You have been appointed the portfolio manager of a 1.5 billion pension fund recently established. The...

You have been appointed the portfolio manager of a 1.5 billion pension fund recently
established. The fund is required to maintain 40% of its portfolio in financial stocks/ markets.
a) Select two financial sector stocks in your proposal to the fund’s board of trustees. Justify
your selection using at least one-year market information.
b) A member of the board of trustees has argued for the use of a stock index in the exercise.
i. State and describe an index on the local bourse that you would use for this
purpose.
ii. Assess the use of market indices in portfolio management

Expert Solution

a. Two financial stock which I would be like to buy are softbank and HDFC.

Softbank is Japanese company which has expertise in relation to the financial sector and it manage alot of its money through investment into portfolio worldwide as well as its worldwide business as well so it will survive and sustain the long run.

HDFC is financial giant in India which has large number of subsidiaries like HDFC bank and HDFC standard life which are respective leaders in their sectors.

return of the stock among past few years have been substantially good and investment portfolio are also good as well as the loan portfolios are also good.

b) I would advise to invest through S&P 500 as it is a market capitalisation index.

market indices are very much important in portfolio management because market indices are based upon various kinds of factors like prices and number of outstanding share or average Weighted so that proper reflection of economy must be there in stock index in order to select.

jeff jeffy answered 1 year ago

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