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FinalReport

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FinalReport

  1. 1. Alexander LENNON, Nicola Cosimo PASTO’, Alan MARTIN, Clément ROBERT KEDGE BUSINESS SCHOOL | INVESTMENTS AND RISK MANAGEMENT ORANGE PORTFOLIO OPTIMUM PORTFOLIO
  2. 2. 1 INTRODUCTION The client is nearing the end of their working career, and now plans to explore opportunities to help decide where best to invest in order to gain the most secure and profitable return. The client married with 3 children - none of then still family dependent, is the owner of their own property in St Etienne, the holder of various savings accounts (1.75% average rate), and the owner of Air France- KLM shares. . Having completed the risk reward profiling survey, we can conclude that the clients aversion to risk in level 2 – deeming themselves unwilling to invest in areas of long-term risky securities, although inclined to opt for proposals of investment in France, his native country. Our mission is to construct a portfolio of carefully selected ETF’s, to offer the safest holdings with the highest returns. The €100,000 investment will be divided between quality growth, momentum growth and low risk securities, to form a diversified portfolio ultimately reducing unsystematic risk without lowering the expected return. Based on the clients risk reward profile and timescale requirements, each holding will have a weighted percentage based on the criteria set forth for the given investment objective of securing a prosperous and secure retirement. This document provides you with key investor information about this UCITS (the "Fund"). It is not a marketing material. The information is required by law to help you understand the nature and the risks of investing in this Fund. You are advised to read it so you can make an informed decision about whether to invest. 2 SELECTED ETFS Figure 1: ETFs trends from 03/01/2011 to 03/02/2015 2.1 AMUNDI ETF NASDAQ-100 UCITS ETF - EUR Benchmark index: NASDAQ-100 Net assets: 127.87 M EUR (02/03/2015) NAV: 42.86 EUR (02/03/2015) Max. Annual management fees (all taxes incl.): 0.23% 2.1.1 Introduction to the AMUNDI ETF NASDAQ-100 UCITS ETF - EUR By subscribing to AMUNDI ETF NASDAQ-100 UCITS ETF - EUR, you are investing in an index-tracking Fund with the objective to track, as closely as possible, the performance of the NASDAQ-100 Index ("the Index"), whether the Index rises or falls. The target for maximum tracking error between changes in the Fund’s NAV and that of the MSCI Europe Index is 2%. The equities forming the NASDAQ-100 Index are taken from a basket of securities issued by non-financial companies listed on the NASDAQ, an American market which specifically includes American and non-American stocks, taken from the technological, Internet 70,00 90,00 110,00 130,00 150,00 170,00 190,00 210,00 230,00 250,00 03/01/11 24/02/11 19/04/11 14/06/11 05/08/11 28/09/11 21/11/11 13/01/12 07/03/12 03/05/12 26/06/12 17/08/12 10/10/12 03/12/12 31/01/13 26/03/13 22/05/13 15/07/13 05/09/13 29/10/13 20/12/13 17/02/14 10/04/14 05/06/14 29/07/14 19/09/14 12/11/14 08/01/15 ETFs trends from 03/01/2011 to 03/02/2015 AMUNDI ETF GOVT BOND EUROMTS BROAD INVESTMENT GRADE 3-5 UCITS ETF AMUNDI ETF NASDAQ-100 UCITS ETF AMUNDI ETF FTSE EPRA EUROPE REAL ESTATE UCITS ETF AMUNDI ETF MSCI WORLD UCITS ETF
  3. 3. and IT sectors. The NASDAQ-100 Index includes equities from sectors such as IT, biotechnology, health, telecommunications and transport. Through the Portfolio, you will be permanently invested at a level of at least 75% in stocks eligible for the Plan d’Epargne en Actions. 2.1.2 Composition of the AMUNDI ETF NASDAQ-100 UCITS ETF - EUR The current fund is a selection of the leading high-tech companies in the world assuring that the expectations of our investors will be fulfilled. As detailed below, these companies have managed to achieve sounds results over the last 4 years and we strongly believe in their potential in the following years. Holding Weight Share Prices as of 02/03/15 ($) Market Capitalisation ($ Mds) Global Performance 2011-2014 APPLE INC 14,55% 128,68 749,53 325% MICROSOFT CORP 7,05% 43,19 354,40 50% GOOGLE INC – CL C 3,84% 568,76 387,01 97% FACEBOOK INC A 3,57% 78,75 220,42 105% AMAZON.COM INC 3,48% 383,43 382,87 190% Figure 2: NASDAQ-100 composition You are exposed to the