Portfolio Management Project

You are required to put together an investment fund portfolio (including security selection), implement the trading strategy (execute all the trades to create and manage your portfolio), and evaluate the performance of your portfolio. The trading platform for the project is Bloomberg.

The Scenario

Trading Period

As of now till the end of the fiscal year/end of semester.

Grading

The project carries 150 points (represents 15% of the final course grade). Your project score will be accrued in increments as you report to management on the status of your fund at your weekly morning briefings. At the end of the fiscal year you will also present a detailed performance report.

  1. (15pts) Find an example of a Fund Prospectus (in Bloomberg) and describe what it is. Include Bloomberg slides from the prospectus in your presentation. The fund prospectus is intended for prospective investors and outlines your investment plan. Then, specifically for your fund, describe on your slides which assets you have included? Which broad asset classes do these assets belong to? Why are they good choices for your portfolio? Include slides of your portfolio holdings. Try to create exposures to multiple factors from different factor classes (see page 7 of the Webinar slides).

    2. For the remainder of your presentation, you will follow the Bloomberg webinar slides on the PORT function, available here. You will include similar screens for your portfolio and will include additional slides describing the items on these screens in detail. Here are all the screens from Bloomberg which your presentations needs to have (while you are doing it, consult the Bloomberg user guide on PORT):

  2. (10pts) Include a slide similar to webinar slide (WS) 12. What are your biggest holdings. See if you can provide different views by changing the 'by' tab/yellow square (third from the left).
  3. (10pts) Choose a benchmark and explain how you chose it.
  4. (10pts) A slide similar to WS 13. What does the graph show? Are there any periods of particularly low/high returns or volatility? Also provide a graph relative to a benchmark.
  5. (10pts) A slide similar to WS 14. Describe in detail the performance of your portfolio over the semester (spending time on the individual components, especially the big winners/losers).
  6. (15pts) A slide similar to WS 15. What is the risk of your portfolio? What are your risk sources? Talk about your Risk(std) and Factor Risk(Std) numbers. Talk about the bars on the graph. What do they represent. What is the biggest source of risk for your portfolio. What individual factors go into this biggest source?
  7. (15pts) A slide like WS 16. Plot the breakdown of your biggest risk source into factors and explain what the plot of these factors represent. Can any individual factor be linked to the ups and downs of your portfolio?
  8. (10pts) A slide like WS 17. Focus on the top five bets and explain all the numbers. What does Tot. Active(Std) mean? Consult the BB guide, and chat with BB help desk if you are having trouble with the interpretation.
  9. (10pts) A slide like WS 18. What happens if you remove your riskiest asset? What happens if you assign equal weights? Explore different manual rebalancing options.
  10. (10pts) A slide like WS 19. First select the single action of minimizing total portfolio risk. Then add more actions to your goal.
  11. (10pts) A webinar slide like WS 20. Provide a few such graphs after you change the optimization actions/constraints in the optimizer.
  12. (15pts) A slide like WS 21. Provide several of these slides, one after each change in your portfolio optimization constraints/actions. Describe in detail what the performance measures for your portfolio are.
  13. (10pts) A slide like WS 22. Describe what your tail risk is. What do the numbers in the columns 95%VaR, 97.5%VaR, and 99%VaR mean?

Your final report will be sent to your investors at the end of the investment period and will give them a summary of the fund performance. Investors want to know how the fund has performed compared to your initial plan. After reading your report, investors will decide whether they should continue to invest in your fund or should they change the amount of funds they put in your group. Your name must appear on the cover page.

Presentation: Fund managers often give presentations to major investors about their fund performance, and answer questions the investors may have. To mimic this situation, each group will give a presentation of their fund to the whole class. Every member of the group will participate in the presentation. Members of other groups, acting as the major investors, should ask questions and evaluate the presentation. You may use a PowerPoint slide show in your presentation. After you present your final report you will submit an electronic copy in Blackboard.

Peer Evaluation: Within the same group, each member's contribution may differ. To account for this, each member is required to file a peer-evaluation for the other members within the same group. This peer-evaluation will be taken into consideration in determining each individual's grade and your year-end bonuses.

Rules

  1. Short selling and buying on margin are allowed, if Bloomberg allows it.
  2. Although you are allowed to re-balance your portfolio as frequently as you desire, bear in mind that transaction costs can add up and lower your performance. On the other hand, this is a good opportunity to test any day-trading strategies.
  3. You are encouraged to check if different types of orders are available: market orders, limit orders, stop-loss orders, etc.

Academic Honor Code

Group members are permitted and encouraged to communicate within each group about the project. Group members CANNOT communicate the project with members of another group. Plagiarism will not be tolerated under any circumstances.

Starting with Bloomberg

For first time users, you will need to set up a login name and password. To get started with Bloomberg please read this: Getting Started with Bloomberg

Creating portfolios in Bloomberg

On any Bloomberg screen type PRTU . You will see the portfolio creation screen:

Click on the red tab 'Create', choose the type of your portfolio (e.g. balanced). You will also be able to choose the benchmark (you need to find the ID of the index that you want as a benchmark).
You type a ticker in the yellow box to add an asset. Then in the yellow box under 'Position' type the number of shares or bonds that you are purchasing:

Below we have added GE's equity and one of GE's bond issues.


A detailed guide on how to create and manage portfolios with the PRTU function is here: Guide on using the PRTU fuction