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MAN307/MAN705 Essay Writing

UNIVERSITY OF THE WESTERN CAPE
SCHOOL OF BUSINESS AND FINANCE
MAN307/MAN705 
GROUP ESSAY

Topic/Question:

Students of MAN307 and MAN705 must answer questions A, B & C which must be answered using the South African asset class returns only. MAN705 students must answer question D as well – using international asset class returns.

The following data is provided: Monthly returns which include those for six assets classes for the six-year period to the end of December 2013.

The Cape Retirement Fund may only invest in the asset classes for which returns have been provided. The Investment Consultants and Trustees of the Fund have indicated that the risk and return requirements of the Fund indicate that exposures (weights) to the asset classes must, at all times, be constrained as follows:

Equities (ALSI) Bonds (ALBI) Cash (STEFI)
Minimum 30% 5% 5%
Maximum 75% 40% 20%

Also, a composite benchmark, against which the fund will be measured, will be constructed according to the following weights to the asset classes:

Equities (ALSI) Bonds (ALBI) Cash (STEFI) Total exopsure
60% 30% 10% 100%

You (and your team) have been appointed as the portfolio manager for the fund and must present your proposal as to how you will construct the investment to ensure an optimal portfolio. The portfolio construction will be based on an asset allocation “mix” that will apply to the whole period (i.e. one optimal asset allocation must be determined for the 6-year period). 

Since you are aware of the several weaknesses in optimisation models, particularly the potential error maximising, you have decided to generate/simulate at least one thousand different possible allocations to the asset classes (ensuring that the constraints are adhered to) to examine the possible return and risk profiles of the different asset class allocations. The Trustees have insisted that you use Beta (as per the CAPM model) and standard deviation as your risk measures relative to the benchmark portfolio. In addition, they insist that the portfolio Beta (relative to the benchmark portfolio) may not vary by more than 0.30 above or below the Beta of the benchmark portfolio.

  1. Your presentation must show your graph (based on your results using the data provided) in which you clearly indicate the minimum variance portfolio and the optimal portfolio – clearly indicate the Capital Market Line. Use standard deviation and beta as your risk statistics ensuring that each are presented in separate graphs.
  2. Show your recommended optimal portfolio based on the use of the Beta constraints indicated by the Trustees.
  3. Motivate your final proposed optimal portfolio that you believe will best meet the needs of the Fund.

For MAN705 students ONLY!

  1. You are given the option of including up to two additional asset classes in the portfolio: offshore equities (MSCI World) and offshore bonds (Global Bonds). The total offshore exposure may not exceed more than 25% of the total portfolio. The benchmark will remain the same as indicated above. Show whether the inclusion of one or both of these additional asset classes will be beneficial to the portfolio and motivate your answer. Your motivation must include the impact of the inclusion/exclusion of the offshore exposure on the standard deviation, Beta and Expected return of the portfolio.

Requirements:

MAN705: Length: 5000 – 6000 words (excluding bibliography, graphs and tables)

MAN307: Length: The body of the report (excluding cover page, table of content, bibliography, graphs and tables) should not exceed 7 pages.

Should be typed: 12 font; 1,5 spacing, Arial

Technical presentation:

All essays must comply with the standard technical requirements for academic writing. The essay must have the prescribed cover sheet (Page 1), a contents page, an introduction, discussion of each of the numbered questions (with the numbers indicating the start of your discussion to that specific question) and finally a conclusion at the end of each question. Pages must be numbered.

Literature List:

All referencing must be done using the Harvard System.

Cover sheet:

The cover sheet below must be completed, printed and attached to the FRONT of your assignment that is handed in. The cover sheet must be page one of your assignment.

Marks will definitely be deducted if these are repeated in your assignment submission.

  1. The use of a plastic sleeve is a nuisance. Staple the document at the top left hand corner and don’t use any customised cover sheet.
  2. Declaration is not signed. Other front pages are used instead of that which was requested to be used.
  3. No contents page or outline of assignment/project.
  4. Too much reproduction of the assignment question - should be succinct and in students own words.
  5. No mention of treatment of data. For example: Was the data left in its “raw” state? Were any asset class returns transformed using logarithms?
  6. Dumping large amounts of “working” data.
  7. Dumping results without an explanation.
  8. Output data that is very poorly formatted.
  9. Inserting graphs without a title, axis labels and poor formatting of axis markers.
  10. Efficient frontier lines that miss the data points substantially.
  11. Graphs and tables that are shaded very dark, have dark backgrounds and very difficult to read.
  12. Return and standard deviations were not presented as percentages. Also, long decimal numbers are used – an appropriate truncation should be used depending on the data presented.
  13. Comments relating to graphs are not clear or are absent.
  14. Font for the text (explanations, etc.) varies in terms of size and type which make the text look very untidy.
  15. Not providing succinct descriptions of relevant data analysis. For example, show the statistics for the data such as mean, standard deviation etc.
  16. Models, other Internet material and accessible content is used and not acknowledged.
  17. The conclusion does not address the question directly by providing the required output. Alternatively, the “Results” should be positioned immediately before the conclusion and provide a clear picture of the necessary output for the answer to the assignment question.
  18. Excessive amount of references are dumped.

Additional advice for your assignment

  • You may replace the country with another suitable one i.e. instead of focussing on SA, you may choose another African country for which you wish to may want to develop your discussion, proposal etc. Do not choose a country for which there is insufficient or spurious data.
  • Clearly state what the objective(s) and/or goal(s) of the presentation is. The presentation must have a clear structure.
  • When completing your assignment, imagine that the audience is a delegation of executives from the IMF and other central banks. You should assume that the audience consists of highly knowledgeable, experienced and qualified professionals. Do not waste their time by:
    1. Repeating pages of textbook material
    2. Providing insufficiently relevant, accurate & concise data – large amounts of raw data is unacceptable. Ensure that the time frame for the data is appropriate.
  • Any definitions, principles, results from previous studies etc. should be succinctly presented and the focus should be the relevance to the objective(s) of the whole presentation.
  1. Ensure that there is structure to your presentation. Make it very clear at the beginning of the presentation what you will be presenting and how the presentation will be structured. Don’t leave your audience of experts wondering what part of the presentation you are dealing with at each point, how a section fits into the whole story, whether you are still busy with the introduction or delivering the results, whether you making a recommendation or simply providing an opinion etc.
  2. Ensure that your material has credibility in its substance. Don’t overwhelm the audience with large font and dazzling colours in the hope that they will miss the need for high quality content.
  3. Honours students are expected to compete with ALL other post graduates in the “real” world or work place (i.e. masters’ graduates, doctorates etc.). Do not assume that other post graduates have sympathy or care that you may not be a PhD holder and that they should expect you to be a “non-competitor”.
  4. Undergraduates (more so for sophomore students) are expected to show a concerted effort toward building a convincing presentation based on facts and material that they have been taught in class. Additional material is always beneficial if it provides further insight, validation etc. and strengthens the presentation in achieving its objectives.
  • The excel presentation should not be cluttered and should be clearly presented and easy and have a logical flow, ensure that each sheet is correctly labelled
  • Ensure that graphs and tables do not shift when you print the report.