Developing an Investment Portfolio: Strategies, Performance Evaluation, and Recommendations

In this report we will discuss about developing an Investment and below are the summaries point:- The report outlines the management and investment strategies of the portfolio for Dendy Park Tennis Club. It includes an evaluation of the portfolio's performance and the yield obtained from the investments. The report provides an explanatory statement for the club's investment choices and recommendations.

Developing an Investment
Portfolio

Contents
Executive Summary.........................................................................................................................3
Body (Main contents)......................................................................................................................4
Introduction..................................................................................................................................4
Research.......................................................................................................................................4
Analysis.......................................................................................................................................6
Capital Allocation Strategies.......................................................................................................6
Explanatory statement for choosing specific investment............................................................8
Evaluation of performance of portfolio of Dendy Park Tennis Club..........................................9
Recommendation.......................................................................................................................12
CONCLUSION..............................................................................................................................12
References......................................................................................................................................13

Executive Summary
For a company it is very important to concentrate and utilise the available fund in a well-
defined manner. The present report gives the outline of how the portfolio of the club is managed
and the different investment strategies that the club has identified. It also includes the report on
the performance of the portfolio of the club as well as the yield that has been arrived from
investing in it. For the investors to check and analyse the investments that are made by the club
has been, explanatory statement has been given.

Body (Main contents)
Introduction
Portfolio is a part of financial asset which includes shares, bonds, cash etc. each
investment have a feature of profit or loss. The profit and loss are the included part of
investment. In order to managing of portfolio, Investor have to select the portfolio in which they
wants to invest and then compare the weightage of other securities. In the present assignment,
financial department of Wells tennis club which is a well-established tennis club of UK. This
report will discuss about the preparation of investment policy along with equity, debt and cash.
Suitable decision for investment with performance of portfolio of Wells tennis club will also
covered in the assignment.
Research
Preparation of investment policy statement
This statement is a written statement that is drafted between two persons in which the first person
has to manage the portfolio and second one has to prepare rules for managers. As per this
statement, the goals and objectives are cleared for both parties so that they can make strategies
for better investment (Abu Hussain and Al-Ajmi, 2012). The management of Wells tennis club
has decided the budget for portfolio is around $500000. Statement of investment policy of Wells
tennis club can be more understood by as under:
Wells Tennis club
Statement of Investment policy
Purpose
The main objective behind this statement is to formulate a framework which includes
policies, goals, vision and mission of Wells tennis club of UK. Purpose for investment in such
kinds of instruments is prepared for using the funds of club in the shares and securities of
various big companies through which the company’s profitability and revenue can be
maximised (Ozik and Sadka, 2012). With using such kinds of investment the stakeholders of
club can get more worth. This statement will be given to all the investment managers of club

so as to get suitable funds from investors.
Constraints of Investment
Various constraints of the investment are given as under:
Liquidity requirement – The cited tennis club is a well-known club in UK so, the
management wants to spend their funds for increasing the facility of club so that a large
number of customers can get attracted towards the club. The managers wants to renovate the
tennis court and many other areas of the club (Bayney and Chakravarti, 2012). Liquidity
defines how an investment can be done in effective manner. Therefore, the managers of club
have to make proper decisions for investment. For this, the management have decided to sell
the assets of club as per the changing conditions of market. The managers have decided to
enhance the liquidity of club with keeping aside the budget of $500000 for portfolio.
Risk tolerance- Proper investment portfolio is defined as a proper investment of funds
which includes lower level of risk and suitable securities (Parker, 2012). On the other hand
risk tolerance is a term in which the capacity of tolerance of risk can be suffered by the
investor in their portfolio. In the context of Wells tennis club, their managers had evaluated the
level of risk tolerance and formulated their portfolio accordingly.
Return requirement – This is considered as an important part of portfolio management.
The investors who are investing in the securities always demand for the return. For this, the
managers of club have decided to invest their assets so that they can earn the income at the
rate5% which is beneficial for achieving the goals and objectives.
Time Horizon – the club wants to operate their function on regularly basis. In order to
making investment of any kind it is very essential to setting a specific time period. For this
portfolio, the managers have decided 5 year time period for share and debenture. 3 months
time period is taken for market securities. An estimation is prepared so that the fluctuation of
the market can be experienced.
Tax considerations- The managers of club have consider tax so that the gain from the
investment can be estimated in proper manner. As the club are not liable for paying the tax
according the guidelines of UK government (Bodie, Kane and Marcus, 2011). It can be
beneficial for the managers of club as they wants to investing for the wellness of club and it
will also help them in making a portfolio.
Regulatory and legal considerations- The managers of club are following the policies

