By undertaking fundamental analysis of company shares, select the country where you want to invest and two equity sectors that you expect to perform well in the coming three weeks.

Module Assessment / Individual Coursework

Module Title:                                       International Investments

Module Code:                                     6FNCE009W

Module Status:                                    Core, BA Finance and Business Management

Assessment Weighting:                      25%

In Module Assessment:                      Individual coursework

Submission Date:                               23 November 2023 Marks and Feedback Date:      14 December 2023

Where to Access the Feedback:        Module Blackboard

Wordcount: 1,500 words

Feedback Method: Mixture of Formative and Summative Assessment Feedback. Students receive comments on their ability to link theory and practice in terms of applying portfolio management techniques and interpreting financial information.

Assignment Outline:

The assignment is an individual report on investment strategy for an ethical fund.

You are the portfolio manager of a UK-based fund and need to build a portfolio of ethical assets (investments in the following industries are not allowed: Tobacco, Defence and Gambling).

The fund should be a balanced portfolio of equities and bonds and must include:

• Equities from five companies as well as one government bond and one corporate bond.
• All assets must be from ethical companies (see above).
• You need to invest £10,000,000 in the portfolio for three weeks (the beginning and end of investment to be decided by you, the fund manager).  
• If you want to use leverage, you can borrow at a rate of 5.5% (annualized quote).
• Your objective as a portfolio manager is to produce a fund that delivers a return of 14% (annualized and net of borrowing costs).
• You need to keep track of the fund performance during the three weeks.
• All assets in the portfolio must be liquidated at the end of the holding period.
• If you decide to use leverage, you must return the principal plus interest at the end of the holding period and measure the fund performance net of borrowing costs.
• Trading is allowed during the investment period (transaction costs are assumed to be zero).
• Equities and bonds can be traded in the UK or any other foreign market of your choice.
• No short-selling, nor use of other funds or derivative contracts allowed

Part 1

A) By undertaking a fundamental analysis of company shares, select the country where you want to invest and two equity sectors that you expect to perform well in the coming three weeks. Based on your analysis (qualitative as well as quantitative such as company news, current and expected P/E ratios, EPS, Dividends, return and sales forecasts, etc.), select five companies that you expect to outperform the market index/benchmark. By undertaking a fundamental analysis of government and corporate bonds (expectations on credit rating, changes in yield, duration, convexity), select two debt securities (bonds) that you expect to perform well in the coming weeks.

Hint: You can start by following the top-down approach, with a broad analysis of some of the major economies in terms of their macroeconomic variables (GDP, Inflation, Unemployment rates) and the performance of their financial market indexes.

Once you have selected the country, examine the major sectors, i.e. pharmaceutical, IT, retail, transport, etc to evaluate how well they will perform, then select the individual assets using financial analysis.

If you decide to invest in countries other than the UK, you don’t need to analyze foreign exchange rates. (Marks allocated: 50%) 

B) By using your judgment and appropriate financial concepts, determine the best asset allocation (% of capital allocated to each asset within the portfolio) given the investment guidelines and return objective.(Marks allocated: 10%)

Part 2

A)Choose a market index to be used as your benchmark (this must be representative of your investment and only related to equity). Explain why this index is appropriate to measure the performance of the equities you select. (Marks allocated: 10%)

B)Monitor the performance of the portfolio on a weekly basis (each asset price needs to be monitored at least once a week and you will need to explain any daily change in price > 5%). In terms of fundamental factors, explain reasons for the changes you are observing. Critically evaluate the performance of the equity part of your portfolios against the performance of the selected benchmark by using the Treynor ratio. If you decide to adjust your portfolio during the three weeks, state your reasons. (Marks allocated: 20%)

Part 3

Conclude and explain the differences you observe between your portfolio and the benchmark in terms of passive or active management theories and concepts. (Marks allocated: 10%, no more than 200 words)

Format of Coursework:

1. An electronic copy of your assignment report should be submitted via the module blackboard site, please do not include your student number nor your name as anonymous marking will be carried out.

2. Copy or screenshots of an Excel spreadsheet, containing performance data used for all calculations where necessary should be submitted as part of the main Word file.

3. Answer all questions in this coursework and present your investment plan and findings in a professionally formatted report.

4. You must include the module title on the first page (Cover Page) of your report. The word count for the report is 1500 words (±10%), with size 12 font and 1.5 line spacing for the main text.

5. A list of References should be included if any materials were cited in the report, following the Westminster Harvard Referencing Style. Appendixes may be used where necessary.