– Portfolio project, first report
Explore portfolio management by implementing an investment policy statement mandate.
Use the client and investment goals assigned to you to implement an investment mandate for a US equity portfolio.
Benchmark: Establish a benchmark index consistent with the IPS mandate.
Screens: Establish appropriate stock screens.
Using finviz.com, develop a set of stock screens that will result in stocks that will help you meet the mandate of the portfolio. For example, if the mandate is large capitalization value US stocks, develop a set of screens that will limit the choice of stocks to those that are both large capitalization and value. You have discretion in how you define these (though finviz has limitations), but you will be expected to defend your choices.
Industry Allocation: Set target sector allocations for portfolio.
Develop a set of sector weights that will result in a portfolio allocation that meets the mandate of the portfolio. We will not have discussed a lot on macro-analysis yet, so for now focus on sector weights similar to the benchmark you chose UNLESS your mandate contains a specific sector constraint.
Selection: Select twenty stocks for the portfolio.
This course and project is not formally about stock valuation. For now, the key goal is to identify stocks that both meet the screens you developed, the industry allocation you developed, and will as a whole allow you to meet the mandate from the IPS. Selection should also include a target weight consistent with the industry allocation.
Written report: A memo detailing your activities as if I were a financial adviser.
• The financial adviser (me) who has asked you to implement the mandate.
• Assume the reader has a general understanding of equity portfolio management, but does not necessarily know everything implementing a particular mandate.
Memo should include (in this order):
• An executive summary of everything in the memo (1 paragraph, first page)
• A discussion of your benchmark choice and why it is appropriate (about 1 paragraph)
• A discussion of the screens you created to address the policy statement (about 1-2 pages)
• A discussion of your portfolio allocation, which focuses on how the portfolio you created in aggregate meets the mandate (about 2-3 pages)
o It is not necessary to discuss every single stock.
o It is necessary to provide evidence that everything meets the screens and allocation expectations. A table in the Appendix would be good.
• Appropriate tables, charts, and graphs to support your discussion. These should be in an Appendix.
In an appendix to the memo, you should include:
• A listing of the positions in the portfolio, along with the weights and evidence that the position meets your stock screens.
• 7 page maximum (double-spaced) excluding the appendix.
• All tables, graphs, and figures should be included in the appendix. They should not be in-line and they should not be in a separate document.
• 1” margins all around with 12 point Times New Roman font
• Poor writing will be penalized.
• Tables and graphs should also be presented professionally with everything labeled.
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