Digital Bank of Singapore (DBS) is a universal bank that provides wealth management, equity research, and...

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Digital Bank of Singapore (DBS) is a universal bank that provides wealth management, equity research, and brokerage services to individuals and investment banking services to corporations. Maureen recently passed her CFA Level II exam and was hired by the wealth management division of DBS. In Maureen's first week at DBS, her supervisor, Douglas, CFA, introduced her not only to the team of wealth managers but also colleagues from other divisions within DBS, such as Marcus, CFA, who is the head of equity research. Marcus tells Maureen that their brokerage business has been languishing due to stiff competition from online brokers, and he recently tweaked the compensation system to now award bonuses to analysts who provide research coverage for companies that is favourable enough to help DBS clinch investment banking deals from these companies. In a recently completed initial public offering that was oversubscribed by 33 times, Marcus even managed to convince his investment banking colleagues to set aside some of the offered shares for him and his team members who worked tirelessly to help secure that deal. Marcus says that, despite the cut in budgeted headcount, his team was able to increase the number of research reports produced. He credits this to his strategy of relying primarily on the research subject company's management forecasts for companies that are potentially highly scalable but currently loss-making. Given the lack of earnings visibility, he feels that the management of these companies would be in the best position to provide said inputs and that doing so would significantly ease the burden on his research staff. In Maureen's second week at DBS, Douglas asks Maureen to set up an appointment with a prospective client, Eileen, who is in town for only a few days. As time is short, Maureen quickly puts together six generic portfolios and proceeds to reach out to Maureen, with the intention to recommend one of these six portfolios to her during their meeting. Maureen meets Eileen, a middle-aged lady, at a nearby coffee joint and learns that she is a property agent based in the United States. She has a net worth of USD10 million, of which she plans to utilise USD1 million in a month for a charitable commitment that she previously made. Eileen is a frugal lady and her expenses do not vary much from month-to-month. She would also like income from her investment portfolio to defray some of her annual expenses and is, at the same time, concerned about the general rise in prices of goods and services over time. In addition, Eileen hopes to have a portfolio that can be liquidated quickly at fair value. Although she is not an American citizen, Eileen has benefitted from opportunities afforded to her in the country and wishes that her investments contribute to growth of American businesses and its overall economy. As planned, Maureen reassures Eileen that she has prepared six suitable portfolios for her, as shown below: Expected Standard Asset class Portfolio Weights Return Deviation 1 2 3 4 5 6 Cash and equivalents 10% 10% 12.5% 5% 10% 5% US equities 11.00% 20.0% 20% 20% 12.5% 40% 45% 20% International equities 9.00% 18.0% 20% 5% 12.5% 10% 10% 0% US intermediate-term bonds 4.00% 7.0% 10% 15% 12.5% 10% 5% 30% US long-term bonds 4.75% 8.0% 10% 20% 12.5% 10% 15% 30% International bonds 5.00% 9.50% 0% 5% 12.5% 5% 5% 0% 7.00% 14.0% 15% 20% 12.5% 15% 5% 5% 17.40% 7.20% 15% 5% 12.5% 5% 5% 10% Domestic real estate Hedge funds Since Eileen is already late for a meeting to close a property deal, she hastily decides on a portfolio. Before she leaves, she requests on the grounds of personal data protection that Maureen shred the notes she made during the meeting. Given the culture of DBS, which puts customers first, Maureen does so promptly and allocates Eileen's funds as instructed. In Maureen's fourth week at DBS, a pandemic broke out, which forced Maureen to work from home. DBS, however, has already undergone a dramatic digital transformation and most of everything that Maureen needs to perform her work is already stored in the cloud. The only thing Maureen had to bring back physically was a case of client business cards that her predecessor had left for her. While she was perusing the case for the contact information of a client, she chanced upon the card of her high school friend, which reads "Jenny Lok, CFA Level II, expected completion 2022". In Maureen's eighth week at DBS, she was retrenched due to pandemic-related budget cuts. As an interim measure, she starts selling products as a freelance insurance agent to the contacts in the case of business cards. Question 1 Discuss how Eileen's circumstances will affect her allocation to each asset class (low, medium, or high) and, hence, recommend a portfolio that is most suitable for her. No calculations are required. (50 