in strict manner due to which they can protect their asset and resources. All the acts and
regulations have to consider by the managers so that they can formulate a better investment
portfolio. With the help of this acts and regulations managers can easily understand that which
security is beneficial for them. Managers have to invest in securities in a proper manner so that
they can avoid the options which can harm the brand image of club.
Unique needs and circumstances – the Well tennis club have to implement some
unique needs in their investment policies such as if any need can be seemed in the club so that
they can withdraw from their invested funds. With the help of it the risk can be overcome and
reduced by the managers.
Diversification
The managers of Well tennis club have to keep their portfolio in a well-diversified
condition because it contains various elements of the firm such as debt rate, fix rate on the
invested funds on securities such as treasury bills, commercial papers etc. with the help of it
the managers will be able to reduce the risk and make their portfolio in diversified nature. It
will also help them in providing profitability to their shareholders.
Analysis
Capital Allocation Strategies
Managers of Well tennis club has decided to invest $500000 for their portfolio in which
they have allocated their investment in equity, debt money and market securities with
considering the present and future market conditions so that the portfolios of club will be
balanced in future (Campello and et. al., 2011). There are some conditions which have to
consider by the managers for making investment in portfolios. They are as follows:
Current and future economic situations- during the construction of portfolio it is very
essential for the investor to evaluate all the economic conditions such as inflation rate, GDP etc.
at some time when the economy of a nation is moving from recession to recovery the investor
have to make some strategies so that the portfolio can be adjusted accordingly (Petrova and et.
al., 2011). Hence, it can be said that the evaluation of current and future economic situation is
very important for the firm.
Government policies- Government have right to formulate the policies which can change
the business environment of a specific nation. There are various kinds of policies such as

stability in interest rates, regulations for economic growth, inflation rates etc. for example the
interest rate is reduced it attract a large number of individuals towards investment (Capelle‐
Blancar and Monjon, 2012). For this, the managers of club have to make suitable strategies
through which they will adjust their portfolio from this kind of changes.
Monetary conditions- The availability of funds gets affected from the monetary policy
which includes the interest rates and exchange rates. During the formulation of investment
policies for firm, managers have to consider monetary policy and its effect on their investment.
With the help of it, the managers of club will make best portfolio mix.
The managers of Well tennis club have to formulate their strategies for portfolio mix and
make the classification of securities such as equity and preference shares, debentures, bonds etc.
so that the security analysis will be conducted in a proper manner (Chandra, 2011). There are
various securities are existing in the market from which the portfolio manager have to select
those securities that are suitable and perfect for their portfolio. For this, they have to make a
proper evaluation of securities and decide for investment accordingly. A simple strategy of
investing in securities is that the undervalued securities have to purchase by the investors and the
overvalued securities has to sell. The managers of Wells tennis club have make an evaluation of
various aspects such as:
 Making the balance between the equities and the fixed interest securities.
 The mangers has to manage the high dividend paying companies with those of high
growth companies.
 Also they have to manage the capital gain as well as income tax payable.
 They also have to maintain the liquidity so as to bargain the amount of investment.
 The growth portfolio investment plans also have to be ascertained by the club.
As it is known that the equities have a higher return but also have some high risk than what
the debt market doesn’t have hence the Wells tennis club has to make a balance between them
accordingly and has to decide the portfolio accordingly (Merna and Al-Thani, 2011). By
analysing the portfolio investment proposal, the perfect balance has to be made between the
portfolio mixes by the managers so that they are able to generate best profits to the investors. So
the club will make the portfolio balance by investing the 40% investment in equity, 40% in debt
and the balance 20% in the money market securities so that the risk that is involved in it can be
avoided from the portfolio. So the amount of investment in shares is $500,000*40/100=$200,000

the amount of investment in debt is $500,000*40/100=$200,000 and the amount that is invested
in money market is $500,000*20/100=$100,000.
Explanatory statement for choosing specific investment
From the above analysis it is seen that selecting the right kind of portfolio gives the best
result so as to obtain the overall advantage in the coming period of time. It is considered as the
best asset that will help the investors to examine their options before they make any decision.
The reason behind selecting the scheme of the company is to invest the money in the shares so as
to earn maximum long term profit from it (Chorafas, 2011). As it is seen from the above that the
bonds as well as the other investment options are also one of the best tool that helps in creating
maximum profits from investment. So it will be best decision for the investors to invest in the
right option so that long term gains and capital profits can be achieved in the coming future
years.
Capital distribution: this is the best system to distribute the financial sources in various
sectors so as to increase the efficiency and to maximise the profits of the club. This helps the
management and the accounts department to complete the goals of optimising the capital
allocation which will help them in building the wealth for the stakeholders (MacLean, Thorp and
Ziemba, 2011). It is considered as complicated process. The managers has to allocate the funds
between equity, debt and money market so that it will generate best result from the resources in
which it is distributed.
If the club has the diversified portfolio then it will help the investors in the club to invest
in various types of securities. Also the diversified portfolio includes the different securities so
that weightage of the security is done in a way that reduces the cost of overall portfolio and the
risk that is associated to it (Pompian, 2011). The club which is having a well-diversified portfolio
then it will generate good amount of funds and will also help the investors to have minimum risk
associated with it.
Systematic Risk: this is considered as the variance in the returns that is generated from
the security which is caused due to the change in the economic and market condition of the club.
These changes affects the portfolio to the some extent (Duffie and Singleton, 2012). It can be
measured by relating the variability of the stock market index and the variance that is caused to
the security of the cub. It is measured through assessing Beta for the company.

