Won Financial Market's Portfolio Contest by structuring a diversified portfolio of different asset classes to beat a predetermined equity benchmark.

1. F I N A N C E P O R T F O L I O C A S E S T U D Y
IE Business School
Financial Markets – Prof. Darío Cestau, PhD
C A S E T E A M
Antonio Auricchio, Théo Tortorici, Julius Kühn, Eudore Pirmez, Radhika Goyal, Andrea Roa
M U L T I A S S E T I N V E S T M E N T S T R A T E G Y

2. Our aim is long-term, sustainable growth, achieved through careful risk assessment and intelligent
fund allocation
I. A B O U T U S
1
Our Firm
§ 70 offices in 30 countries
§ Worlds largest asset manager with currently $5.1 trillion
assets under management
§ Comprehensive range of services offerings, market
access and products
§ Among our clients are governments, companies,
foundations and wide range of individuals
Our core principles
§ We are a fiduciary to our clients – their interests come
first and we are the market voice on their behalf
§ We are passionate about performance – our success
requires that we out-think and out-work the competition
§ We are one BlackRock
§ We are innovators
Sources: Fund website
Fin
Chem
Services
CGHCS
Eco
Insurance
Rest
Senior Secured 1st Debt
Senior Secured 2nd
Debt
Unsecured Debt
Preferred Equity
Common Equity & Other

3. 2
II. E X E C U T I V E S U M M A R Y
Transaction details
§ Invested capital: 1,000,000 €
§ Sharpe Ratio: 1,16
§ PTF Return: 3.05 %
§ PTF Risk: 2.63 %
§ BM Return: 1.64%
§ BM Risk: 3.45%
R² = 0,78024
R² = 0,96823
0%
5%
10%
15%
20%
25%
30%
201720162015
Benchmark Performance Portfolio Performance Poly. (Benchmark Performance) Poly. (Portfolio Performance)
Strategy brief
§ Investment in stable, well-performing, less-hyped industry leaders
§ Bear Put Spread to hedge against US exposure
§ Core-Satellite ROW strategy: participate in the individual markets through
ETFs and a small selection of market-making stocks

4. III. I N V E S T M E N T E N V I R O N M E N T

5. III.I M A R K E T S
4
§ US being the largest economic partner for
Japan (20% of imports).
§ Continuous innovation in automotive sector.
§ Potential economic and corporate policies
benefit long term investments.
United States
Japan
Europe
Brazil
§ US market is skyrocketing due to the
imminent interest rate increase by the Fed
§ 235,000 new jobs in February
§ Inflation rate: 2%
§ Trump’s tax reform: from 35% to 20%
Sources: Company website
§ New Liberal President: Michel Temer.
§ Team composed with professionals
from the energy sector.
§ Reforms to improve foreign
investments.
§ GDP growth demands more power
capacity and transmission
§ Elections in three major countries.
§ Uncertainty due to Brexit negotiations.
§ Solid companies contribute to a balanced
economy.

6. III.II U P C O M I N G T R E N D S
Singapore
§ A lower seller’s stamp duty
may benefit real estate sector.
Hence, a 3% growth in the
number of residential property
transactions is expected.
Europe
§ Technological companies
raised $3 billion in Q3 2016.
§ New tech hubs emerging.
§ Maersk’s announcement of
purchasing the German
rival, Hamburg Süd.
Brazil
§ Government’s ten-year
energy expansion plan.
Japan
§ Companies are transforming
demographic liability into assets
thanks to robots.
Non-US
Securities
5

7. IV. P O R T F O L I O

8. Off the beaten path: avoiding S&P 500 “trendy names” and grossly inflated (overvalued) titles.
IV.I O U R C R I T E R I A
7
Equity and ETF
§ US Stocks
§ “Value” oriented stocks using Bloomberg rating (3.5+ grade or above)
§ Consistent Market Cap/EBTIDA ratio to avoid inflated/hyped titles (Netflix, Facebook, Snapchat etc.)
§ The best-performing stocks in a 3M, 6M, 1Y, 3Y period
§ ROW Stocks
§ Complementary with ETF strategy, mainly focused on technology (ASTM – Inmarsat), robotics
(Fanuc), mining (CMIG4) and shipping (Maersk) industry.
§ ETF
§ US market: two ETFs to boost performance as interest rates increase
§ Insurance à Insurance companies will maximize their returns on underlying bond investments
so as to amplify the effect on the market growth
§ Currencies: Dollar Index ETF will gaining momentum against other currencies since higher
rates will attract foreign capital into US domestic market.
§ ROW: Core-Satellite approach.
§ Almost 80% of our exposure is in index-tracker ETFs mirroring the given benchmark
§ The remaining funds were invested into high-growth potential stocks

