PORTFOLIO ANALYSIS AND MANAGEMENT

Running head: PORTFOLIO ANALYSIS
Portfolio Analysis
Name of the Student:
Name of the University:
Author Note:

PORTFOLIO ANALYSIS1
Table of Contents
Introduction:...............................................................................................................................2
Discussion:.................................................................................................................................2
Details of the Fund:................................................................................................................2
Portfolio Allocation Decision:...............................................................................................3
Reason for holding all the stocks:..........................................................................................6
CAPM:...................................................................................................................................8
Efficiency of the markets:......................................................................................................8
Conclusion:..............................................................................................................................11
References:...............................................................................................................................12

PORTFOLIO ANALYSIS2
Introduction:
Portfolio management is a process which requires analytical skills and observation
skills of the portfolio manager. A portfolio is constructed in two dimensions which are to
manage it actively and another is to manage it passively. The passive management of
portfolio implies to mimic the benchmark index with the level of return and risk, thus does
not require the portfolio manager’s skill. However active management involves the use of
portfolio manager skills to beat the benchmark and generate alpha or excess returns. This
requires the portfolio manager to apply strategic asset allocation along with tactical asset
allocation of the portfolio, with a higher frequency of churning the portfolio (Chandra 2017).
Thus, this report aims to provide the portfolio allocation decision of the Monticello
fund which is actively managed to generate alpha. Also the various measures of return and
risk from the portfolio is analysed and calculated to analyse the effectiveness of asset
allocation. The importance of using Diversification and the efficiency of the markets is
analysed in the report along with the use of CAPM in calculating the expected return of the
stocks which comprise in the portfolio (Antchak, Ziakas and Getz 2019).
Discussion:
Details of the Fund:
The fund Monticello fund was a part of the Darden capital management team which
comprised of another two funds. The funds were actively managed by a small group of
students to provide them experience of actively managing a portfolio and providing them the
relevant experience in regards to the practical application of the theoretical knowledge. The
old team which had previously managed the fund had generated impressive returns of 42.9%
while the index which is the S&P 500 had generated 35.1% in the same period. Thus in

PORTFOLIO ANALYSIS3
absolute terms the return of 42.9% is quite impressive performance by the team, but in
relative terms the team has been able to generate only 7.8%. Thus the aim of the new team is
to use the appropriate strategic asset allocation to generate impressive returns greater than the
benchmark and provide alpha returns to the fund (Nawrocka 2018).
Portfolio Allocation Decision:
The stock selection is an important aspect for the portfolio allocation decision. The
fund is focused in providing abnormal returns to the capital managers, hence the primary
weightage is given to the equity selection, while the rest of the weights is invested in bonds.
Hence the style of the portfolio is to invest in aggressive portfolio which is actively managed.
The portfolio which was managed by the predecessor was using the combination of Large
Cap stocks along with bonds. The large cap stocks which were invested in the past were from
different industries and sectors, hence the diversification of the portfolio was an objective
with weightings ranging from 2.1% to 5.6% in the portfolio for the stocks (Alford,
Luchtenberg and Reddie 2018).
Thus the current decision and the selection of the stocks of the portfolio is the analysis
of the fundamentals of the company which are possibly undervalued but have higher growth
opportunities. Thus the discussion regarding the different stocks and their fundamentals need
to be considered when selecting the portfolio of stocks (Grinold 2018).
Figure 1:
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