DTU406 - 2023 Group Assignment-2

DTU406 – PORTFOLIO MANAGEMENT
ASSESSED GROUP ASSIGNMENT
Assignment credit
30% of the marks for the module are awarded for this assignment, in which 20% will be given to
the report and 10% will be given to the presentation.
Description
This is a group project. The teams are formed at the beginning of this course. Each team is required
to form a portfolio, monitor and revise the portfolio during the course, produce a written report
explaining the investment objective, investment strategy, weighting, key decisions, and
performance measurement.
One group has 4-5 students.
Date handed out: 9 August 2023
Deadline for report: 20 September 2023
Maximum word length: 3,000
Assignment
Each group must select a “Style” from the following list:
 Growth
 Value
 Small cap
 Large cap
You are a manager in a mutual fund company and you have been tasked with setting up a new,
actively managed fund with the above style. The fund’s investments are drawn from the US market.
The portfolio should normally consist of 10-20 stocks (plus treasury securities if necessary), and is
based on a notional USD20 million. Your task is to construct the fund portfolio (i.e. choose the
stocks that the fund will invest in, and establish the investment weights in each stock). You will
need to provide evidence on the fund’s performance and its risk characteristics over an evaluation
period. Your objective is to (a) outperform the S&P500 index over the evaluation period, and (b) to
outperform the appropriate style benchmark portfolio over the investment period (i.e. to outperform
a passive investment in a portfolio that has the same investment style as your fund).
Assume that today is 1 August 2022. Design the fund’s objective, IPS, investment strategy, risk,
strategic asset allocation. Construct the fund portfolio by selecting stocks from the S&P500 index
constituents. You can rebalance the portfolio when appropriate.
Assume that today is 1 August 2023, one year after your fund started. Evaluate the performance and
style of your the actively managed fund. In analysing the styles of the fund, you should consider
style indices for size and value/growth. As a proxy for the style indices, you should use the
appropriate exchange-traded funds (ETFs). In assessing the performance of your fund, you should
provide a detailed analysis of its risk.
1
Note
 For the purpose of this assignment, you will NOT be evaluated in terms of the fund’s
performance. Instead, you will be evaluated in terms of the techniques that you employ and
your justification for using those techniques. In particular, actively managing your fund
simply by choosing to overweight one or more stocks that subsequently performed well
during the evaluation period will NOT give you an advantage. Try and place yourself in the
position of a fund manager at 1 August 2022.
 Your report should contain sufficient detail such that your results can be replicated exactly.
 You should explain and discuss the theory behind your model. You should critically discuss
your results, highlighting the limitations of your approach, and make suggestions for
improving the analysis.
 Your report should be professionally presented. You can find examples of research reports
on the websites of a number of financial institutions.
 Remember, however, that this is an academic assessment and so you need to also abide by
the rules on citation and referencing.
 You should not include Excel screen prints in your report. All results should be properly
tabulated or charted.
 The word limit does NOT include the executive summary, tables, figures, footnotes,
equations or references, but DOES include appendices. The ability to convey research
findings concisely is an important skill in the real world.
 A word count must be included on the first page of your reported. Half a point will be
deducted if you exceed the word limit.
 Together with your written report, you should submit a file containing (a) your calculations
and (b) your report.
ASSESSMENT
This is an assessed piece of work that will account for 30% of the total marks available for this
course. This is a team assignment with marks allocated equally to each member of any given group.
Students must work within their given teams.
Presentation
Be professional as you will be presented before wealthy individuals who are interested in investing
in your mutual fund.

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DTU406 – PORTFOLIO MANAGEMENT

ASSESSED GROUP ASSIGNMENT

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