Portfolio Management – Investment Club Learning Module

Aim

To construct and manage a portfolio of equities within the limitations of the scenario set out below. This will involve reading the financial press, interpreting information, analysing information and where appropriate speculating upon it.

Scenario

You are required to set up an Investment Club with the objective of constructing and managing a portfolio of shares. The members of the club have agreed to invest a total of £200,000. A non-active member of the club has contributed £100,000 of this total sum. The members of the club have agreed that half of the £200,000 will be invested in speculative short-term stocks and the other half to be invested over the medium/long term. All the members have taken the precaution of maintaining a substantial amount of liquidity in low risk investments such as building society accounts and therefore all the money is to be directed towards maximising the return on capital via an equity portfolio.

Activity

• Week 12. Team formation and role agreement. Three or four (Investment Club) teams will be formed per seminar group with each team agreeing specific roles for their members. Roles will need to be agreed bearing in mind 1st presentation requirements and thought also given to how these roles will change after this event.
• Week 25 or 26. Construction of the portfolio presentation (formative assessment).

Learning outcomes tested are 2, 3, & 4 (see page 10 for a full list of outcomes & descriptions)

At this event you will need to convince the non-participating member (tutor) who is prepared to invest £100,000, that the club is going to meet his/her expectations. Each team will have analysed their agreed market areas/sectors in line with their general strategies and objectives. It is expected that the economic and sector analysis will be of a good standard at the time of this event. Specific company analysis is not an important feature of this presentation but will need to be completed by the end of week 28. All available monies must be invested by Friday 4pm of week 28.

In order to reach an acceptable standard in this formative assessment element students should ensure that their team:

1. Provide a clear insight into how security analysis and portfolio theory will affect the decision making process
2. Discuss their strategies to be adopted and why (both group and portfolio), including aims/objectives that will enable the club to measure their group and portfolio performance
3. Stipulate realistic legal and administrative processes that would be necessary/desirable in setting up the club. ‘Legal and administrative processes’ means justifying why you have decided for instance to form a partnership instead of any other type of business organization e.g. a limited company and how you go about setting up your chosen formation method e.g. do you need to all sign some form of partnership agreement – & can you compare yourselves with how a real investment club has set itself up.
4. Demonstrate a reasonable standard of presentation skills within the time limit set.
5. Each team will have a maximum of 15 minutes to complete their presentation. Pertinent questions may be asked at the end of the presentation (though time restrictions may prevent this) by the non-participating investor (tutor). The quality of the answers provided will be taken into account in the assessment.

Very good standard presentations will:

1. Fulfill the pass criteria
2. Complete a very good economic and sector analysis related well to the portfolio decision making process, including reasons why foreign economies will/will not affect strategies/decisions
3. Provide an overview of foreseeable challenges and how they will be overcome. ‘foreseeable challenges’ will probably be most associated with either your ability to work effectively as a team or concerned with the strategies/analysis you intend to put into action – but could be other things like the challenge associated in achieving your own set performance targets. Challenges will differ in type and degree from team to team.
4. Demonstrate a very good standard of presentation skills within the time limit set.

The criteria required to achieve each grade is shown in appendix 1

• Weeks 28 – 34. Progress reports to be submitted to the tutor every two weeks during this period (submit reports in weeks 28, 30, 32 and 34) at the place and time specified and in the prescribed form (see appendix 2). No further trading will be expected after week 35 though students can continue to monitor their portfolio performance if they wish up to their final presentation in the third term. During the trading period it is advisable to keep a ‘client’ file, containing details of the portfolio from its initial inception to the current position. The information contained within the file could include:
  • The group’s strategies
  • When and why buying and selling transactions were carried out
  • An evaluation of the portfolios performance.

This file is for your own group records and will not be viewed by the tutor. However it will be useful in keeping a detailed record of the Club’s activities. This in turn will provide useful background information for the 2nd presentation event and assist in preparation for the exam.

• Weeks 38 or 39. Running the portfolio presentation (formative assessment)

Learning outcomes tested are 1 -5 (see page 10 for a full list of outcomes & descriptions)

Each team will have a maximum of 15 minutes to complete their presentation. Pertinent questions may be asked at the end of the presentation by the non-participating investor (tutor). The quality of the answers provided will be taken into account in the assessment.

The criteria required to achieve each grade is shown in appendix 3. Note that this is a formative assessment and the grades awarded do not contribute towards your module grade.