Construction and management of a portfolio

Résumé du document

The objective of the essay is, to construct and manage an equity portfolio that delivers an annualized return of at least 15%. As part of a UK-based fund management, to avoid international interest rate risks, I will only invest in companies quoted in GBP. I decided not to invest in bonds as the Fed decision to cut interest rates had disastrous consequences on bond prices. Furthermore, this would not be adequate according to my portfolio's written policy statement i.e, 'to achieve a maximum return for an investor prepared to take a high level of risk.'

Extraits

[...] The Company is also provides electrical and mechanical services. The Company is organized into four business segments: construction contracts, maintenance contracts, product sales and solution sales. On May it acquired interest in T-Com Technology Co Limited (TCom). On October the Company acquired 100% interest in Leader Smart Engineering Limited. Its subsidiaries include T-Com Technology Co Limited, Leader Smart Engineering Limited and Leader Smart Engineering (Shanghai) Limited. Senior Senior plc is a holding company. The Company designs, manufactures and markets high- technology components and systems for original equipment producers operating in the global aerospace, automotive and specialized industrial markets. [...]

[...] Umeco Umeco plc engages in the distribution, supply chain management, and repair and overhauls services to the aerospace and defence industries. It operates in three segments: Umeco Composites, which provides composite materials and specialist chemical products to the aerospace, motor sport and automotive, and wind energy markets; Umeco Supply Chain, which provides distribution and supply chain outsourcing services to original equipment manufacturers in the aerospace and defense markets, and Umeco Repair and Overhaul, which comprises three businesses: AEM Limited, Avionics Mobile Services Limited, and Aeromedic Innovations Limited. [...]

[...] If an asset is correctly priced, it should not yield returns above or below the appropriate risk premium, on average, and the alpha would have a value of zero. Portfolio's alpha is positive because E(r RFR) = 1.74 > β RFR) = It means it produces excess returns, it outperforms the market. Reasons for the divergences between the benchmark and the portfolio My portfolio is active, as I tried to beat the market to gain excess return. It means I selected sectors and weighted them in order to do better than the market. [...]

[...] This correlated risk, measured by Beta, creates almost all of the risk in a diversified portfolio. The beta coefficient is a key parameter in the capital asset pricing model (CAPM). It measures the part of the asset's statistical variance that cannot be mitigated by the diversification provided by the portfolio of many risky assets, because it is correlated with the return of the other assets that are in the portfolio. Source : Wikipedia As the market was entering a recession, I decided to invest more heavily on assets which have a beta inferior to as they are less sensible to the market fluctuations. [...]

[...] In July 2007, it acquired the manned security and fire suppression businesses of the Irish privately-owned Omada Fire and Security Group together with A.1. Omada and the remaining of Bell Communications. In October 2007, it acquired RIG -PR Limited. In March 2008, it announced the acquisition of the Rock Steady Group of companies. British American Tobacco British American Tobacco PLC is a holding company that owns, directly or indirectly, investments in the numerous companies constituting the British American Tobacco Group of companies. [...]