Holdings Microsoft Corporation Boeing Co Home Depot, Inc. Merck amp; Co Inc Wells Fargo amp; Co Royal Dutch Shell PLC ADR Class B Lockheed Martin…

For this project, you will take on the role of a Financial Advisor and Analyst who is advising a client on investing his life savings. You must first describe your client and identify at what stage of his career he is. This will allow you to craft an appropriate strategy. For example if the client is young and at the beginning of his career, he will not have much money, but he can take risks because most of his earning period lies before him he is in Accumulation Stage and you may advise him to take a few risks (e.g. advising him to invest in small cap type funds. Suppose he is close to retirement. This sort of client will have a much larger quantity of money but he cannot afford to take risks. He is approaching the Consumption Stage i.e. he will start to draw (or live on returns) of his investments. You will probably advise him to invest in much safer (value type) funds

You will access the various mutual fund databases e.g. Morningstar, CRSPSIFT (available in FTC) etc and analyze various mutual funds

Stage 1

You need to write a proposal for your client  to advise him on how to select mutual funds to allocate his investment funds into 2 actively-managed U.S. diversified open-end mutual funds from more than 10,000 funds offered by about 700 U.S. registered investment companies. In the analysis, you need to cite from at least 10 mutual fund papers on topics related to what drives the fund performance. Through this analysis, you will need to pick and defend the proxy for managerial skill. For those of you who come up with a creative and unique proxy that can identify and predict top performing fund managers (e.g. ranked at the top quintile of the mutual fund peers) you will receive bonus points.

Stage 2

Based on the conclusion from Stage 1, you are going to analyze the holdings from the 2 mutual funds from the recent quarter. You need to collect the most recent fund prospectus, semi-annual report, and to analyze soft and hard information. In your analysis you need to cover at least (1) organization structure (mutual fund company), (2) board quality, (3) fund managers, (4) fees structure, (5) performance and ranking among the peers and benchmark index, (6) portfolio holding characteristic, etc. Specifically, when you download the holdings, you need to analyze (1) whether the holdings are consistent with the objective of the fund and (2) whether the holdings are able to predict the subsequent holding and fund performance.  A detailed outline of the holding analysis will be posted on blackboard.

Goal for the mutual fund project:

The purpose of this mutual fund portfolio project is to develop both the qualitative and quantitative skills to understand the practice of portfolio management, operations, and reporting.  Students will need to use the softwares available in the FTC to support their analysis. Through the project, a student will need to (1) identify the needs for a hypothetical client, (2) review a policy statement from thousands of mutual funds, (3) identify and analyze manageria

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