Comprehensive Analysis of an Investment Portfolio: Funds and Returns

This assignment analyzes an investment portfolio constructed from Australian Securities Exchange (ASX) listed funds, including an A-REIT (Shopping Centre Australia Property Group), an infrastructure fund (Infigen Energy), and an ETF (Betashares Global Cybersecurity ETF). The analysis includes calculating excess return and tracking error, evaluating portfolio performance, and assessing the correlation between the portfolio and the Dow Jones Industrial Average. The study also explores optimal fund allocation to reduce total risk by 1%, providing correlation and covariance matrices for the portfolio components. The assignment fulfills the criteria of selecting funds with specific characteristics and analyzing their performance based on provided weights and market data, offering insights into investment strategies and portfolio management.

Running head: INVESTMENT PORTFOLIO
Investment Portfolio
Name of the Student:
Name of the University:
Author’s Note:

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Question 1
1) The Australian REIT Fund that has been selected for the purpose of analysis is the Shopping
Centre Australia Property Group. The property group includes two internally managed real estate
investment trusts. The property group also owns and manages a wide variety of sub regional and
neighbourhood shopping centres. On the other hand, the infrastructure fund that has been
selected for the purpose of analysis is the Infigen Energy, which is listed in the Australian Stock
Exchange as a listed energy market participant that aims to deliver energy related solutions to
Australian Business and large retailers (Infigenenergy.com 2019). The key assets of the Infigen
Company are located across the region of New South Wales, South Australia and Western
Australia (S3-ap-southeast-2.amazonaws.com 2019). The key list details of the Assets owned by
the firm are as follows:
1) Capital Wind Farm: The nameplate Capacity of the farm is around 140.7 MW and is located
in the New South Wales (NSW). The asset has produced around 374 GWh of electricity in the

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year 2018, which was marginally higher from the last year number standing at around 345 GWh.
The increase in the production capacity of the firm has almost increased by around 8% in the
time period.
2) Lake Bonney 2 Wind Farm: The name plate Capacity of the farm is around 159.0 MW and
is located in South Australia. The asset has produced around 405 GWh of electricity in the year
2018, which was marginally higher from the last year number standing at around 381 GWh. The
increase in the production capacity of the firm has almost increased by around 6% in the time
period.
The production for the company has increased primarily for the company due higher
wind capacity that has been well delivered by the key assets of the company such as Capital
Wind Farm and Lake Bonney 2 Wind Farm. An overall 53 GWh was increased in the production
side of the company which has been contributed from these above sector. In order to well
visualize the production capacity of the various assets of the firm and the associated utilization of
the assets (in terms of unit sold) can be well shown:

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2) (i) The ETF Fund that has been selected for the purpose of analysis is the Betashares Global
Cyber security ETF. The funds aims at tracking the performance of the Nasdaq Consumer
Technology Association Cyber security Index, before taking into account several key figures like
fees and expenses (Scaproperty.com.au 2019). The key reason for the selection of the fund has
been because of the tactical exposure that the fund would be providing to the global cyber
security sector. The key advantage that the ETF Fund would be providing will be primarily be
because of the simple and cost effective way that fund has across a diversified set of portfolio in
the world’s one of the leading cyber security companies. Diversification and Cost effective with
no active manager’s fees that is charged were some of the key aspects for the purpose of
selecting the fund.
2 (ii) The three key reasons or factors that would be influencing the fund performance
(Betashares Global Cyber Security ETF) are primarily:

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 Growth in the technological industry.
 Investment in Global and Giant Leaders in the Cyber security Industry.
 Overall growth of the economy and the NASDAQ Consumer Technology Index.
Question 2
1) The excess return of the portfolio was calculated with the help of return generated on the
portfolio less the prevailing risk free rate in the economy.
Excess Return of Portfolio: Return on Portfolio (Rp)—Risk free rate (Rf)
Asset A (Portfolio Excess Return)
Return on Port. 0.56%
Risk Free Rate 0.10%
Excess Return (Rp-Rf) 0.45%
2) The tracking error of the portfolio was calculated with the help of the return generated on the
benchmark index that is the S&P ASX 200 index which was around 0.58% and the return on
portfolio was around 0.56%. Thereby, the computed tracking error of the portfolio was computed
to be around 0.02%.
Asset A (Portfolio Tracking Error)
Tracking Error
Return on Port. 0.56%
Return on Bench. 0.58%
Tracking Error (rp-rb) -0.02%

