Your team manages a family office for a Singaporean client who has S$1 million in investible wealth.

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Question:

Your team manages a family office for a Singaporean client who has S$1 million in investible wealth. After reviewing the client’s investment policy statement, your team gathers that he would like a diversified portfolio that is long-only in Singapore equities. In addition, that portfolio should yield an average real return of 6% per year and will only accept a 5% probability of losses that are more than $100,000 in any given year. The long-term annual inflation rate in Singapore is 2.5%.

Question 1
Propose a portfolio that historically meets all of the specified investment objectives. As part of this process, you should extract adjusted price data from Yahoo! Finance for each security in your proposed portfolio to compute monthly returns from January 2016 through December 2020. Use this historical data to justify your proposed portfolio.

Question 2
The client suggests using the SPDR Straits Times Index ETF as a benchmark portfolio. Evaluate whether this would be an appropriate benchmark portfolio. As part of this process, you should extract adjusted price data for the ETF to compute returns from January 2016 through December 2020.

Question 3
Recommend and justify three (3) changes to the industry weights for your portfolio constructed in Question 1. Industry classifications can be obtained from FactSet. Communicate these changes to your instructor by the end of Week 3.

Question 4
Implement and justify three (3) changes to the weights of stocks for your portfolio constructed in Question 1. Communicate these changes to your instructor by the end of Week 3.

Question 5
For the portfolio that incorporates the changes you made in Questions 3 and 4, compute the annualised return for the period starting from the beginning of Week 4 to the end of Week 5. Using the portfolio constructed in Question 1 as the benchmark, analyse using micro-attribution how your portfolio has performed relative to the benchmark.