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%.
If needed, you may submit your supplementary computations in an Excel file, using a separate tab for each question. Price data can be extracted from Yahoo! Finance and industry classifications (Global Industry Classification Standard) can be obtained from Thomson Reuters Eikon.
Asset allocation
SPDR Straits Times Index ETF - 30%
Raffles Medical Group - 10%
ComfortDelgro Corporation Limited - 10%
Sheng Siong Group Ltd - 10%
CapitaLand Mall Trust - 40%
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Asset allocation
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Estimated Expected return
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Weightage
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SPDR STI ETF
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3.0%
|
30%
|
|
Raffles Medical Group
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24.0%
|
10%
|
|
ComfortDelgro
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15.1%
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10%
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|
Sheng Siong Group
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24%
|
10%
|
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CMT
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8.4%
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40%
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Total
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100%
|
|
Expected portfolio return
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10.6%
|
|
|
|
|
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Target portfolio return
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8.65%
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|
Question 1
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 price data for the ETF to compute returns from January 2012 through December 2016.
Question 2
Evaluate the need to rebalance your portfolio. Make and justify three (3) changes to the industry weights for your portfolio constructed in Question 1. Communicate these changes to your instructor by the end of Week 3.