currency exchange risk between the currency of the stocks in the Index ($) and your currency (€). For the purpose of stock-picking, management does not, neither exclusively nor mechanically, rely on the ratings issued by rating agencies, but bases its buy and sell convictions of a security on its own credit and market analyses. Our index may comprise up to 20% equities or debt securities issued by the same entity; this limit may be raised to 35% maximum for a single issuing entity. As it is clear on Figure 1, the AMUNDI ETF NASDAQ-100 UCITS ETF – EUR has managed to outperform its benchmark (the Nasdaq- 100) for three consecutive years now and the market remains full of promises. We believe that this fund would fit particularly well in our offer, bringing a bit of controlled risk for higher returns. 2.2 AMUNDI ETF FTSE EPRA EUROPE REAL ESTATE UCITS ETF Benchmark index: 100% FTSE EPRA/NAREIT Net assets: 31.28 M EUR (02/03/2015) NAV: 356.37 EUR (02/03/2015) Max. Annual management fees (all taxes incl.): 0.23% 2.2.1 Introduction to the AMUNDI ETF FTSE EPRA EUROPE REAL ESTATE UCITS ETF This seeks to replicate as closely as possible the evolution of the FTSE EPRA/NAREIT Developed Europe net return strategy index, denominated in Euros, whether the trend is rising or falling. This ETF enables investors to benefit from an exposure to the most liquid securities of the European property sector, in a single transaction. Between its inception on August 20, 2009 and Feb 17, 2014, the fund objective was to replicate the Euronext IEIF REIT (real estate investment trust) Europe index. Investing in Real Estate provides several benefits to the investor. Suiting the client’s needs through its high tangible asset value, and relatively low volatility, investing in real estate adds real value through its diversification potential by providing a higher return per unit of risk. Furthermore, with 23.53% of the index’s assets allocated to the client’s home country, France, we deem this index as a perfect compliment to the portfolio. 2.2.2 Composition of the AMUNDI ETF FTSE EPRA EUROPE REAL ESTATE UCITS ETF Holding Weight Share Prices as of 02/03/15 (€) Market Capitalisation ( Mds) Global Performance 2011-2014 UNIBAIL RODAMCO-AMSTERDAM 13.42% 256.54 25,159 70.45% LAND SECURITIES GROUP PLC 7.36% 1,277.00 13,910 87.95% BRITISH LAND CO ORD 25P 6.16% 1175.64 11,950 37.23% KLEPIERRE 4.08% 44.71 8,773 61.32% HAMMERSON PLC 3.97% 940.19 7,373 42.03% Figure 3: FTSE EPRA/NAREIT composition
  4. 4. 2.3 AMUNDI ETF GOVT BOND EUROMTS BROAD INVESTMENT GRADE 3-5 UCITS ETF Benchmark index: FTSE MTS Eurozone Government Broad IG 3-5Y Net assets: 83.94 M EUR (03/03/2015) NAV: 197.11 EUR (03/03/2015) Max. Annual management fees (all taxes incl.): 0.14% 2.3.1 Introduction to the AMUNDI ETF GOVT BOND EUROMTS BROAD INVESTMENT GRADE 3-5 UCITS ETF In any investment climate, the level of active risk is motivated by a clear view of macroeconomic developments. Using these tools we can reduce the volatility of our portfolios in periods of uncertainty. In the present moment of time, with the quantitative easing set off by the Central Bank, devaluation of the €, and a low inflation; there is an expectation of continuous growth in the EU. This is especially true for Germany, France and Italy; three of the strongest and most influential economies in the world. This combination of bonds issued by Italy, France and Germany add up to 40% of the total weight of the portfolio. These bonds are the perfect addition with a solid return and ground-level risk. 2.3.2 Composition of the AMUNDI ETF GOVT BOND EUROMTS BROAD INVESTMENT GRADE 3-5 UCITS ETF Holding Weight Expedition date Total Weight Expiry date FRANCE OAT 4.25% 14,35% 01/01/2015 April18-Oct19 ITALIAN REPUB BTPS 4.5% 14,49% 01/01/2015 Feb18-Sep19 GERMANY BRD 3.5% 2,88% 01/01/2015 Jun19 2years 32,26% 5years 67,74% Figure 4: FTSE MTS Eurozone Government Broad IG 3-5Y composition 2.4 CORRELATION OF RISKY ETFS Correlation between AMUNDI ETF NASDAQ-100 UCITS ETF and AMUNDI ETF FTSE EPRA EUROPE REAL ESTATE UCITS ETF is 0,39. This is a good vale because it means that, whatever happens in the market, the two ETFs don’t react in the exactly same way. In other words, this is a good insurance against the market. 2.5 ETFS PERFORMANCES Increase in return during the past four years with a stable level of risk, makes this portfolio a perfect fit for the client’s needs. 0,00% 20,00% 40,00% 60,00% 80,00% 100,00% 1 QTR 1 YR 2 YRS 3 YRS 4 YRS ETF returns performance AMUNDI ETF GOVT BOND EUROMTS BROAD INVESTMENT GRADE 3-5 UCITS ETF AMUNDI ETF NASDAQ-100 UCITS ETF AMUNDI ETF FTSE EPRA EUROPE REAL ESTATE UCITS ETF 0,00% 5,00% 10,00% 15,00% 20,00% 25,00% 1 QTR 1 YR 2 YRS 3 YRS 4 YRS ETF risks performance AMUNDI ETF GOVT BOND EUROMTS BROAD INVESTMENT GRADE 3-5 UCITS ETF AMUNDI ETF NASDAQ-100 UCITS ETF AMUNDI ETF FTSE EPRA EUROPE REAL ESTATE UCITS ETF Figure 5: ETF returns performance Figure 6: ETF risks performance