Unsystematic risk: this is the risk that is considered as unique for the company and it
relates to the specific company, this can also vary from one company to another company. This
can be eliminated or reduced by combining two negative correlative securities.
Reduction or dilution of portfolio risk through diversification: It is done by combining
one or more than one stock in the portfolio which is referred to as diversification. Well Tennis
club has used the diversification so as to reduce the total risk by mitigating the unsystematic risk,
without forgoing the return of the portfolio (Guo and Seaman, 2011). So for the company to
understand the impact of variability on the portfolio risk they have to consider different cases:
 Perfectly positive correlated
 Perfectly negatively correlated
 Returns are uncorrelated or independent
The portfolio managers of the company has to check and analyse the different investment
that has to be done so the analysis of the different portfolio companies which are having
investment in different sectors this includes,
Equity / Debt /
Money Market
Securities
Company Name Sector Amount Invested
($)
Purchase Price
per share ($)
Equity The a2 Milk
Company (A2M)
Milk sector 200,000 18.32
Equity Adelaide
Brighton (ABC)
Real estate sector 70,000 6.27
Equity AGL Energy
Limited (AGL)
Energy Sector 70,000 10.6
As the company has to purchase the debenture of around $200,000 as it has a fixed
interest rate of 10% and the amount of money that has been invested in the securities which
would be of amount 100,000$ in a treasury bill and commercial papers amounting to $50,000
which would be of short term flexibility (Fabozzi and Markowitz, 2011). The investment of the
fund in the equity shares of different sector which includes milk sector, real estate sector and
energy sector, debenture having a fixed interest rate of 10% and the market securities of a

treasury bills and commercial papers which would make the Well tennis club a good diversified
club.
Evaluation of performance of portfolio of Dendy Park Tennis Club
It is the report that contains the portfolio of Well tennis club, in this the investment
policies are framed in a starting of the month of the year and after this the investment mix is
decided in the middle of the month of December that is 40% is invested in shares also 40% is
invested in debentures. Hence the investment in the various companies of different sectors and
debentures and money market securities are made.
Presentation of the investment portfolio made by Well tennis club can be checked on a
weekly base that starts from January 2019 to February 2019 on projected basis are as follows:
WEEK The a2 Milk Company
(A2M)
Adelaide Brighton
(ABC)
AGL Energy Limited
(AGL)
Price per share ($) Price per share ($) Price per share ($)
1-7 January 10.48 4.28 20.61
8-14 January 10.52 4.25 20.58
15-21 January 10.6 4.23 20.65
22-28 January 10.58 4.26 20.49
29 January – 4
February
10.44 4.31 20.55
5-11 February 10.11 4.32 20.69
12-18 February 9.81 4.28 20.88
19-25 February 9.45 4.27 21.2
25 February -3 March 8.88 4.19 21.11

Performance chart of The a2 Milk Company (A2M) shares:-
Performance chart of Adelaide Brighton (ABC) shares:
Performance chart of AGL Energy Limited (AGL) shares:

Recommendation
The Well Tennis Club have a continuous enactment in all the shares in its portfolio leaving The
a2 Milk Company (A2M). As well as the company is shaving a well-diversified portfolio, the
fall in price of A2 Milk Company (A2M) is paid off with the securities and debt since the value
of debt is constant all through the period of January and February (Fernandes, 2011). The
performance of the club is linked with its benchmark portfolios, also it is decided that the club's
performance in its portfolio is steady.
CONCLUSION
From the above analysis it is concluded that portfolio management is necessary and this
process includes selection, construction and the weights of securities of the portfolio. Portfolio
should be well diversified and this will help in maximising the wealth of stakeholders. Also in
the above report it is analysed that Well tennis club of UK is done which has $500,000 for its
investment. 40% of the amount is invested in shares of A2 Milk Company (A2M) and various
other companies. The performance of portfolio is also evaluated in last part of this project.

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