9. We used linear programming to optimize the our portfolio diversification and expected return.
IV.II P O R T F O L I O O P T I M I Z A T I O N
8
Data preparation
§ Calculate the weekly percentage return of different
assets
§ Create a Var/CoVar matrix
§ Compute the risk and return for the portfolio assuming
equal distribution
Linear programming
§ Linear function to be optimized
§ Maximization of the portfolio Sharpe ratio
§ This creates the best possible diversification
§ Problem constraints
§ 100% of the portfolio should be invested
§ Non-negativity
§ All weights have to be positive, no short-selling
Result = Ideal portfolio composition
Return
Risk
PTF Return: 3.05 %
PTF Risk: 2.63 %
Benchmark Return: 1.64%
Benchmark Risk: 3.45%
R² = 0,78024
R² = 0,96823
0%
5%
10%
15%
20%
25%
30%
201720162015
Benchmark Performance Portfolio Performance Poly. (Benchmark Performance) Poly. (Portfolio Performance)

10. The portfolio composition focusses on outperforming the benchmark with high US exposure, while
minimizing volatility through hedging and index diversification.
IV.II A S S E T A L L O C A T I O N
9
Equity; 60%
ETFs; 39%
Real Estate
2%
Derivatives
1%
US
50%
EU
30%
JPY
10%
EM
10%
Asset Allocation
Equity
Altria Group 15,2%
Berkshire Hathaway 5,9%
Johnson & Johnson 0,3%
Northern Trust 7,8%
Phillip Morris 3,0%
Reynolds American 8,0%
Union Pacific 7,4%
Union Pacific 7,4%
AP Moller - Maersk 3,0%
STM 3,0%
Inmarsat 2,5%
Fanuc 1,5%
Companhia Energetica de Minas 1,5%
ETF
Fidelity VIP High Income Portfolio 1,5%
Dollar Index Spot 0,5%
Lyxor UCITS ETF Euro Stoxx 50 21,0%
Lyxor UCITS ETF Euro Stoxx 50 21,0%
LYXOR JPX-NIKKEI 400 (DR) UCITS ETF Daily Hedged C-EUR5,5%
Robo Global Robotics & Automation Index ETF 3,0%
Lyxor ETF Brazil (IBOVESPA) EUR 7,0%
Real Estate
CapitaLand Commercial Trust 1,5%
Derivatives
Future on S&P 500 Put @ 2115 (June 2017) 0,3%
Future on S&P 500 Put @ 2000 (June 2017) 0,3%

11. IV.III H E D G I N G S T R A T E G Y
10
1850 1900 1950 2000 2050 2115 2150 2200 2250 2300 2350
Short Put Long Put Bear Put Spread
Bear Put Spread
§ Low-cost bear put spread as protection
against a general deflation of the S&P500
(nearly 22 times trailing earnings)
§ The strikes were chosen at 2115 and 2000,
thus the portfolio will experience a benefit for
a fall in the index up to 2000
§ Due to the expiry date of the puts (June 2017)
they will maintain a certain residual value
even at the end of the month during which the
portfolio is considered
§ Considering the low market volatility, this
strategy will be relatively cost efficient
Profits
S&P 500 quotation

12. V. F I R S T - M O N T H P E R F O R M A N C E

13. -$9.542
$5.025
-$3.238 -$3.953
$1.038
-12.000
-10.000
-8.000
-6.000
-4.000
-2.000
0
2.000
4.000
6.000
8.000
Market Performance Breakdown
USA EU JP BRA SGP
United States (50%)
• Lower asset value due to market
volatility: US $9.542
• Major loss from Altria Group: US
$6.000
• Strict anti-smoking regulations.
• Lower sales than expected due to
increase of selling price.
Positive performance:
• Philip Morris: (5,80%)
• Reynolds American: (3,35%)
• VIP High Income: (1,30%)
Assets weight on total PTF: 11,50%
V.I U N I T E D S T A T E S

14. -$9.542
$5.025
-$3.238 -$3.953
$1.038
-12.000
-10.000
-8.000
-6.000
-4.000
-2.000
0
2.000
4.000
6.000
8.000
Market Performance Breakdown
USA EU JP BRA SGP
Europe (30%)
• Higher asset value: US$ 5.025
Positive performance:
• Inmarsat (12,42%): yet only 2,98%
was invested.
• Euro Stoxx 50 (1,53%): share price
only increased 0,5 points.
• French elections.
• Uncertainty after Brexit.
V.II E U R O P E A N U N I O N

15. -$9.542
$5.025
-$3.238 -$3.953
$1.038
-12.000
-10.000
-8.000
-6.000
-4.000
-2.000
0
2.000
4.000
6.000
8.000
Market Performance Breakdown
USA EU JP BRA SGP
Japan (10%)
• Return: US $3.238
• Weaker yen: JP stocks plunged
after lowing interest rates in the US.
• Geopolitical risks lead to concerns
about Japanese companies’
earnings.
Positive performance:
• Fanuc shares: (3,79%)
• The company benefited from
weaker Yen.
V.III J A P A N

16. -$9.542
$5.025
-$3.238 -$3.953
$1.038
-12.000
-10.000
-8.000
-6.000
-4.000
-2.000
0
2.000
4.000
6.000
8.000
Market Performance Breakdown
USA EU JP BRA SGP
Singapore (1,5%)
• Return: US$ 1.038
• CapitaLand Commercial Trust
increased share price 5% due
to better real estate market’s
condition.
Brazil (8,5%)
• Return: US $3.953
• Companhia Energetica de Minhas
displayed a significant drop in its
share price due to political turmoil
commercial partners worsened
stability.
V.IV B R A S I L & S I N G A P O R E