Portfolio for IE business School class project

1. 1
Structure
Structure of Presentation
2. Our
Tradings
3. Our Results
1. Our
Portfolio
Structure

2. 2
1. Our Portfolio
Short Wrap-Up
I. Investor & Portfolio
Risk/Return Tradeoff
■ Risk to high risk
investors
■ Accept potential losses
of up to 20%
Objective
■ Outperform benchmark
portfolio
■ Achieve notable capital
gains in short time
II. Portfolio Setup
50%
10%
20%
20%
III. Risk Analysis
■ VaR Analysis
■ Benchmark Analysis
Top-Down Approach
■ Macro Analysis
■ Industry Research
■ Technical Analysis
Active Portfolio Mgmt
■ Various Trades
1.
IV. Asset Distribution
■ “Boom” portfolio more diversified in terms of asset classes
■ Same strong focus on US market
BUT: Less FX exposure, more exposure in USD
■ Stronger focus on short investment horizon
■ Higher willingness to take risk
V. Benchmark Comparison

3. 3
b.
Japan
Stocks
a.
US
Stocks
Derivative
d.
Cmdty
c.
1. Our Portfolio
Our Initial Portfolio
a. Strong US Market / US $
c. Commodities – Weak demand & stronger
supply
b. Bullish Japan Stock Market
d. High instability in HK
■ Small Cap Index (10%)
■ Restaurants & Bars Index (10%)
■ Automotive Index (20%)
■ Bloomberg Commodity Index (4%)
■ Crude Oil (16%) ■ Straddle on HK Hang Seng Index (20%)
■ NIKKEI Index (10%)
e. Cash Reserve“ /“Bank account“ US Treasury Bond (10%)
1.

4. 4
2. Our Tradings
An Overview
Monday, 24thThursday, 20th Tuesday, 2nd Wednesday, 3rd Thursday, 4thMonday, 1st
Start of Investment Period
Initial prices were added to
excel sheet.
Sell 1
Sell derivative position
(Straddle) on HK Index
Buy 1
Buy ETF on FTSE/JSE Africa
Index
Sell 2
Sell ETFs on NIKKEI 225
End of Investment Period
Final prices were added and
performacnce was measured.
2.
1.

5. 5
3. Our Results
Overview on Performance
Asset Class Product Weight Price 27.11.2014 Price 04.12.2014
Change in
%
Status
a. US Stocks
Small Cap Index 10% 675,28 681,41 0,91%
Restaurants & Bars Index 10% 992,53 1005,41 1,39%
Automotive Index 20% 133,80 136.95 2,31%
b. Japan Stock NIKKEI Index 20% 17299 17887 3,46%
c. Commodities
Bloomberg Commodity Index
(futures)
4% 118.12 112.29 -4.92%
Crude Oil (futures) 16% 80,06 69,58 -12,93%
d. Derivative Straddle Hang Seng Index 20% - - 3%
e. Bonds US Treasury Bond 1Y 10% 99-151/4 99-22+ 0,42%
f. New trades
African index 40% 43479,14 43767,55 0,70%
TOTAL 100% 4,12%
üKey: = Offen = In Bearbeitung oder = Erledigt

6. 6
3. Our Results
a. US Stocks- Details
Reason for investment
■ Based on 3-factor-model (Fama/French)
- Small caps tend to outperform
market:
■ Small cap market is easy to reproduce
à S&P Small Cap 600
Small Cap Index Automotive Index
Reason for investment
■ Credit level for automotive up by 6%
■ Real gas prices declining in USA
■ Consumption and wages will increase
due to downward trend of
unemployment
Restaurants & Bars Index
Reason for investment
■ Job recovery will lift wages
■ Mid class income & confidence increase
à consumption goes up
■ Mid class has strongest sensitivity in
regards to no. of dine outs
a.
Cause for price increase/decrease
■ US companies taking advantages of
low yields
■ Unexpected good Macro data.
■ S&P Small Cap out performed Big Cap
Cause for price increase/decrease
■ Consumer demand increased
■ Unemployment down to 5,8%.
■ Unexpected good Macro data
Cause for price increase/decrease.
■ US GDP well ahead from expectations
■ Continous decrease in Real Gas Price
■ Consumers demand lift 0.3% of total
GDP

7. 7
3. Our Results
b. Japan Equity – Details
Reason for investment
■ Big depreciation of YEN (YEN is on 7-years-low currently,
Yen’s 14-day relative strength index against $ and € < 30 level)
■ BoJ surprised investors with further currency-
depreciating stimulus (QE)
Cause for price increase/decrease
■ YEN fell to seven-year low on Dec, 4th
■ BUT: Great timing of sale of YEN exposure on Dec, 2nd
à almost no currency losses (-0,1%)
Reason for investment
■ Earlier Re-elections of Prime Minister Abe expected
■ Delay of planned sales tax increase expected
■ Announcment of BoJ on monetary policy
Cause for price increase/decrease
■ Recent poll favoring Prime Minister Abe to get re-elected
■ Announcment of economic stimuli
■ BoJ expected to buy exchange-traded funds as part of its
monetary easing steps
YEN NIKKEI
Ø Positive effect on stock market
Ø Almost no negative currency effect
3.
1.

8. 8
3. Our Results
c. Commodity Futures – Details
Reason for investment
■ Industrial and real estate slowdown in China, reinforcing a weak
demand for commodities
■ USA extreme wheat production expected, therefore a excess of
supply incurring in lower prices
■ Downward trend on prices for commodities
Bloomberg Commodity Index Crude Oil
Reason for investment
■ Downward trend on Brent barrel prices
(30% decrease since June)
■ Continuous slowing of China demand
■ Supply maintain the same by South Arabia
■ New countries producing (Libya, Syria)
Cause for price increase/decrease
■ World food costs dropped to a four-year low (increasing supplies
of milk, butter, cheese for export and less demand from Russia
and China)
■ Return of rainfall to Brazilian sugar plantations
■ Combined output of the crops will reached a record 2.05 billion
metric tons
Cause for price decrease of oil
■ OPEC’s decision to keep output unchanged
■ Saudi Arabia will offer deepest discounts for its benchmark
crude to Asian buyers à want to take out the growth in U.S.
shale production
■ U.S. crude production increased to 9.08 million barrels
a day (highest ever)
■ Price war!
+ +
3.
1.

9. 9
3. Our Results
d. / e. Derivative & Bond – Details
■ Political instability (HK protests)
■ HK dollar fell to 6-month low in Sep, shares slipped to 3-month
low à many businesses closed down
■ High fluctuations of underlying in the last 4 months
Straddle on Hong Kong Hang Seng Index
Cause for price increase/decrease
■ High growth followed the introduction of the trading link
(+3%),
■ Turn of events of the HK protests following the clearance of
protesting sites has been disastrous – arrests, attacks urges for
students to retreat
■ High volatility overall
■ 10% of investment in US Treasury Bonds (1Y maturity)
■ Regarded as „Cash Reserve“ /“Bank account“
■ Not aiming for coupon (2 weeks!)
US Treasury Note
Cause for price increase/decrease
■ Reduced overall VaR
■ No significant fluctuation in 2 weeks as expected (xy%)
+ +
3.
1.

10. 10
3.Our Results
g. Benchmark comparisson
■ Better managed currency risks compared to benchmark.
■ Total profits 3,20% higher than the current Benchmark Return.
■ A 2 day delay on our nikkei sol out, would have increased the
influence on our portfolio revenues.
Comparisson