Question

1. You have each been assigned a sector of the economy to develop a sector based mutual fund.
   1. (20 points) What is your sector, and do you expect your sector to outperform the S&P500 over the next 2 months? Why or why not?
   2. 1. (20 points) Do you expect that the companies you have chosen for your fund will outperform the sector in general over the next 2 months? Why or why not?

Answer 1

Ans) 1. A mutual fund is a pool of money of the investors and the money is invested in bonds, stock and other assets. A mutual fund is managed by the professional who take care of the fund and charged professional fees for it. A sector based mutual fund is a fund whose money is invested in various sectors of economy like agricuture , minning and other natural resources sector they comes under the primary sector. Also the other sector is the secondary sector consisting of manufaturing, engineering,construction , There is tertiary sector which is also called the service sector like banking and insurance as well as telecom secter. My choice for sector based mutual fund is quaternary sector which is related to activities like education and research.The portfolio of mutual fund should consists of companies which are into the business of knowledge and research. As because of the COVID 19 the stock market is down and the recovery process will take a lot of time, the importance of research in medical science has proven its points , the superpowers like US and China although invest huge amount in research but there will be a great shift towards research in the fields of virology and drugs, the expenditure of defence would give away quite a big room for saving AMERICA from such kinds of threat , which not only hampered the economic activity but taken a great toll of lifes.Hence a fund based on companies doing intellectual activities like educational and research will definately outperform the S&P 500. Here it is important that the funds should have risk analysis as well as insurance companies in its portfolio. As Financial risk management firm and insurance companies will pay a much bigger role in the time to come hence the tertiary sector will be prime focus for the mutual fund.

Ans 2 .) The companies that are chosen for the portfolio of mutual fund are as follows:

1 Capella education company ( CPLA) : it is online learning based company and provides various bachelor and masters degree programme in behavioral health and human services etc.

2.AstraZeneca - is a Global bio-technological company and into research in medical science

3. Everest Re Group - is a leading reisurrance company

4. Globe life - is a financial service holding company it offers life insurance and supplementary health insurance products.

5 IQVIA - provides technological driven healthcare services and help big pharma companies to perform research.

The reason why the companies listed in the mutual fund will do better than S&P 500 is because of the changing market dynamics and the rise in the importance of life and medical insurance and medical research also the companies will adjust their products portfolio according to the demand. It will take time for the market to recover but the earlier recovering sector will be tertiary or service sector.