Seminar Advanced Investments: Trading Game

You are a team of fund managers managing a fund with AUM of $1,000,000. Pick a name for your fund. For inspirations, go to http://www.hedgefundnamegenerator.com/. You manage the portfolios for your clients over the next 6 week trading period. This period begins on Monday, 15 January 2018, and continues through to Friday, 23 February 2018. You don't need to liquidate your portfolio at the end of the trading game.

The clients of the fund have specified capital appreciation as the main investment objective and have no short-term cash needs. Your challenge will be to design and execute an investment strategy that satisfies the client over the 6 week investment period. Your grade for this project is based on both the performance of the portfolio and a report. Each team will be responsible for the following:

• Articulating the investment objective. Besides the performance investment objective, you can also target clients who have other specific requirements, e.g. Socially responsible investment
• Choosing the benchmark according to your investment objectives
• Formulating an appropriate investment strategy to meet the objectives
• Conducting the necessary research
• Selecting the appropriate securities and executing trades. Note that you can only execute 300 trades during this period. Use them wisely.
• Track the daily performance of your portfolio and your benchmark index
• Rebalancing the portfolio when necessary.
• If you decide you want to change your strategy, you must justify your decisions

To register your account, go to

http://www.stocktrak.com

Your cost for the simulation is $29.95, payable to Stock-Trak online when you register. Each team only needs ONE account.

Date Event

• 15/01/2018 Stock-Trak opens for trading, start formulating your investment objective, asset allocation, investment strategies and choice of benchmark index.
• 27/01/2018 You can at most have 10% of the AUM in cash. We want you to invest, not sitting on the sidelines.
• 06/02/2018 Midterm performance ranking, the best fund will receive an inflow of $ 200,000. Since investors chase past performance.
• 23/02/2018 Stock-Trak trading ends

Your clients are also evaluating other portfolio managers, all of whom happen to be in the FEM11075 class (amazing coincidence). At the end of the 6-week trial period, they plan to host a conference meeting with the fund managers. Each team has 20 minutes to show that they have the true skills to generate the best risk adjusted return. The best performing funds need to prove that their performance is due to skills rather than luck. The funds that do not perform well can show that the funds have the sound strategies to produce best long term returns. The clients will decide which teams of fund managers have the true skills and have their final pick of the funds to continue managing their money.

The short report should be no more than 5 pages (including Tables).

Deadline: Tuesday Feb 27, 9:00

Upload a copy to the discussion forum of Black Board and email a copy to

Please include the following in the report and presentation

• Investment objective, Target clients and Benchmark
• Philosophy, Process and Portfolio Statement
• Risk adjusted returns
• Which positions exceeded your expectations? What factors created the gap?
• Which positions underperformed for you? What factors created the gap?
• What is your risk taking behavior before and after the midterm ranking? (mutual fund tournament)
• What are the key things you learn from this portfolio management experience?

You can use any means of presentation: formal business presentation, video, movie, acting, singing & dancing (if that helps)…. Be as creative as you can be!

Your grade of the trading game depends on two parts.

1. Performance based grade The performance grade presents the financial compensation the fund managers would receive, which is often 1% of AUM for mutual funds. The AUM will be the final portfolio value based on the closing prices on 23rd February 2018.

The following table matches the grades with the range of the management fee. The performance grade accounts for 5% of the total grade.

Fees Grades

• 20,000 and above 10
• 15,000-19,999 9
• 12,000-14,999 8
• 10,000-11,999 7.5
• 9,000 -9,999 6.5
• 8,000-8,999 5.5
• Below 8,000 5

2. Report based grade

The report grade accounts for another 15% of the total grade. It depends on the following.

• Do you have clearly defined investment objectives?
• Are the investment strategies you took appropriate for your clients given the investment objectives and target risk/return goals that you selected?
• What specific steps did you take during the trading period to attempt to adjust your portfolio to better achieve your target? How successful were these steps?
• Do you apply what you have learned through the class in your portfolio management?
• Do you follow the trading rules (number of trades, choice of benchmark, use of cash, tracking your performance)?

Have fun investing!