FIN 4510 - Report on University Endowment Fund Performance Analysis

This report provides a detailed analysis of the performance of a university's endowment fund from March 1st to March 31st, 2020. The executive summary highlights the fund's 6.87% return, outperforming the benchmark NASDAQ composite's negative return. The report details the initial investment strategy, asset allocation, and active management decisions, including timely adjustments made in response to the COVID-19 pandemic and related market volatility. The market overview section summarizes the turbulent events during the investment period, emphasizing the impact of the pandemic and economic downturn on large-cap stocks. The report explains the shift towards FMCG and essential goods, driven by increased demand during lockdowns. The portfolio's positions, including Walmart Inc., Facebook Inc., and Pepsico, are analyzed. The future outlook anticipates continued demand for pharma and essential goods. The report concludes with a review of the portfolio's performance and recommendations for future allocations.

Report on Fund Performance managed for university for the period 01-03-2020 to 31-
03-2020
Executive Summary
The endowment fund of university comprises of 50 Million USD and the entire amount has
been allocate in the portfolio to make it comparable with the benchmark NASDAQ
composite. Further, 100% allocation has been made in equity as Nasdaq is an equity
composite. Further, all large caps have been selected for investment considering the global
turmoil on account of Covid-19. The initial investment structure comprised the following.
Company Name AAPL Microsoft 3M Walmart Inc. Facebook Pepsi co
Funds Allocation 5,00,00,000 5,00,00,000 5,00,00,000 20,00,00,000 5,00,00,000 10,00,00,000
Returns`
Further, at the end of the period of analysis, the return of the portfolio was 6.87% as
compared to negative return of the index of (-) 14%.
Active management
The portfolio outperformed the benchmark on account of active management, timely
decisions and economic perspective. If one consider the return of individual stocks over the
period of 1 months, it represents a negative return. Thus, a steady portfolio would have
eroded the capital. Accordingly, the portfolio is churned in this volatile market to reap out the
benefits of active return.
Initial Strategy
Also, the initial asset allocation did not survive the current volatility of the market and
accordingly the positions needed to be squared off on different dates to minimise the losses.
The squaring off was done mainly on days when lock down was declared in European
countries so as to prevent further downfall of stocks.
Major Contributor
The sector that contributed most to the return was Manufacturing and in specific FMCG
sector as due to lockdown globally and in many states of US, demand for FMCG and daily
consumption goods soared which resulted in rise in the prices of these stocks after a heavy
fall under initial days. Further, the rise has also been on account of bailout package by
President Trump on 25th March, 2020.
The individual position of long on Walmart had the most significant impact on the returns to
the portfolio.
Market Overview
The investment period has been on of the most volatile period in the investment history
wherein major large capital company have erorded their wealth by almost 25% and the index
also eroded by 14% in a month. The market was grappled with fear of Covid-19 with the
figures of death and victims rising at an exponential rate. Besides, during the concerned
period USA became the new hotspot of virus with highest number of infections and death

tolling at an alarming pace. The above factors created a bear market resulting in downfall of
even large capitalised companies and fundamental factors took a back seat.
Also, major giant companies during the concerned period experienced a downfall in sales on
account of lock down and transportability issues.
Positon
In this turbulent time, I positioned myself on large cap stocks with a steady portfolio initially
which was eroding day by day, so in order to safeguard my investment I squared off the
position on lock down announcement days in European countries. Further, on perusing the
trend in the market regarding FMCG companies and demand for essential items, I placed my
bet on FMCG. I have also considered pharma stocks but on account of issues regarding the
fundamental aspect and chances of success of such companies in short term, I have negated
them. Thus, the factor contributed was going long on essential and FMCGs.
Stock Movement
During the period, there were no new stocks added. However, there has been increase in
investment in Walmart Inc. to generate good return in these turbulent times. Positions in all
stocks were removed and role of watcher was observed for some time to re align the strategy
with the current time. There was no rebalancing of sector weights as only one sector was
performing and others were taking a downward trend.
Future Look
There are only three stock in the portfolio with an aggressive outlook betting high on large
cap stocks namely
Walmart Inc.: Long term positive result expected
Facebook Inc: Long term positive result expected
Pepsico: Short term squaring off.
Economic Outlook
Economic outlook under this period of tough times is that only pharma companies and
essential supply shall be a good bet as this condition shall persist for entire 2020.
Future Action
The portfolio under current position is not positioned to absorb the market trend and needs to
be allocated at 50-50 for pharma and essential goods.
Rationale for choice
The two significant factors for choosing the essential good stocks is the sudden spurge in
demand which is going to exist in short term and positive market sentiment for this
companies.
One tech company has been selected gradually due to increased viewership and
advertisement on the platform of this company.
Conclusion

Portfolio has achieved goods returns but an active churning is required.
Portfolio
Company Name AAPL Microsoft 3M Walmart Inc. Facebook Pepsi co
Funds
Allocation
5,00,00,00
0
5,00,00,00
0
5,00,00,00
0
20,00,00,00
0
5,00,00,00
0
10,00,00,00
0 500000000
Purchased 01-03-2020 01-03-2020 01-03-2020 01-03-2020 01-03-2020 01-03-2020
Purchase price 298.809998 172.789993 153.020004 115.369514 196.440002 136.657257
Sale 06-03-2020 06-03-2020
Sales price 289.029999 153.649994
Profit/ Loss -1636491.26 205852.1708
Sale 10-03-2020 10-03-2020 10-03-2020 10-03-2020
Sales price 160.92 119.26 178.190002 134.139999
Profit/ Loss -3434803.947 6748377.219 -4645184.233 -1842022.923 495395727
Purchase 12-03-2020 12-03-2020 12-03-2020
Purchase
amount 247697863.5 123848931.8 123848931.8
Purchase Price 103.591637 154.470001 115.339996
Closing Date 31-03-2020 31-03-2020 31-03-2020 31-03-2020 31-03-2020 31-03-2020
Sales Value 254.289993 157.710007 136.509995 113.620003 166.800003 120.099998
Closing Value 271676679.8 133734719.1 128960091.7
534371490.
5
Benchmark
Return
Portfolio return 6.87% -13.99%