evaluate forms of portfolio theory

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ABC Capital Management is one of the most prestigious asset management companies in the country. It has been managing the wealth of America for over 100 years. It utilizes various forms of fundamental, technical, and quantitative analyses in the design and implementation of its several investment strategies and portfolios. Today, ABC Capital is a global investment management firm that continues to focus on rigorous research and the development of innovative, practical investment strategies. Because of this, ABC Capital is able to achieve the goals of its clients: individuals, pension funds, endowment funds, banks, insurance companies, foundations, and sovereign wealth funds.

You work as a junior portfolio manager with ABC Capital. As part of the normal portfolio review process, the company provides a list of 20 possible investments. You must select at least 6, but not more than 12, investments to create a fully asset-allocated portfolio that will have the characteristics of an 11% expected return, a beta of 0.5 or less, and a correlation of less than 60% to the stock market. Assume broad market returns are 8% annually and use the current 1-year treasury yield. You will create the portfolio and present it to the company.

  • In the Word document provided below, explain the following:
    • Your portfolio.
    • Rationale for the investment selection including the weighting of each investment.
    • Whether it is better to use active or passive investment management.
  • Support your findings by showing your calculations in the spreadsheet provided below. Include:
    • Calculations for achieving required characteristics (expected return, beta, and correlation).
    • Calculations for the risk adjusted rate of return (Sharpe Ratio and Treynor Ratio).
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