marks) Digital Bank of Singapore (DBS) is a universal bank that provides wealth management, equity research, and brokerage services to individuals and investment banking services to corporations. Maureen recently passed her CFA Level II exam and was hired by the wealth management division of DBS. In Maureen's first week at DBS, her supervisor, Douglas, CFA, introduced her not only to the team of wealth managers but also colleagues from other divisions within DBS, such as Marcus, CFA, who is the head of equity research. Marcus tells Maureen that their brokerage business has been languishing due to stiff competition from online brokers, and he recently tweaked the compensation system to now award bonuses to analysts who provide research coverage for companies that is favourable enough to help DBS clinch investment banking deals from these companies. In a recently completed initial public offering that was oversubscribed by 33 times, Marcus even managed to convince his investment banking colleagues to set aside some of the offered shares for him and his team members who worked tirelessly to help secure that deal. Marcus says that, despite the cut in budgeted headcount, his team was able to increase the number of research reports produced. He credits this to his strategy of relying primarily on the research subject company's management forecasts for companies that are potentially highly scalable but currently loss-making. Given the lack of earnings visibility, he feels that the management of these companies would be in the best position to provide said inputs and that doing so would significantly ease the burden on his research staff. In Maureen's second week at DBS, Douglas asks Maureen to set up an appointment with a prospective client, Eileen, who is in town for only a few days. As time is short, Maureen quickly puts together six generic portfolios and proceeds to reach out to Maureen, with the intention to recommend one of these six portfolios to her during their meeting. Maureen meets Eileen, a middle-aged lady, at a nearby coffee joint and learns that she is a property agent based in the United States. She has a net worth of USD10 million, of which she plans to utilise USD1 million in a month for a charitable commitment that she previously made. Eileen is a frugal lady and her expenses do not vary much from month-to-month. She would also like income from her investment portfolio to defray some of her annual expenses and is, at the same time, concerned about the general rise in prices of goods and services over time. In addition, Eileen hopes to have a portfolio that can be liquidated quickly at fair value. Although she is not an American citizen, Eileen has benefitted from opportunities afforded to her in the country and wishes that her investments contribute to growth of American businesses and its overall economy. As planned, Maureen reassures Eileen that she has prepared six suitable portfolios for her, as shown below: Expected Standard Asset class Portfolio Weights Return Deviation 1 2 3 4 5 6 Cash and equivalents 10% 10% 12.5% 5% 10% 5% US equities 11.00% 20.0% 20% 20% 12.5% 40% 45% 20% International equities 9.00% 18.0% 20% 5% 12.5% 10% 10% 0% US intermediate-term bonds 4.00% 7.0% 10% 15% 12.5% 10% 5% 30% US long-term bonds 4.75% 8.0% 10% 20% 12.5% 10% 15% 30% International bonds 5.00% 9.50% 0% 5% 12.5% 5% 5% 0% 7.00% 14.0% 15% 20% 12.5% 15% 5% 5% 17.40% 7.20% 15% 5% 12.5% 5% 5% 10% Domestic real estate Hedge funds Since Eileen is already late for a meeting to close a property deal, she hastily decides on a portfolio. Before she leaves, she requests on the grounds of personal data protection that Maureen shred the notes she made during the meeting. Given the culture of DBS, which puts customers first, Maureen does so promptly and allocates Eileen's funds as instructed. In Maureen's fourth week at DBS, a pandemic broke out, which forced Maureen to work from home. DBS, however, has already undergone a dramatic digital transformation and most of everything that Maureen needs to perform her work is already stored in the cloud. The only thing Maureen had to bring back physically was a case of client business cards that her predecessor had left for her. While she was perusing the case for the contact information of a client, she chanced upon the card of her high school friend, which reads "Jenny Lok, CFA Level II, expected completion 2022". In Maureen's eighth week at DBS, she was retrenched due to pandemic-related budget cuts. As an interim measure, she starts selling products as a freelance insurance agent to the contacts in the case of business cards. Question 1 Discuss how Eileen's circumstances will affect her allocation to each asset class (low, medium, or high) and, hence, recommend a portfolio that is most suitable for her. No calculations are required. (50 marks)

Answer rating: 100% (QA)

Heres a breakdown of how Eileens circumstances might affect her allocation to each asset class low m... View the full answer