note that most of the readings for in class discussion will be assigned on a weekly basis.

Students are required to register at the Social Sciences Research Network ( and search for articles relevant to their research interests.

Students are also required to read the Financial Times on a daily basis throughout the term.

1.13 Textbooks

The recommended textbooks for this course are:

Bodie, Z., Kane, A., Marcus, A.J. (2008) Investments, Sixth Edition, McGraw-Hill.
Reilly, F.K. and Norton, E.A. (2006) Investments Seventh Edition, Thomson.
Somarajah, M. (2004) The International Law on Foreign


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