Evaluation of the security transaction, the consistency of the portfolio construction and management with client’s profile

Type :

Term papers

Pages :

6 pages

Format :

.doc

Published date :

05/13/2009

Category :

Economics & finance

Sub category :

Finance

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Summary :

Introduction
Portfolio's return and variability in value
1. Portfolio returns
2. Comparison with its benchmark
Details of the security transaction
1. Which security do we get rid off?
2. Which security do we choose to improve the diversification of our portfolio?
3. How did we the transaction?
Evaluation of the portfolio construction and management with our client's profile
1. How did we choose our stocks?
2. How could we do better?
Conclusion
Sources
Appendix

Abstract

This year, Pro Fund is very proud to have a new client, Mr Lucent who is 47 years old. He sold his firm during the summer and received 1,000,000€ for it. He doesn't really need this money but he wanted to have a new challenge in another sector. He wants to keep the money for the future (children' studies and retirement). Therefore, we get his trust to manage his fortune. In terms of return expectations, Mr Lucent wants to receive a better income as in a bank placement (2.75% of interest rate). He also doesn't want to take too much risk. Given that he has a long-term strategy, he will need liquidity only in 6-7 years. His aim is to follow the market or beat it by 2%.

Regarding to our client's expectations we decided to build a portfolio and invest 874,985.7 euros equally shared in five different shares listed in Euronext Paris (see initial report). We kept the rest, 125,014.3, to transactions costs and management fees. Given that we took only stocks from the industrial sector, we chose a benchmark according to that. There is an index listed on the Paris Stock Exchange (Euronext Paris) with all stocks from the industrial sector. It is called CAC industrials.

After 2 months we could already put two and two together: This report details the returns and variability in value of the portfolio in a first part. In the second part, we explain how and why we did a security transaction. In the third, you will find an ex-post evaluation of the consistency of the portfolio construction and management with our client's profile.