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3) In order to well construct the portfolio the key funds, shares and etf that were selected in the
respective groups were given a specific weights and the return generated from these funds was
then analyzed. The weights that have been applied to the portfolio is as follows:
 A-REIT (20%),
 Infra Funds (15%),
 ETF (55%)
The return generated from the portfolio with the help of above weightage is well computed
below, whereby the monthly return of the portfolio was calculated to be around 0.56% and the
variance for the portfolio was calculated to be around 0.10% (BetaShares 2019).
Particulars Mean Variance
Asset A 0.56% 0.10%
On the other hand, it is crucial to note that the excess return of the portfolio was dericved
by dividing the annual risk free rate prevailing in the Australian economy which is around 1.25%
and the same was divided by 12 to get the monthly risk free rate. The monthly return generated
by the portfolio at the same time was around 0.56%, monthly risk free rate to be around 0.10%
and the computed excess return to be around 0.45%. It can be well observed that the company
has provided an excess return that the risk free rate. At the same time the tracking error generated
from the portfolio was negative stating that the constructed portfolio was not able to beat the
benchmark returns generated.

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Question 3
i) The return generated by the Dow Jones Industrial average has been around 0.97% and the
same has been well computed with the help of the monthly return data set taken for a sum of two
years whereby relevant changes in the index has been taken into consideration for the index. The
correlation between the constructed portfolio that is Asset B and Dow Jones Industrial Average
has been around 0.093 and the R-Squared for the set of data has been around 0.305 as shown
below:
Correlation between Portfolio and Dow Jones
Correlation {r} 0.093
R squared 0.305
ii) The best allocation of the three funds in order to reduce the total return to total risk by 1%
would be as follows:
Particulars A-REIT Infra Funds ETF
Portfolio Allocation 30% 40% 30%
The correlation matrix and covariance matrix for the portfolio is shown below whereby it can be
well seen that the correlation between the Infrastructure Funds and Australian REIT has been
negative and very low that is around -0.02 times. On the other hand the correlation between the
ETF and Infra Funds has been around 0.15 times.
Correlation Mat.
Australian
REIT Infra. Funds ETF
Australian REIT 1.00 -0.02 -0.20
Infra. Funds -0.02 1.00 0.15
ETF -0.20 0.15 1.00

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Cov. Matrix A-REIT Infra Funds ETF
A-REIT 0.12% -0.01% -0.03%
Infra Funds -0.01% 0.92% 0.07%
ETF -0.03% 0.07% 0.23%

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References
Asx.com.au. 2011. Complete list of exchange-traded products on ASX.. [online] Available at:
https://www.asx.com.au/products/etf/managed-funds-etp-product-list.htm [Accessed 9 Oct.
2019].
BetaShares. 2019. BetaShares FTSE 100 ETF | BetaShares | ASX: F100. [online] Available at:
https://www.betashares.com.au/fund/ftse-100-etf/ [Accessed 9 Oct. 2019].
BetaShares. 2019. Global Cybersecurity ETF | International Market Exposure | BetaShares.
[online] Available at: https://www.betashares.com.au/fund/global-cybersecurity-etf/#each-
overview [Accessed 9 Oct. 2019].
Infigenenergy.com. 2019. FY18 Full Year Results - Infigen Energy. [online] Available at:
https://www.infigenenergy.com/investors/publications/financial-results/fy18-full-year-results/
[Accessed 9 Oct. 2019].
S3-ap-southeast-2.amazonaws.com. 2019) [online] Available at: https://s3-ap-southeast-
2.amazonaws.com/infigen/wp-content/uploads/2018/08/18154447/AnnualReport20181.pdf
[Accessed 9 Oct. 2019].
Scaproperty.com.au. 2019. [online] Available at:
https://www.scaproperty.com.au/Resources/pdf/LCM448_AR_2018_Complete%20vFs.pdf
[Accessed 9 Oct. 2019].