  5. 5. 3 PORTFOLIO 3.1 OPTIMAL ETFS ALLOCATION Considering the risk averse profile of the client, the optimum portfolio is represented by the following combination of AMUNDI ETFs. ETF Allocation in the portfolio AMUNDI ETF NASDAQ-100 UCITS ETF 42% AMUNDI ETF FTSE EPRA EUROPE REAL ESTATE UCITS ETF 18% AMUNDI ETF GOVT BOND EUROMTS BROAD INVESTMENT GRADE 3-5 UCITS ETF 40% Figure 7: Optimal ETFs allocation 3.2 PORTFOLIO PERFORMANCE Performance Statistics value Sharp ratio 1,09 Treynor measure 0,15 Jensen's alpha 0,03 Information ratio 5,77 M2 3,39% Figure 10: Performance statistics 3.3 ANNUAL CHARGES TOTAL INVESTMENT € 100.000,00 ETF AMUNDI ETF GOVT BOND EUROMTS BROAD INVESTMENT GRADE 3-5 UCITS ETF AMUNDI ETF NASDAQ-100 UCITS ETF AMUNDI ETF FTSE EPRA EUROPE REAL ESTATE UCITS ETF ETF % 40% 42% 18% INVESTMENT PER FUNDS [€] € 40.000,00 € 42.000,00 € 18.000,00 ANNUAL CHARGES [%] 0,14% 0,23% 0,35% ANNUAL CHARGES [€] € 56,00 € 96,60 € 63,00 TOTAL ANNUAL CHARGES [€] € 215,60 Figure 11: Annual charges -4% -3% -2% -1% 0% 1% 2% 3% 4% 03/01/11 17/03/11 02/06/11 16/08/11 28/10/11 12/01/12 27/03/12 13/06/12 27/08/12 08/11/12 29/01/13 16/04/13 01/07/13 12/09/13 26/11/13 12/02/14 30/04/14 14/07/14 25/09/14 09/12/14 Portfolio returns from 03/01/2011 to 03/02/2015 0,00% 10,00% 20,00% 30,00% 40,00% 50,00% 1 QTR 1 YR 2 YRS 3 YRS 4 YRS Portfolio - risks VS returns Portfolio return Portfolio risk Figure 9: Portfolio returns from 03/01/2011 to 03/02/2015 Figure 8: Portfolio – risks VS returns
  6. 6. 4 AIR FRANCE After the crash of flight 447 in 2009, the rise of low cost airlines leading to a loss of competitiveness and the continuous strikes have left Air France in a very delicate situation. 5 PORTFOLIO VS AIR FRANCE STOCK With a return three times higher last year and a risk as high as four times the one in the portfolio, there is no question in the benefits incurred adopting our product. 6 RECOMANDATIONS AND CONCLUSION After a careful analysis of Marc’s profile, we are offering Marc to invest its savings into this low-risk portfolio with a long-term objectives. Our offer is structured around two different types of assets: government bonds (bringing stability to the overall portfolio), NASDAQ shares of strong and reliable company as well as real estate companies acting as safe haven for a better return. We believe that this portfolio is less risky than Marc’s current shares in Air-France KLM with a good diversification made by investing 40% in government bonds, 42% in NASDAQ and 18% in real-estate. This financial product may bring up to 15% to 40% return with a minimum risk under 10%. The low operating expenses of our company would leave its profits at an interesting level bringing a constant additional income to Marc for its retirement on the long- term. Past performance is not a reliable indicator of future results. Returns may decrease or increase as of result of currency fluctuations. When making an investment in the fund, investor’s capital is at risk. All rights reserved to our team. 0 2 4 6 8 10 12 14 16 Air France-KLM SA (AF.PA) stock trend -20,00% 0,00% 20,00% 40,00% 60,00% 1 QTR 1 YR 2 YRS 3 YRS 4 YRS Air France-KLM SA (AF.PA) - risk VS return Return Risk -20,00% 0,00% 20,00% 40,00% 60,00% 1 QTR 1 YR 2 YRS 3 YRS 4 YRS Portfolio VS Air France - returns performance Portfolio return Air France-KLM SA (AF.PA) 0,00% 10,00% 20,00% 30,00% 40,00% 50,00% 1 QTR 1 YR 2 YRS 3 YRS 4 YRS Portfolio VS Air France - risks performance Portfolio risk Air France-KLM SA (AF.PA) Figure 13: Air France-KLM SA (AF.PA) stock trend from 03/01/2011 to 03/02/2015 Figure 12: Air France-KLM SA (AF.PA) – risks VS returns Figure 15: Portfolio VS Air France – return performance Figure 14: Portfolio VS Air France – risks performance

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